Tuesday, May 13, 2008

For-Profit Health Information Exchanges

In a May 8, 2008 Government Health IT article written by Nancy Ferris entitled "For-profit HIEs are the answer, entrepreneur says," Dr. Elliott Menschik, president of HxTechnologies, is quoted extensively from a recent Capitol Hill Steering Committee on Telehealth and Healthcare Informatics. (All quotes are taken from Ms. Ferris' article and not from primary sources.)
Dr. Menschik's company "began with grant funding from the National Institutes of Health, but that funding ran out last year. Now Menschik is in discussions with two large insurers in the Philadelphia area, Independence Blue Cross and Aetna, about sponsoring the project." "Working with radiologists, his company is developing a for-profit HIE that will deliver radiology images to doctors in Philadelphia....In New Jersey, HxTechnologies is building the New Jersey Health Information Exchange for a client, the AmeriHealth subsidiary of Independence Blue Cross."

According to Ms. Ferris, Menschik's claims that the current push for “altruism-driven” HIE is not getting results because “the lowest common denominator approach paralyzes participants.” Ferris states that the "need to achieve consensus on every issue slows the process to a crawl, and fear of antagonizing anyone means that the actions with the greatest potential impact are avoided. The projects are dependent on grants that eventually end, leaving the HIE without enough funds."

His model focuses on health plan funded-radiolology information exchanges. (Think of it as a pharmacy benefits manager for radiology.) Indeed, many pharmacy data aggregators, laboratory information providers, and other data services also are for-profit in structure. (But not not necessarily profitable at this juncture.)

If the coverage is reflective of Dr. Menschik's views, his concerns on the lowest-common-denominator have been justified by the glacial pace of the NHIN as broadly constituted. But the alleged slow pace of a broadly constituted NHIN in no way should lead one to conclude that the only alternative is to embrace models such as Dr. Menschik's as the only alternative. We need both.

According to Ms. Ferris, Dr. Menschik suggests that "for-profit, businesslike HIEs are the way to go in the current environment, according to a company president who says the free enterprise model can deliver results better, faster and cheaper. "

Are these claims true?
  • Better? For whom? For patients? providers? plans? all of the above?
  • Faster – if mobilizing capital is important, perhaps. But to what end?
  • Cheaper? How will we know since we won’t know the true price buried within the cost structures of health plans and intermediaries nor will we have any comparisons if transparency efforts do not advance.

A Flawed Argument
The argument placing for-profit models in opposition to non-for-profit models is flawed. The claim that one model provides a solution to one problem does not refute the validity of a claim that is not the logical opposite but rather a complement directed at different tasks. Specifically, a radiology exchange funded by health care plans does not in and of itself refute the value of a broader, community-based health information exchange, particuilarly since these exchanges in some way serve as an imperfect proxy for a consumer-focused health care information system. Furthermore, the "for-profit" vs. "non-profit" argument is secondary if not irrelevant. A more important argument is over the rising role of heavily-funded and economically "disruptive" personal health care records offered by Microsoft, Google, Intuit, Dossia, and many others.

The issue is raising capital. Health plans - for-profit or non-profit - get much of their capital simply because they get our money first and essentially distribute it, whereas new models for innovation - be they new technologies, new drugs, or new approaches to information management - can only thrive if they obtain new capital (via IPO or angel funding) or by trying to demonstrate value to the health plans and other intermediaries who already have our health care dollars.

Dr. Menschik's company sounds like a good idea. If the numbers work, it will bring immediate value to payers. Like a PBM, this approach is almost certain to garner the attention of intermediaries with fiscal responsibilities. Like other initiatives to constrain costs, it almost certainly will demonstrate cost savings and will incur the wrath of some who lose revenue (e.g., Dr. Menschik's radiology colleagues). Like other initiatives, the costs of the infrastructure may be high.

In the final line of the article, Ms. Ferris states that "substantial amounts of federal funding for HIEs would be a good alternative to the business-driven efforts he [Menschik] is advocating. But that kind of financial support does not seem likely to be forthcoming...."

This is the point. The real struggle is among the advocates of a purely driven health care system and the advocates of a system dominated by intermediaries. As Menschik's model would suggest, there may be room for both. But the success of one model devoted to certain purposes and markets does not necessarily support the claim that other models will fail either financially or from the perspective of the public interest. And purely for-profit endeavors are to be found in both.

The article begins with the following assertion: "Public-private partnerships to develop health information exchanges? Forget about it. "

I would suggest that the consumer public will not "forget," nor will the next generation remain totally reliant on information whose access is withheld and decisions made by invisible intermediaries. Consumers will want a growing seat at the decision-making table and a rising interest in how their health dollars are spent. Whether this is through for-profits or non-profits, independent companies or community partnerships, is yet to be determined. One size may not fit all.


Blogger Elliot said...

Unfortunately Ms. Ferris' summary of my discussion on the Hill doesn't quite capture the argument I was advancing. Let me make an attempt here to set the record straight:

As you note, for-profit vs. non-profit is beside the point – this is a distinction that relates to corporate organization and governance and has little to do with successful execution in getting sustainable HIEs and the NHIN up and running. Last I checked, just about every RHIO in the nation is entrusting its data to a for-profit vendor.

The real question is as follows: is there an alternative model to federal and/or state-funded private/public collaboratives that can succeed where these have failed or are moving so slowly as to risk irrelevance?

It is absolutely reasonable to look at HIEs and the anticipated NHIN as a public good, not unlike interstate highways or the NASA moon-shot. Under this model, we should not expect a sustainable business model. We should expect realization and ongoing operation to be funded by the taxpayer. The problem is that, to date, the NHIN and regional HIE efforts have been 1) woefully underfunded, 2) without a mandated technical framework to ensure network-to-network interoperability and 3) based on an all-inclusive collaboration model that by necessity slows decisions to a crawl while preventing consensus on sharing any data that might save money (by threatening the revenue streams of some of those at the table).

Single payer, developed countries (e.g. Canada, France, Austria to name a few) have actually treated this as a public good successfully – there is no business model, but rather a national infrastructure, meeting a nationally-mandated set of interoperability standards, funded by the taxpayer with savings to the healthcare system accruing to the taxpayer.

Our multi-payer, employer-funded healthcare system, coupled with a poor national appetite for large public works investments, seems to require an alternative approach if we are ever to have the benefit of successful health information exchanges on a meaningful scale, let alone a nationwide network.

I believe that this alternative is now emerging in the form of “business-driven” HIEs. Like the “altruism-driven” HIEs we see today, these networks recognize and strive to deliver on the clinical promise of sharing health information. The key distinction, however, is that a business-driven HIE is designed from the start to also deliver measurable, financial return on investment (ROI) to those who finance the network. It has a focused execution model that emphasizes rapid deployment, low up-front costs, and targets the highest value data in the highest value geographies by connecting together the highest value healthcare organizations.

This means networks funded primarily if not entirely by those who stand to benefit financially: payers (i.e. those who hold the risk for the cost of care, whether it be health plans, employers, or providers themselves who bear risk through per-diems, DRGs and other capitation-type arrangements).

This means choosing strategically what data to share first so as to establish a sustainable business model and establish ROI out of the gate. From where we sit, we believe an ideal (but certainly not the only) place to start is imaging. This is not the endpoint, but rather a beachhead. Starting here, with the payer as the customer, what we can deliver is a reduction in unnecessary repeat imaging that not only speeds time to an accurate diagnosis and avoids unneeded radiation exposure, but delivers a measurable decline in imaging spend for the sponsors of the exchange. Once up and running and demonstrating measurable returns, it then makes sense to expand to other forms of clinical data that may have lower ROI, but the network has already been paid for.

This is inherently not a win-win financial proposition for all healthcare players in a given market. For the healthcare system to save money, it has to come from somewhere. The business-driven HIE is designed so that the innovators who participate first and share their data first, are the ones who receive the competitive advantage in the marketplace.

Whether this model proves to become the dominant one for HIE is clearly an open question, but its certainly where we are placing our bets.

May 14, 2008 12:49 AM  

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