Saving Health Care, Saving America

By BRIAN KLEPPER, DAVID C. KIBBE, ROBERT LASZEWSKI and ALAIN ENTHOVEN

So far, Congress' response to the health care crisis has been alarmingly disappointing in three ways. First, by willingly accepting enormous sums from health care special interests, our representatives have obligated themselves to their benefactors' interests rather than to those of the American people. More than 3,330 health care lobbyists - six for every member of Congress - contributed more than one-quarter of a billion dollars in the first and second quarters of 2009. A nearly equal amount has been contributed on this issue from non-health care organizations. This exchange of money prompted a Public Citizen lobbyist to comment, "A person can reach no other conclusion than this is a quid pro quo [this for that] activity."

Second, by carefully avoiding reforms of the practices that drive health care's enormous cost growth, Congress pretends to make meaningful change where little is contemplated. For example, current proposals would not rebuild our failing primary care capabilities, which other developed nations depend upon to maintain healthy people at half the cost of our specialist-dominated approach. They fail to advance the easy availability and understandability of information about care quality and costs, so purchasers still cannot identify which professionals and organizations are high or low performers, essential to allowing health care to finally work as a market. They do little to simplify the onerous burden associated with the administration of billing and collections. The proposals continue to favor fee-for-service reimbursement, which rewards the delivery of more products and services, independent of their appropriateness, rather than rewarding results. Policy makers overlook the importance of bipartisan proposals like the Wyden-Bennett Healthy Americans Act that uses the tax system to incentivize consumers to make wiser insurance purchases. And they all but ignore our unpredictable medical malpractice system, which nearly all doctors and hospital executives tell us unjustly encourages them to practice defensively.

Most distressing, the processes affecting health care reflect all policy-making. By allowing special interests to shape critically important policies, Congress no longer is able to address any of our most important national problems in the common interest - e.g., energy, the environment, education, poverty, productivity.

Over the last four years, a growing percentage of individual and corporate purchasers has become unable to afford coverage, and enrollment in commercial health plans has eroded substantially. Fewer enrollees mean fewer premium dollars available to buy health care products and services.

With diminished revenues, the industry is unilaterally advocating for universal coverage. This would provide robust new revenues. But they are opposing changes to the medical profiteering practices that result in excessive costs, and which often are the foundation of their current business models. And these two elements form the troublesome core of the current proposals.

Each proposal so far contemplates additional cost. But we shouldn’t have to spend more to fix health care. Within the industry's professional community, most experts agree that as much as one-third of all health care spending is wasted, meaning that a portion of at least $800 billion a year could be recovered. There is no mystery about where the most blatant waste is throughout the system, or how to restructure health care business practices to significantly reduce that waste.

Make no mistake. A failure to immediately address the deep drivers of the crisis will force the nation to pay a high price and then revisit the same issues in the near future. It is critical to restructure health care now, without delay, but in ways that serve the interests of the nation, not a particular industry.

Congress ultimately must be accountable to the American people. The American people must prevail on Congress to revise the current proposals, build on the lessons gleaned throughout the industry over the last 25 years, and directly address the structural flaws in our current system. True, most health industry groups will resist these efforts over the short term, but the result would be a more stable and sustainable health system, health care economy and national economy, outcomes that would benefit America's people, its businesses and even its health care sector.

Finally, the American people should demand that Congress revisit and revise the conflicted lobbying practices that have so corroded policymaking on virtually every important issue. Doing so would revitalize the American people's confidence in Congress, and would re-empower it to create thoughtful, innovative solutions to our national problems.

Brian Klepper is a health care analyst and industry advisor. David C. Kibbe is a family physician and a technology consultant to the industry. Robert Laszewski is a former senior health insurance executive and a health policy analyst. Alain Enthoven is Professor of Management (Emeritus) at the Stanford University Graduate School of Business.

A Message to America's Physicians: Purchasing EHR Technology: A Shaky State of Affairs

October 28, 2009

By DAVID C. KIBBE AND BRIAN KLEPPER

Much of the conversation and debate about physician EHR adoption has centered on the single issue of the (high) cost of purchase. However, we'd like to suggest that the situation is much more complex and involves several more subtle variables.

Consider, for example, uncertainty about the future. In a recent speech, Lawrence Summers, Director of the White House's National Economic Council for President Barack Obama, related the following analysis about decision-making under conditions of uncertainty in the marketplace, which he had first heard from Ben Bernanke, current Chairman of the Federal Reserve, in a speech Mr. Bernanke gave over 30 years ago: "If you as a business were considering buying a new boiler, and if you knew the price of energy was going to be high, you would buy one kind of boiler. If you knew the price of energy was going to be low, you'd buy another kind of boiler. If you didn't know what the price of energy was going to be, but you thought you would know a year from now, you wouldn't buy any boiler at all. And in exactly that way, it is illustrated that the reduction of uncertainty, through the resolution of disputes, is, I would suggest, all important, if we are to maintain confidence."

Let us paraphrase both of these eminent economists, while applying the same set of ideas to the purchase of electronic health records: If you as a physician were considering buying a new EHR technology, and if you knew the reimbursement rates for your practice were going to be high, you would buy one kind of EHR. If you knew the rates of reimbursement were going to be low, you'd buy another kind of EHR. If you didn't know what the reimbursement rates were going to be, but you thought you would know a year from now, you wouldn't buy any EHR at all.

We've substituted "reimbursement rates" for the "cost of energy" here because, especially for physicians in small practices with under ten clinicians, the amounts they are paid per encounter by health plans, Medicare, and Medicaid are what determines how much money net of expenses will be available for significant investments such as EHRs at any given period of time.

And there is enormous economic uncertainty for physicians now. A 21 per cent cut in fees from Medicare is looming overhead, set to go into effect January 1, 2010. An arcane system known as the SGR determines annual Medicare payment rates by using a formula that aligns actual spending rates with specified targets. Medicare rates are crucial as they are the benchmark rates by which private sector health plans set their payment schedules. In the past several years, spending has exceeded targeted rates, triggering steep reductions in physician payment rates, which have been averted only by last minute Congressional intervention. What's worse is that recently the so-called "Medicare-fix" of the SGR has become a political football, with a Democrat-led effort to revamp the system as part of the health reform legislative package failing to reach the Senate floor for a vote on October 14, 2009. This only adds to the uncertainty regarding what physicians will earn in 2010 and beyond. No cut? A 5 per cent cut? A 21 per cent cut? The prudent physician or practice administrator, like the prudent business, would be wise to delay major purchases like an EHR until knowing if there will be capital available to pay for them.

Enter the ARRA/HITECH incentive payments of as much as $44,000 for "meaningful use of certified EHR technology" over a 5 year period starting in 2011, intended to stimulate physician and hospital adoption of EHR technology, uptake of which has been anemic at best. Currently, only somewhere between 15-20 per cent of physicians are using EHRs, and the number among small and medium size practices is even lower. Clearly, Congress and HHS believe that a stimulus of approximately $10,000 per doctor per year should be enough to induce a significant number of America's doctors to change their minds and acquire and use EHR technologies in their practices by 2015.

But only if the doctors can make a reasonable calculation as to the net costs of such a purchase, and right now there is too much uncertainty to make such a calculation. Not only do they not know the federal government's definition of a "certified EHR technology" -- which will determine which products currently on the market, or on the market sometime during 2010-2011, will qualify their practices for incentives, if purchased. They do not know yet which particular "meaningful uses" of such technology will be rewarded, if such a "certified" technology is purchased. They also don't know how to apply for the incentive payments, when to make such application, or in what time period to expect a reply. (To be fair to ONC and HHS, the regulations sorting all this out are expected to be released in December, 2009. However, as we understand the process, final versions are unlikely to be read into the Federal Register until mid-2010 or beyond.)

Furthermore, many physicians with whom we've spoken believe that the $44,000 being offered by the ARRA/HITECH incentives would cover only a quarter to a third of the actual total costs of ownership during those five years, leaving them with expenses of roughly an additional $100,000 per physician that must come out-of-pocket in order to implement one of these software programs. This may be why one hospital recently offered to add an additional $40,000 per physician, over and above the ARRA/HITECH payments, as incentive to get their system's doctors to utilize one of the more popular EHR products. ("Popular" may be a stretch. When only 15 per cent of doctors have chosen to acquire an EHR from any vendor, none of them can really be considered the people's choice.)

Thus, there exists a significant "uncertainty gap" between what Medicare or Medicaid is willing to pay a physician to adopt an EHR technology, and what the actual costs to each physician will be. Physicians buying now must either a) accept the possibility of a significant out-of-pocket expense, or b) have confidence that health care payment reform will provide significant additional payments beyond those of ARRA/HITECH to doctors will make up the difference. However, confidence among physicians in incentive payment programs from HHS and CMS is probably at an all time low. Many thousands of physicians who complied with the Physician Quality Reporting Initiative, or PQRI, by sending CMS quality and performance data from 2007 to 2009, have yet to receive a penny for their efforts. Some report they haven't even gotten responses from CMS as to the nature of the problems! The bonus payments are just 1.5-2.0 per cent of Medicare billings, or between $1,000 and $2,000 for the average family physician or general internist. But according to many physicians, the work that has to be done in order to qualify for these payments routinely uses nearly as much office staff and IT consulting work as the bonus is worth. The many snags encountered by physicians who have tried to participate in PQRI have added insult to injury, significantly tarnishing the reputation of CMS and putting into question, in the minds of many physicians at least, the government's ability to operate the ARRA/HITECH incentives, without question a much more complex endeavor than has been PQRI.

Finally, physicians lack confidence in broad payment reform of the kind that would actually create a return on investment for health IT used to improve quality and monitor costs of care. Beyond the issue of Medicare incentive payments for EHR technology not yet specified, to be used in ways that haven't yet been defined, doctors are manifestly not confident about the longer term issue of whether short-term incentive payments will be converted to sustainable economic returns, as through pay-for-performance, after 2015. This concern is perhaps more relevant to the reduction of uncertainty and the build-up of confidence than the narrow issue of ARRA/HITECH incentive payments, which are, after all is said and done, a faux business model for investments in EHR technology that comes to an end in 2015.

So, what should America's doctors do? Well, we're not in the business of advising people about how to spend their hard earned money. But we do believe that it's human nature to be conservative and to withhold investing when uncertainty about income, expenses, and returns on investments is high, and doubly so when confidence in the people and organizations making the decisions that effect those variables is low. That this is precisely the situation in which most doctors in America who work in small and medium size medical practices now find themselves may be more determinative about the future of the EHR market place and adoption of EHR products and services than any advice we could offer. This interplay of uncertainty, confidence, and money for health IT investments may also create challenges and give direction for Dr. Blumenthal and his staff at ONC as they operationalize the policy and regulations mandated by ARRA/HITECH. For one thing, as Ben Bernanke so wisely pointed out many years ago, resolving disputes will be key to ending uncertainty and returning confidence to this shaky state of affairs. But we're not sure that even Congress has the will to resolve the disputes that would set our health care system on a reasonable course and reduce the uncertainties we've discussed here.

David C. Kibbe MD MBA is a physician and Senior Advisor to the American Academy of Family Physicians. Brian Klepper, PhD is a health care analyst based in Atlantic Beach.

Why Standards Matter 2: Health IT Enters a New Era of Regulatory Control

By DAVID C. KIBBE AND BRIAN KLEPPER

The recent history of electronic medical records in ambulatory care, or what we now call EHR (electronic health record) technology, can be divided roughly into three phases. Phase I, which lasted approximately 20 years, from about 1980 to the early 2000's, was an era of exploration and early adaptation of computers to outpatient medicine. It coincided with the availability of PCs that were cheap enough to be owned by many doctors, and with the increased capacity of off-the-shelf software programs, mainly spreadsheet and database management systems such as Lotus, Excel, Access, and Microsoft's SQL, to lend themselves to computerized capture of health data and information.

Phase II coincided roughly with the American Academy of Family Physician's (AAFP's) commitment to health IT as a core competency of the organization, and with its support/promotion of the early commercial vendors in the Partners for Patients program, a national educational campaign inaugurated in 2002 which involved joint venturing with vendors that included Practice Partners, MedicaLogic, eClinicalWorks, and eMDs, among others. Several other physician membership organizations joined this effort to popularize EMRs, or crafted their own education programs for their members based on the AAFP's model. The most popular Phase II products were, and still are for the most part, client-server software applications that run on local networks and PCs within the four walls of a practice, and tend to use very similar programming development tools, back-end databases, and support for peripherals such as printers. The industry grew, albeit sluggishly, from roughly 2002-present in an unregulated environment, with increasing support from quasi-official industry groups like HIMSS and CCHIT, and with the blessing of many professional organizations, including the AAFP, ACP, AOA, and the AAP. Best estimates are that the numbers of physicians using EHR technology from a commercial vendor roughly tripled during this period, from about 5% of physicians to about 15%. The Bush administration gave moral support to the industry, but did not provide funding or payment incentives, and mostly left the industry to itself to sort out the rules, including certification. The industry is now entering a new phase, one we predict will significantly depart from the previous two eras.

Phase III will be a time of government regulation of EHR technologies during which Congressional mandates -- sometimes quite vague -- will be interpreted by policy bodies within the government, which in turn will lead to federal rule-making and regulation as a means of carrying out policy goals and objectives. This will require significant interpretive work within the agencies delegated, mainly ONC and HHS, along with NIST and possibly the FDA and CDC, the results of which will have the potential to fundamentally alter the market for EHR technology and the products within that market, for many years to come.

Because there is a great deal of money at stake, Phase III will also be a period of intense competition, new and aggressive lobbying activity, and perhaps not just a few legal challenges, as winners emerge and losers fall by the wayside.

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Why the revolutionary efforts to exert regulatory control over the market for EHR technologies in the US, and why now?

As we have listened to and participated in the meetings of the HIT Policy Committee and ONC staff, we have been struck by several things. First, the leadership are people who believe in principle in regulatory policy as a means of managing and improving upon the market. Secondly, they and their colleagues believe that the market for EHR technology has failed in several important respects, most notably by failing to create widespread adoption among physicians, medical practices and hospitals of even the most basic health IT tools, and by failing to institute interoperability of health data exchange, despite certifications that claim the opposite. And third, they have faith that regulations and rule-making are the means by which our nation's providers can be incentivized, and punished if necessary, into adopting the EHR technologies and associated standards that will set the stage for long term health care reforms in the payment system. In other words, they are committed to using the regulatory tools available to them to change the course and to move the curves of IT adoption in as short a time as possible.

Anyone present or listening by teleconference to the HIT Policy Committee meeting of July 14, which was devoted to the issue of EHR certification, had to have been impressed by both the directness and the force of the attack on the Commission for Certification of HIT, or CCHIT. It was relentless, and came from all quarters: from academic informaticists, from federal standards officials, from hospital CIOs, physicians in private practice, doctor membership organizations, and health care economics analysts. And, at the end of the day, CCHIT was stripped of its previously unchallenged prerogative to set certification criteria; removed of its monopoly for certification of EHRs; and left with large questions about even the validity of its role as advisor to ONC on the processes of certification.

The HIT Policy Committee recommended, and ONC has accepted its recommendations, that EHR technology certification criteria are henceforward to be decided not by CCHIT, an industry body with ties to the incumbent vendors, but by HHS and ONC directly. The term "HHS Certification" was coined and is now in use to indicate this change. Certification as a process will focus no longer on a long list of features and functions, but target Meaningful Use, interoperability, and security only. And, in the final insult to the industry and to CCHIT, ONC declared its intent to offer contracts to several entities to do the certification once criteria are set in early 2010, on a competitive bidding basis.

Thus, by the end of 2009, the industry that makes and sells EHR technology and into which will flow upwards of $30 billion in subsidies between 2010 and 2015, will receive a set of regulations that will specify the rules they must play by. There will be regulations defining Meaningful Use, others that regulate the process of HHS Certification of EHR technologies, and still others setting out the requirements physicians must fulfill to validate that they are meaningful users of certified products. Finally, the regulations will set the standards and protocols all parties must utilize in order to meet these definitions and processes, and especially with regards to computable (interoperable) data exchanges and the security of health data while in transit or stored in databases. This will be a complex new set of regulations unlike anything that the health IT industry has faced before -- although, of course, there are many other industries where regulatory control has played an important role in shaping major issues in the market, such as competition, pricing, and innovation.

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What should we expect, and how might these new regulations alter the EHR technology landscape?

In his most recent book, Supercapitalism, Robert Reich provides rich detail to support his contention that regulations rarely result in the public good being achieved, the claims of politicians and agency officials notwithstanding. Instead, the regulatory environment typically becomes the battleground upon which competing firms in a sector of the economy struggle to advantage themselves and disadvantage their competitors, whenever and however possible, most often through lobbying and influence peddling aimed at Congressmen and Senators, as well as at the regulators themselves. Regulations create regulatory disputes among competitors, each side claiming the moral high ground in whatever argument is in play, and often spending enormous sums on advertising, marketing, and lobbying firms, or on lawsuits intended to increase the value of their stock or to injure the reputation of their rivals.

These battles are well known and can be fierce, but they are new to health IT as an industry sector. A regulatory tussle that is current and attracting a lot of attention is the "Internet neutrality" debate. Discussions in Congress, at the FCC, and in the blogosphere revolve around the degree to which Internet Service Providers, ISPs, should be allowed to charge, or be prohibited from charging, different payment rates based on the content and origins of material presented in Web browsers attached to the Internet. The idea could be posed this way: Should local book stores be as easily accessible on the Internet, at the same speed of downloading, as large companies like Barnes and Nobles and Amazon.com? Or, should ISPs be permitted to charge large corporations higher fees to make their content arrive faster to customers' desktops and laptop computers?

Proponents of Internet neutrality argue that the federal government ought to regulate the industry to instill competition and protect the smaller companies, who may not be able to afford the higher prices easily affordable to Amazon.com, and in order to allow customers the greatest freedom of choice. But the larger companies argue that, by offering their bigger customers the opportunity to offer their own customers better service, the public interest is better served. They argue that to withhold the market's determination of how rates are set is inherently anti-competitive and against the long term interests of the consuming public, which they argue wants fast access to the most popular websites. Of course, they fail to mention that setting higher rates might also boost their own profits and increase the value to their own shareholders.

Vonage is an example of a company with a disruptive technology / business model that has actively engaged with the regulatory process in an effort to protect its business plan, while also being shaped by the regulatory framework. Initially, they weren't regulated like a phone company at all, and won a landmark case against the state of Minnesota, in which the FCC said Minnesota couldn't regulate them as a state telecommunications company, because their service -- voice over Internet protocol, or VoIP -- is inherently interstate in nature. At the same time, initially in response to consumer and legislative outrage that Vonage didn't provide 911 emergency service, the FCC has extended many telco regulations - including 911 regulations - to VoIP providers to ensure that Vonage and others can't circumvent many telco obligations and thereby gain a competitive advantage over traditional telcos. VoIP is now subject to 911 rules, Universal Service Fund obligations, many reporting requirements. So, in this case the regulatory framework initially favored competition and innovation, but was then changed to favor the incumbents. Many hundreds of millions of dollars have been spent by both sides in this long dispute.

Regardless of whose side you take in these kinds of debates, there are always going to be "winners" and "losers" when state or federal regulatory control is put into operation. And though we may like to think that the debates themselves are objective, free of undue influence by either side, in fact this is almost never the case. Large corporations have the money and other resources to lobby both Congress and regulatory bodies like the FCC, whereas consumers' interests or those of smaller and less well-heeled constituents are often unable to match the larger players' coffers. This is not to say that the side with the most money always wins. But as economist Robert Reich reminds us, the incumbents most often have and keep the upper hand.

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Although it is still early in the game, with the first issuance of regulations expected as a Notice of Proposed Rule Making (NPRM) in late December 2009, followed by a 60-day public comment period, the broad outlines of battles to come are now discernible. The incumbent health IT firms, mostly those such as Cerner and Epic whose growth and financial successes have been tied to large enterprise implementations, largely in hospital systems and large group medical practices, have vigorously put forward and defended a set of legacy standards that are complex, referential to other complex standards, not-well-suited to inter-organizational or personal data exchanges, and expensive to put into operation. They benefit from the promulgation and extension of these standards as regulatory mandates because, they say, this is the way to create stability in the industry. However, they fail to mention that these standards also advantage the older companies, as new entrants will have to expend significant time, energy, and money to acquire the expertise that these enterprise-friendly standards and protocols require, but which the incumbent vendors already possess.

But new entrants in the health IT economy, some very large and powerful, including both Microsoft and Google, along with a host of medium and small companies that gravitate around them like satellites circling large planets, have started to fight back. For example, Google's CEO, Eric Schmidt, has publicly criticized the Obama administration's current plans for subsidizing health IT and EHR technology use among physicians and hospitals. As a member of the prestigious President's Council on Science and Technology, he was quoted as warning that the ONC's plans threaten to lock the nation's health care system into the technological past, rather than launch it into the future. Google is not alone in wanting to see more of the nation's health IT infrastructure -- including physicians' practices and hospital systems -- move to Web services and so-called "cloud computing," in part because this is Google's strength as a company and where it hopes to make its profits in the coming years.

It's important that we end this piece on a positive note. The Blumenthal team at ONC, along with IT specialists at the White House and HHS, are in a listening mode, and the regulations are not yet finalized. Aneesh Chopra, White House CTO, has taken steps to open the discussion to include testimony for innovators, and to make innovation an explicit goal over at the HIT Standards Committee, of which he is a member. He and Todd Park, CIO for HHS, have recently announced that the direction of the Health Internet (formerly the NHIN) and its massive CONNECT gateway project will be re-focused to make secure access to and transfer of health data easier and under greater consumer control, using off-the-shelf standards and protocols wherever possible. When asked recently if these plans were endorsed by David Blumenthal, the response was an emphatic "yes," that the team in charge of health IT within the administration was working collaboratively under Dr. Blumenthal's express supervision. Perhaps even more importantly, these two and others are signaling that they want input from the experts, from the public, and from those who will be affected by the ARRA/HITECH programs. If you have an opinion about EHRs, PHRs, standards for health IT, or any other aspect of this new regulatory framework, now is the time to stand up and speak your mind.

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians. Brian Klepper PhD is a health care analyst.