How market forces, regulations have worked against interoperability

The evolution of healthcare reimbursement and competitive market forces have stalled healthcare data exchange. But positive changes are in the wind.

This is Part 1 of a 2-part series on interoperability. Part 2: How the interoperability revolution will affect all of healthcare.

Despite all recent technology advances and adoption, despite all of the regulations and incentives, useful interoperability in healthcare still remains a stubborn challenge.

Outside of healthcare, interoperability is ubiquitous with widespread network connectivity, shared standards and a wide variety of endpoints and apps to serve almost every digital goal. So, what makes healthcare different?

Once upon a time, healthcare connectivity followed a relatively similar path to other industries. Early work computerizing billing and lab systems moved at roughly the same pace as the computerization of other markets. Cloud computing in healthcare debuted in the 1980s with the emergence of the company Shared Medical Systems, and standards such as HL7 enabled lab data to flow smoothly. While these early, primarily intra-health system networks required lots of hard work to build and manage, that work was advancing at a speed comparable to other sectors.

Today, there is a massive gap between the free flow of financial and retail transactions across a rich internet ecosystem of networks, sites and apps, in contrast to the slow, incomplete and incompatible data flows we settle for in healthcare. Even with widespread adoption of electronic health records and a solid, modern, mandated internet-friendly clinical data standard in FHIR, we are still making only glacial progress toward the interoperable infrastructures that have been commonplace in other industries for a decade or more.

Why healthcare has lagged

Why are we so far behind?  Certainly, the complexity of our biology and the kinds of information we need to share to document, manage and deliver care plays a big role. But most of the impediments to interoperability are not a result of the nature of the data itself but are rather direct outgrowths of decades of federal policies that regulate the way we pay for healthcare.

The central failure of the American healthcare system goes back the better part of a century to the post-WWII era. Until then, consumers largely negotiated and paid for medical care with doctors and hospitals directly, and the classic market economy dynamics of buyers and sellers generated quality and efficiency in the usual way. That began to change with the 1942 Stabilization Act which sought to stabilize workforces by setting limits on wages, but exempted health insurance, which at the time was a fairly rare and inexpensive “benefit.” As a result, companies began to pour money into health benefits to make their jobs more attractive, quickly establishing employers as the primary purchasers of care, not consumers.

In the ensuing decades, the healthcare industry has grown rapidly in size, clinical sophistication, business complexity and, of course, cost. Payer organizations have grown to dominate the employer-sponsored care industry, adding an additional layer of consumer disintermediation and profit-taking. In the 1960s, government-funded healthcare for the elderly (Medicare) and the poor and disabled (Medicaid) began, and soon grew to cover nearly a third of the population.

Since 1942, healthcare policy has been a downhill slide, with series of swings and misses, as legislators and regulators seek to address the failures and unintended consequences of past policies, only to create new problems and increase complexity. The collateral damage from these policy missteps has been vast, and the dramatic fall-off in healthcare interoperability can be directly linked to the economic weirdness and perverse incentives that stem from that legacy.

Interference from economic policy

Despite the benefits of some federal policies such as the Cures Act’s APIs and information blocking prohibitions and the companion payer API rules from CMS, which have helped advance interoperability, it is our fundamental economic policy incentives that are working against information sharing.

In our payer-mediated, employer/government-sponsored system, consumers have very little power to impact cost and quality. Through CMS, the government effectively sets prices for care by establishing reimbursement rates for Medicare and Medicaid, which serve as benchmarks for the commercial payers.

The result is a system where the prices are artificially inflated and deflated by policy, are out of synch with actual costs, and thus require doctors and health systems to cross-subsidize, charging more than necessary (usually for specialty care) to make up for underpayment elsewhere. It turns out that this cross-subsidization can make interoperability an economic liability.

Because hospital systems have to subsidize services such as primary care by charging more for specialty care such as cardiology, oncology and surgery, it is crucial to keep specialty referrals inside the system. This creates a financial incentive to keep referral orders within the system’s EHR and not allow referrals or transfer of medical information to outside providers. Interoperability is in direct opposition to the core business strategy of today’s consolidated delivery systems, which aim to keep all business within their own system.

Seen in the context of the business imperative to protect the cross-subsidizing services that provide the margin for modern delivery systems, interoperability becomes a two-edged sword. On the one hand, interoperability within the system facilitates the business, and the leading EHR vendors have lots of tools to help data move within the system, but then provide only limited and brittle support to move data outside the system.

Other impediments

External interoperability creates inherent tension and incentives for “information blocking.”

Patients want their medical data, want choice, want to be able to shop for care and want to be able to move about the country, and each of these require external interoperability. Providers, too, need some external interoperability to get details on the care their patients received elsewhere. So, delivery systems and their preferred vendors have to offer some level of external interoperability, even though they also want to keep as many patients and as much patient data as they can within their systems.

As a result, a kind of bounded interoperability exists, where data flows freely inside institutions, but faces limits for external sharing by APIs and networks that are controlled by EHR companies and their provider partners. Many of these providers have achieved significant geographic consolidation by tamping down local competition, as well as significant influence over their patient and employer customers and the regulators that oversee them.

That dynamic is clearly reflected in the latest TEFCA regulations which call for a network of information brokers (qualified health information networks, or QHINs), an antiquated transmission protocol (IHE), and document-formatted data that needs to be parsed and transformed to extract any computer-usable information. Realistically, the only folks who will be able to share TEFCA information are the incumbent delivery systems and their partners, thus perpetuating the status quo.

Are improvements in sight?

The good news is that today’s interoperability stalemate is unlikely to last much longer. Public dissatisfaction with healthcare is significant and growing louder. The modern smartphone based digital economy is rapidly “re-norming” the bounds for acceptable digital behavior and consumer experience.

Congress and the Cures Act have reset expectations for a seamless digital economy in healthcare. Payers and providers are increasingly being bound together with win-win “value-based” contracts, utilization management and quality measurement based on data sharing and computable interoperability.

Also, the now-mandated modern FHIR standard is establishing the real-time RESTful API in healthcare and bringing it into synch with the rest of the global digital economy (even if neither are in TEFCA today – RESTful APIs are the conceptual opposite of TEFCA “APIs”). Thanks to these powerful forces, even U.S. healthcare will be unable to stop the modern digital economy. Consumer grade interoperability will happen.

How and when it happens is another story entirely, and one that we will break down in the next installments of this interoperability series. Next, we’ll break down the “why” – why interoperability matters, and why organizations across the industry must make it their top priority.

Don Rucker, MD, is chief strategy officer of 1upHealth and former National Coordinator for Health Information Technology.

This is Part 1 of a 2-part series on interoperability. Part 2: How the interoperability revolution will affect all of healthcare.

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