2009: A Year of Surprises and Change for the EHR Technology Market

By DAVID C. KIBBE and BRIAN KLEPPER



2009 began with a bang for legacy Electronic Health Record (EHR) vendors, promising strong sales and windfall profits on the heels of stimulus package incentive bonuses initially worth more than $19 billion to doctors and hospitals. But things changed dramatically along the way.

Here ten surprises and notable events that have impacted the EHR market:

Payment for Meaningful Use of EHR technology, not for the software and hardware itself.

The idea that using EHR technologies ought to produce improvements in quality of care, better communication with patients, enhanced safety, and better public health reporting -- and that these outcomes ought to be monitored and providers held accountable for their achievement -- was itself a surprising innovation in 2009. It has to be counted among the best 10 health care ideas to come out of government in the past generation.

For several years many EHR technology vendors had expected federal money to enhance IT adoption flowing straight to them and their investors. But the interpretation of "meaningful use" by David Blumenthal, MD and his staff and advisors at the Office of the National Coordinator (ONC) proved that they want EHR adoption tightly linked with health reform and capable of supporting accountable care payment schemes, such as bundled payment, pay-for-performance, and accountable care organizations. The burden of proof that EHRs are being used appropriately lies squarely on the physicians and hospitals that purchase them.

It's become PC to ask tough questions about EHRs, quality, and health care costs

For several years it seemed that any criticism of EHRs, any questioning of the relationship between the use of health IT and the attendant quality of care or its cost, was off limits in policy discussions. EHRs were all good, all the time. But in 2009 we've seen a trickle become a torrent of serious challenges to the conventional wisdom about EHR value. It's come from diverse sources including distinguished federal science panels, academic studies, testimony before ONC and the National Committee of Vital and Health Statistics (NCVHS), and from a chorus of individual users with personal experiences to relate on listservs and blogs. While generally extolling the virtues of health care computerization, these voices of dissent have drawn attention to the large gaps in performance, ease-of-use, and standardization that plague the current crop of EHR products and services.

Perhaps more importantly, in the process they have unburdened the physicians and hospitals who have sat on the sidelines from being labeled "slow adopters," anti-technology, cheapskates, and even worse. As it turns out, these folks may have simply not seen the value in current EHR products that offer mediocre performance at best, and which have, so far, mostly demanded a king's ransom to purchase, implement, and sustain. We expect to see continued critical examination of the uses of EHR technologies, and new reporting that links health IT with documented enhancements in safety of care, quality improvement, and cost efficiencies.

CCHIT's loss of invulnerability and the displacement of its monopoly on EHR certification

2009 didn't go as well as the Certification Commission on Health IT, or CCHIT (pronounced sea-chit) might have liked. The HIT Policy Committee advised ONC to replace the vendor-sponsored methodologies for both selecting certification criteria and then carrying out the "certification." Instead, the criteria for "certifiied EHR technologies" would be set through an HHS Certification process, and then an international standards-based process used for certification and for selecting accredited certifying entities on the basis of competitive bid contracting.

This was a stunning reversal for the industry-leading companies involved with CCHIT. Many external to the process had criticized CCHIT as a "foxes guarding the henhouse" scheme, with apparent conflicts of interest that would never be tolerated in other industries. But CCHIT's real sins were a Byzantine certification process that failed to increase EHR adoption among physicians and hospitals, and the glaring fact that, despite an interoperability certification process, it failed to promote health data exchange among EHR applications. Among the most dramatic and damning testimonies at the HIT Policy Committee hearings in July was that of the CIO of East Texas Health System, who testified that her organization had jettisoned a multi-million dollar CCHIT certified (for interoperability) HIT system because it couldn't exchange information with another CCHIT certified system.

Then, recently, CCHIT's embattled CEO Mark Leavitt, MD announced his resignation from the organization. Although still retaining a primum inter pares status as an EHR-certifying entity due to its contractual ties to ONC, it seems likely that several other testing labs will compete with CCHIT for the contracts to certify EHRs under the ARRA/HITECH program. In fact, one company, Drummond Group, announced on November 2, 2009, that it would submit to become a certifying body upon the release of the requirements, expected in late December. The hope is that competition and oversight will create a more level playing field by keeping certification costs down and reducing the barriers to market entry.

Innovation as a theme and goal going forward, backed by the White House
One of the most unexpected, but also most promising, twists in 2009 was Aneesh Chopra's arrival into the fray, with support from the new Chief Technical Officer for HHS, Todd Park, the former co-founder of web-based practice management software company AthenaHealth. Aneesh holds the title of first Chief Technical Officer of the United States. A known innovator and proponent of off-the-shelf and open source software, Chopra was previously Virginia's Secretary of Technology.

Chopra sits on the ONC advisory HIT Standards Committee, where late this year he formed an Implementations Workgroup. That effort breathed much needed fresh air into the smoky backrooms atmosphere of the HIT Standards Committee, which had effectively blocked entry of innovative and start-up firms into the EHR technology market by recommending a set of untested, complex, and large enterprise-centric standards.

Apparently recognizing that these were unimplementable, Chopra's work group held a day of hearings that solicited advice on what does and doesn't work with respect to standards from - imagine this! - experts with proven track records outside of the health care industry. We don't yet know the results of this last minute counterbalance to the incumbent and legacy vendors' influence on ONC. But even some of the most entrenched people on the HIT Standards Committee are now blogging on their ideas for the "Health Internet," a term quietly replacing the older National Health Information Network. This is good news.

The Power Shift Away from Legacy HIT Firms

Physicians, particularly those whose practices are owned by hospitals, will continue to purchase legacy EHR systems. But there are now alternatives, supported by a grass roots movement towards modular, web-based, and much less expensive software for managing clinical work and information in medical practices.

We've called this emerging and disruptive innovation Clinical Groupware to differentiate it from the previous generation of EHR products. We're happy to report that there is new trade association on the scene, the Clinical Groupware Collaborative, with a mission to educate, promote, and organize collaboration among its members. It's existence is simply one indication that Web-based applications and software-as-a-service (SAAS) is finally arriving in health care.

This new health IT paradigm is being aided by the phenomenal success of Apple's iPhone and apps store (2 billion downloads, more than 100,000 apps) and a chorus of technologists, politicians, and public commenters who are asking why a similar platform + modular apps approach hasn't gained more acceptance in health care among physicians and hospitals.

Interest in HIT by Big Technology Companies

The convergence of the opportunities in health care and the race toward cloud computing isn't lost on the largest Web firms. Organizations like Microsoft, Google, Salesforce, Covisint, IBM, Intel, and Amazon not only are marshaling their forces to create new health care products, but have the resource bases and very deep IT infrastructures required to rapidly scale the kind of effort that will be required in a sector as vast and sophisticated as health care.

Their emergence in this space presents a non-traditional challenge to legacy firms, which have typically faced and easily out-gunned smaller, less resource-capable innovators. These new entrants are extremely sophisticated, established businesses with enormous capitalization and, often, more leading edge technologies.

These unexpected turns of events are profoundly important for a simple reason. The changes in health information technologies over the next few years could well be foundational, shaping how health care works globally for the next several decades. Which is why it is imperative that we not allow older paradigms that have outlived their utility to prevail, just because they were there first. 2009 has been a bright spot, in the sense that we've seen signs that the old guard could be dislodged. Against a backdrop of a health care reform effort that, as far as we can understand it, will not do much to improve the system, this progress in Health IT is encouraging.

David C. Kibbe, MD, MBA and Brian Klepper, PhD write together about health care market dynamics, technology, and innovation. Their collected works are here.

The NHIN and the Health Internet: A Matter of Control, Cost and Timing

By DAVID C. KIBBE and BRIAN KLEPPER

There is growing tension within the Obama administration's health team over who will control health data exchange: everyone (including consumers and their doctors), or just large provider organizations. The public debate will be framed in terms of privacy, security, and the adequacy of current exchange standards. But what really matters is who gets to make decisions about where health data resides, how it can be accessed, how much exchange will cost, and how long it will take for exchange to become routine.

Now is a good time to re-visit the plans for a National Health Information Network (NHIN), since we can finally observe and compare different health data sharing and exchange models in the marketplace. NHINs represent an older model that tries to use regional health information organizations (RHIOs) to establish secure networks, privately owned and operated by large provider organizations, mostly hospitals and health systems. The idea was that, over time, each private regional network would develop a gateway to other networks, creating a "network of networks" that would allow Stanford to talk to Partners Health, or Kaiser to Mayo. This communications model was enterprise/provider-centric. Patients/consumers were relegated to depending upon each RHIO's policies for access to their health information. It was also a massively expensive and time consuming - think decades - way to build a health data network.

Suppose a RHIO is in your area. Your health data from hospitals, outpatient clinics, and other settings associated with Health System A, are collected and combined with health data stored in similar settings in Health System B. Possibly Health Systems C, D, and E have also collaborated with A and B in this RHIO. Most RHIOs have cost or will cost many millions of dollars to build and operate. They were greatly encouraged by the Office of the National Coordinator under the Bush Administration, and have received additional support and funding under the ARRA/HITECH provisions that establish Health Information Exchanges (HIEs). They generally create large database management systems housed in large data centers. They typically run on proprietary software, creating closed networks that may or may not permit access onto and off the Internet.

As an individual, you probably don't have direct access to the RHIO data; only doctors and nurses are authorized to access your information. In most RHIOs, if you request access to your health information you must make the request the same way you would to your physician's medical practice, and often you will receive the results on paper. Transfer of these medical records to another institution or to a new provider outside the RHIO is not possible in most cases, although some RHIOs and HIEs now permit patient accounts and viewing of selected data.

By contrast, the Health Internet is a more current model, centered on the patient/consumer. As the name implies, the Health Internet leverages the Web's physical network and its open protocols and standards for health data exchange controlled by patients (and/or patient agents, like doctors, through authorized web services). The idea is to develop mechanisms that allow health information to pass easily across institutional and business boundaries, to anywhere it's needed. The Health Internet builds on the same Internet infrastructure and conventions that under-gird the transactions of major industry sectors like banking, e-commerce, retail sales, home mortgage business, and media and entertainment. Because this infrastructure is largely already in place, although little-used by health care entities now, the Health Internet could grow and scale rapidly at very little cost.

You can already see how the Health Internet is developing. You go to a CVS MinuteClinic, or to a handful of doctors, hospitals, labs, or pharmacies that offer you a personal health record account that lets you transfer your data in machine-readable format at will. You also create a Google Health account (or Microsoft HealthVault, Keas, or any number of personal health record platform websites) which allows you to upload your machine-readable, structured health data to them.

Next, you give your Google Health account permission to transfer your summary health data: to a doctor in anticipation of a visit; to a family member who is helping look after you; to a service that offers decision-support based on your information to help you solve some of your health/wellness problems; or to a service that will organize your health data into folders categorized by date, or provider, or episode of illness. The important thing here is that you, the individual, are deciding when, why, and where your health information is going.

The Health Internet example we've described above is performing the foundational transactions required of a national health information exchange network, and is doing so today. There are many examples, and they are growing organically, without government support, without new and complex standards, and at very low cost.

Even so, the Health Internet's growth is constrained mainly by the limited data available to patients and consumers from their doctors and hospitals, who continue to resist the idea that individuals ought to control their own data. They are also inhibited by patients' reluctance to challenge their doctors and hospitals on this point.

These and other barriers also make the Health Internet an imperfect solution to the goals of secure and efficient interoperable health data transfer. For example, current coding and classification systems remain a complex stumbling block to any model of health data exchange. Various coding systems are in use. Some are proprietary and require pay-for-use, and others need to be extended and gain industry consensus to be truly useful.

But it is no coincidence that the British government is investigating using both Google Health and Microsoft HealthVault for personal health data exchange, moving away from its own National Health Service program, after the latter spent billions on a national information network that doesn't appear to work. The NHIN "network of networks" model in this country is beginning to flounder, too, and may never achieve its future potential as a national system. The reasons are partly political, economic, and technological. An NHIN system's triple burdens - smoothing over competitive markets, enormous cost, and proprietary complexity - created so that large systems like the VA and the DOD, Kaiser and Geisinger, can exchange data without having to reach the Internet, will likely sink this ship even before the British program runs aground.

The Health Internet, on the other hand, has the obvious advantage of not "re-inventing the wheel." As former Intel CEO Craig Barrett famously said, "We already have a network for health data, it's called the Internet." Proponents of the Health Internet argue that, while health data and privacy and security are very important, the data themselves are inherently no different from financial data or the kinds of personal information routinely -- and very securely -- transported over the Internet using fair market encryption and other security technologies to protect it from intrusion, capture, or breach. So why go backwards to create the equivalent of Prodigy or AOL in every state? It could take forever.

We want to give credit to David Blumenthal, the Obama health team members and the folks at HHS who are taking a hard look at how best to create a secure and efficient method for health data transfer in this country.

David C. Kibbe MD MBA and Brian Klepper PhD write together on health care market dynamics, technology, policy and innovation.

Will Business Force Reform Back to the Drawing Board

By BRIAN KLEPPER and DAVID C. KIBBE

Until now, non-health care business has been noticeably absent from the health care reform proceedings , and quiet about the bills' impacts on their management of employee benefits, on cost, and on the larger issues of global competitiveness. Where have the voices been of the powerful business leaders who will pick up much of the tab?

They've finally surfaced, and now we'll see whether they have the will to bring reform back on track. They certainly have the strength. The question is whether this salvo by the business mainstream could force Democrats to reconsider and revise the content and structure of their proposals.

On October 29th, a powerful collaborative of major employer organizations sent a letter to Speaker Pelosi and Republican Leader Boehner asserting that the House legislation "falls short of the bipartisan goal of controlling costs and jeopardizes employer-sponsored coverage which now serves more than 160 million Americans." The same group sent a similar letter to Senate President Reid earlier that week.

It is important to note that the collaborative - the group includes the American Benefits Council, the Corporate Health Care Coalition, the ERISA Industry Committee, the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Association of Wholesaler-Distributors, the National Coalition on Benefits, the National Retail Federation, the Retail Industry Leaders Association, the Business Roundtable and the National Business Group on Health - represents the mainstream of American business. In general, these associations' member firms have sponsored employee health coverage for decades, and understand the linkages between health, productivity, cost and competitiveness. Their very real stake in the outcome, their long term sponsorship and their sheer collective clout enable them to enter and change the terms of the discussion.

Then, Tuesday, Employee Benefit News published a list of 10 specific items prepared by National Business Group on Health President Helen Darling, a longstanding progressive voice in health benefits, that "should concern plan sponsors that provide health care benefits to their workers." The bill, she said:

1. Lacks meaningful ways to control health care costs;
2. Takes us down the road to even worse deficits and crushing national debt by not getting more savings from the health system and making the coverage more affordable;
3. Does not support strong evidence-based medicine or a way to make certain that we don’t pay for treatments that are not effective;
4. Does not establish a strong independent Commission that could help Congress make the politically hard, but obvious, good decisions to eliminate wasteful and harmful treatments and spending;
5. Does nothing to correct medical liability problems and related costly defensive medical practices;
6. Doesn’t expand employers’ ability to help employees to actively engage in wellness activities or achieve health goals;
7. Undermines ERISA and opens ERISA plans to unacceptable burdens;
8. Raises serious questions about the public plan and how it would operate;
9. Could require an employer who provides comprehensive benefits to still be subject to an 8% payroll tax if employees decline employer coverage because it costs more 12% of the employee’s income; and
10. Contains an outrageous requirement that would require employers still offering retiree medical coverage to continue it indefinitely, thereby hurting employers who have maintained retiree benefits in good faith.

Non-health care businesses comprise about six-sevenths of the economy - meaning they have six times the heft and influence of the health care industry - and financially sponsor coverage for more than half of Americans. Year after year, employers have borne the lion's share of onerous health care cost increases, 4 times general inflation over the last decade. Endless reports have described how health care, business' largest and most unpredictable benefit cost, has sapped America's global competitiveness and placed its employers at a severe disadvantage. An equal torrent of words has been spent on health care's excessive waste, at least 30% of our $2.6 trillion expenditure, or north of $800 billion annually. Even so, most business leaders are loathe to simply give up the health system they currently sponsor, its flaws notwithstanding, unless they can be confident the alternative can result in lower cost, improved quality, and an equally or more productive workforce.

Keep in mind that, at this point, health care reform has been a series of power plays between Congress and the health care industry (meaning the professionals, firms and associations representing health care's four major sectors: the supply chain, HIT, care delivery and insurance/finance).

Until now, the health care industry - those who seek dollars - has dominated, lobbying Congress and contributing enormous sums to election campaign coffers to make sure that the legislation doesn't impede health care profiteering and sends new funds their way. Meanwhile it has held its breath, apparently hoping that other interests with clout won't notice. As the bills come down to the wire, the air waves have NOT burned with cautionary and righteously indignant health care industry messages opposing them. That's because organizations in the health industry are reasonably certain they've won. They have been sitting tight until the deals are done.

And with good reason. As they stand now, the reform bills are very generous to the health care industry, facilitating, through mandate and/or subsidy, millions of new customers but, as we've recently pointed out, doing pathetically little to rectify the health care crisis' structural drivers. For example, the health plan sector can raise rates without restraint, and a significant chunk of Medicare dollars will be transferred to private sector control. The biotech industry gets a 12 year moratorium on generic competition. With only token progress away from fee-for-service reimbursement and toward primary care re-empowerment, the system will continue to make specialist excesses lucrative. The American Medical Association (AMA) and Medical Group Management Association (MGMA) couldn't be more enthusiastic, though both are now campaigning for H.R. 3961, which would eliminate the 21.2% drop in Medicare physician reimbursements scheduled to go into effect January 1, 2010. There are many more examples.

Commercial purchasers have waited to see how all this would play out. But now they're stirring, and not a moment too soon. Non-health care business leaders finally appear to be mobilizing against the weak cost control provisions of the current proposals.

What is needed now is an orchestrated, mobilized, highly visible campaign effort that features the faces and voices of well-known American CEOs, and that leverages the full force of business' leadership across industries, not just for their own interests, but for those of all Americans. The places to start are in the structural areas we and others have recently discussed: primary care, fee-for-service reimbursement and cost/quality performance transparency. Properly implemented, reforms in these approaches throughout health care could have profoundly positive impacts on both cost and quality, empowering the market to make health care far more affordable for businesses and working families.

It is possible that the entire health care reform process just changed tone and direction. If it did not, then we're no worse off than before. But if it did, then the ramifications for how American policy works - not just for health care but for all our issues - could have just entered a new and profoundly important paradigm.

Brian Klepper and David C. Kibbe write together on health care market dynamics, health IT, innovation and policy.

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.