Unfreezing the Health IT Market

DAVID C. KIBBE AND BRIAN KLEPPER

Originally published 1/12/11 on Health Affairs Blog

Washington Post columnist Ezra Klein recently described the Obama administration’s consistent efforts to improve troubled private markets:

Isolate the eight key economic decisions of the Obama presidency: The intervention in the financial sector, the intervention in the auto sector, the intervention in the housing sector, the stimulus package, the health-care bill, financial regulation, and the tax deal…Where there was a market that they considered functional-but-frozen, they worked to unfreeze it.

Intervention into health IT should be added to this list. Nowhere has this administration’s activities to unfreeze private markets been more dramatic than in the health IT products and services sector, especially for electronic health records (EHRs).

When the President was elected, this market was dominated by the vendor-controlled Certification Commission for Health IT (CCHIT). The entry rules were intentionally complex and expensive, safeguarded by an interlocking system of standards organizations and both open and clandestine industry alliances that defended against innovation and new entrants.

By 2008 it had become so obvious that the EHR market was functional-but- frozen that a website arose for a fictitious EHR brand, Extormity, and gained a widespread following. With a byline of “Expensive, Exasperating, Exhausting,” the site lampooned legacy EHR vendors with heavy satire. In a fake press release, Extormity’s management promised to mirror and at the same time out-do CCHIT. They would create

a new, completely independent association known as SEEDIE – the Society for Exorbitantly Expensive and Difficult to Implement EHR’s. We created standards that we knew we could promote and adhere to, and we are now fully SEEDIE certified. Several other colossal, slow and unresponsive EHR companies have joined SEEDIE, giving medical practices, hospitals and clinics a number of costly and combative EHR vendors to choose from.

And it was indeed a small number. In 2009, at the height of CCHIT’s certification dominance, it had “certified” fewer than 40 EHR products, a handful of which had cornered the small but lucrative market — about 20 percent of physicians and fewer than 10 percent of hospitals. Pricing for these vendors’ ambulatory products could be as high as $50,000 per physician the first year, with 15-20 percent annual maintenance fees subsequently. Hospital EHR contracts routinely ran into the tens of millions of dollars during the first years of implementation.

Breaking The Ice

Contrast this with early 2011, after administration of certification rules had been transferred to the Office of the National Coordinator for Health IT (ONC) inside the Department of Health and Human Services (HHS). Now more than 200 EHR technology products have passed ONC certification, and can be used by physicians and hospitals participating in the incentive programs that reward “meaningful use” of EHR technology. Three-quarters of these are complete EHRs and/or EHR “modules” for the ambulatory care space, nearly four times the number of EHRs certified under the old regime.

Many newly-certified ambulatory EHRs are web-based and sold by subscription, with minimal up-front costs. Industry pricing is now nearly an order of magnitude less than before, with fees in the $150-$400 per physician per month range. A couple of these products are ad-supported, and free of any fees. A handful have been designed to run on mobile devices, such as the iPad, and iPhone and Android smart phones. And, almost overnight, cloud-based computing has come to dominate the emerging EHR technology market.

None of this could have happened without the Obama administration’s intervention, which included coordinated actions by the staffs at ONC, the Centers for Medicare and Medicaid Services (CMS), the National Institute of Standards and Technology (NIST), and the White House IT team. The 2008-09 health IT market environment – low penetration and sales, expensive products, predominance of older client-server architectures, extensive barriers to entry – was at odds with the administration’s goal of rapid EHR adoption, considered necessary to both improve quality and lower costs of care. Nor was it consistent with Congress’ intentions, expressed through the Health Information Technology for Economic and Clinical Health (HITECH) portion of the American Recovery and Reinvestment Act (ARRA) of 2009. That bill included more than $20 billion in incentive payments for doctors and hospitals as part of an ambitious national effort to modernize health care’s IT infrastructure.

When Obama’s health IT team took office, the market was unable to satisfy these policy objectives, So they set about to change the market with a series of deft moves that almost no one expected.

How They Did It

First, they overturned the industry ‘voluntary’ EHR certification process, replacing it with one based on internationally accepted procedures. This established a competitive landscape where private companies – transparently credentialed by the government – would compete on price and service.

They increased the number of ONC accredited certifying and testing bodies (ACTB), creating competition where once there was a bottleneck. There are now six – count ‘em – organizations doing certification and testing.

They endorsed a modular approach to EHR technology design, specifically permitting EHR modules to be certified under the new certification and testing regime. Modularity, among other things, makes it easier for developers to focus on a particular set of functions – e.g. e-prescription or quality reporting – and bring those products to market more quickly.

They insisted on health data exchange standards that included the market-tested Continuity of Care Record (CCR) standard that emphasizes XML and simplicity. This broke the near monopoly that the HL7 standards organization has enjoyed with respect to data formats used for transporting clinical content.

They funded research that explicitly seeks to move the market towards innovative approaches developed outside health care, including the establishment of a plug-and-play “medical app store,” based on the Apple iPhone/iPad App Store.

They collaborated in the writing of the PCAST (President’s Council of Advisors on Science and Technology) recommendations, including a “universal health data exchange language” in XML that would accelerate the pace of interoperability among EHR technologies.

And they initiated the Direct Project to create the protocols and specifications necessary for simple, secure, and affordable e-mail exchange between doctors, and between doctors and patients. This approach will dramatically advance the number of physicians capable of meeting MU requirements for health data exchange.

A Fast And Sustainable Intervention

The administration’s intervention in the health IT market has been lightning fast, in large part because it’s policy imperative came from Congress and the ARRA/HITECH timeline. It also owes much of its speed to the liberal amounts of money that Congress approved, some of which ONC/CMS has been able to spend right away. That these trends are likely to be sustained is due to the fact that much more money has been committed over the next 5 years on EHR incentives to physicians and hospitals.

It’s important to note that the administration did not choose to take over the health IT market, for example, by requiring all doctors to use a particular brand of EHR owned by the government.  This was proposed by more than a few observers who had grown frustrated with the lack of adoption, but it would not have worked well. Instead, the Obama team chose to unfreeze the health IT market, to improve its dynamics and its offerings.  

And the result, so far, are impressive.  The new wave of EHR technologies, by themselves, won’t fix American health care. But they provide a common foundation for information capture, exchange, storage and analysis that will be transformative, enabling a new era of care quality and cost that would be unachievable without it. The scope and importance of this approach are breathtaking, and could not have occurred if not for the leadership and guidance of the Obama administration and its health IT team.