DOT.GO pays the bulk of the industry's premiums, is it any wonder which one wins? If this were not the case, then the industry would not have lobbied so uniformly and furi ously against all of the thirty-day claims payment rules proposed by numerous states.3 And, if this were not the case, the large insurers would have gotten to gether in the 1980s, when the large banks did, and created a uniform and open transaction system that everyone could use, at every point of care in the United States. After the installation of such a system, every provider then-and everyone with an Internet connection today-would have simple and secure access to the health insurance equivalent of an ATM, through which we could track the status of all of our transactions in real time Providers'interest. Providers are no less conflicted. Nearly every U.S. hospital has an ATM in its lobby, enabling secure access to patients' financial information Why doesn't the er have the equivalent for at least some of their medical informa- tion? Because not knowing is good for business. FFS reimbursement still domi nates our health care system, Rasputin-like, after more than two decades of at tempts to kill it. 4 Those excited about the promise of "pay-for-performance, "the latest attempt to fix this problem, may wish to consult the dozen books and five hundred journal articles published in the mid-1990s about capitation. Under the past, current, and future FFS reimbursement system, Joe wilsons tattered insur- ance card is a blank check for a hospital; the less the hospital knows about him, the more services it can render, the more it can bill his health insurer, and the more it will collect Lab-testing firms'interest. The diagnostic imaging and lab-testing businesses across the street from the hospital are equally motivated not only to do nothing bold or innovative with HIT, but to impede others'attempts to do something Nearly half of the $77. 8 billion we would save per year by digitizing the entire U.S health care system, according to a financial analysis by jan Walker and colleagues, would be derived from a major reduction in lab costs, most of it by eliminating re dundant tests. Is it any wonder that the three dominant U.S. lab con,chnology not rushed to embrace such a system? Many would like to blame it on ted arguing that we do not have uniform standards for lab tests. This would be news to Clement McDonald and his colleagues at the Regenstrief Institute who created for classifying lab tests and reporting on their values, back in 1994. 6 Why have sem Logical Observations, Identifiers, Names, and Codes(LOINC), a uniform system three lab companies not installed this system to improve the transactions of those gho order their tests and receive their results? It surely would have reduced their dministrative costs the same way automated claims payment systems would re duce health insurers' administrative costs. The labs have not installed these sys- tems because like the insurers. these administrative s are a pittance com effic pared with the economic benefits of ine iciency; in the case of lab testing, that inefficiency rings up $31.8 billion in annual sales. As Walker and colleagues point out with agonizing understatement, "those who depend in subtle ways on redun HEALTH AFFAIRS Volume 24. Number 5 1251
D o T - G o V pays the bulk of the industry's premiums, is it any wonder which one wins? If this were not the case, then the industry would not have lobbied so uniformly and furiously against all of the thirty-day claims payment rules proposed by numerous states.'^ And, if this were not the case, the large insurers would have gotten together in the 1980s, when the large banks did, and created a uniform and open, transaction system that everyone could use, at every point of care in the United States. After the installation of such a system, every provider then—and everyone with an Internet connection today—would have simple and secure access to the health insurance equivalent of an ATM, through which we could track the status of all of our transactions in real time. Providers' interest. Providers are no less conflicted. Nearly every U.S. hospital has an ATM in its lobby, enabling secure access to patients' financial information. Why doesn't the ER have the equivalent for at least some of their medical information? Because not knowing is good for business. FFS reimbursement still dominates our health care system, Rasputin-like, after more than two decades of attempts to kill it.'"* Those excited about the promise of "pay-for-performance," the latest attempt to fix this problem, may wish to consult the dozen books and five hundred journal articles published in the mid-1990s about capitation. Under the past, current, and future FFS reimbursement system, Joe Wilson's tattered insurance card is a blank check for a hospital; the less the hospital knows about him, the more services it can render, the more it can bill his health insurer, and the more it will collect. Lah'tcsting firms' interest. The diagnostic imaging and lab-testing businesses across the street from the hospital are equally motivated not only to do nothing bold or innovative with HIT, but to impede others' attempts to do something. Nearly half of the $77.8 billion we would save per year by digitizing the entire U.S. health care system, according to a financial analysis by Jan Walker and colleagues, would be derived from a major reduction in lab costs, most of it by eliminating redundant tests.^^ Is it any wonder that the three dominant U.S. lab companies have not rushed to embrace such a system? Many would like to blame it on technology, arguing that we do not have uniform standards for lab tests. This would be news to Clement McDonald and his colleagues at the Regenstrief Institute who created Logical Observations, Identifiers, Names, and Codes (LOINC), a uniform system for classifying lab tests and reporting on their values, back in 1994.^* Why have the three lab companies not installed this system to improve the transactions of those who order their tests and receive their results? It surely would have reduced their administrative costs the same way automated claims payment systems would reduce health insurers' administrative costs. The labs have not installed these systems because, like the insurers, these administrative savings are a pittance compared with the economic benefits of inefficiency; in the case of lab testing, that inefficiency rings up $31.8 billion in annual sales.''' As Walker and colleagues point out with agonizing understatement, "those who depend in subtle ways on redunHEALTH AFFAIRS - Volume 24, Number 5 1251
HIT POLICY ' It is noteworthy not that so few practices computerize their clinical activities but that so many actually do dancy and excess could find such change costly. "18 This is health care's second dirtiest little secret: One organization's unnecessary medical product or service another s revenue stream Physicians'adoption of HIT. The list of economic impediments to HIT adoption is as long(and grim)as the list of impediments to health care system reform. A steady stream of researchers marvels at the low penetration of electronic medical record(EMR) systems in physicians'offices, when the greater marvel is that any physician, at his or her own personal expense, would install a system that(1)costs upward of $24,000 per physician in the short run, (2) promises to reduce billable services in the long run, and (3)saves money for every health care stakeholder ex cept the adopting physician. 9 Add interoperability to the list of features of the EMR, and each of these three economic effects is magnified. Even the most mun- dane and interoperable HIT stumbles on the simplest economic obstacle: Physi cians have a dozen reasons for not exchanging at least some e-mail with estab- lished patients, but the reduction in billable office visits-the most obvious- rarely makes the list. Given these many economic obstacles, it is noteworthy not that so few practices voluntarily computerize their clinical activities but that so any actually do The insurer WellPoint experimented with this problem by controlling the di rect cost, offering 25,000 of its high-volume physicians an e-prescribing device free of charge. The popular press did its usual glass-half-empty health care report- ing: An Associated Press reporter noted that one-quarter of physicians did not ac cept the systems, rather than the more quantitatively relevant fact that three quarters did. 20 The bold, unprecedented WellPoint program is an object lesson for the federal government, showing how removal of the direct cost hurdle can have a major impact on physicians'adoption rates and how a critical mass payer can, when motivated, break up the hIT market failure with a directed subsidy PBMs and pharmacies interests. Beyond the physician's office, examples of the power of economics to obviate HIT adoption pervade the system. the large chain pharmacies could just as easily redirect maintenance prescriptions to their own mail-order operations, but how then would they sell patients birthday card candy bars, and shampoo? The PBM companies cutting into the market shares of those chain pharmacies make their money by switching patients not to the lowest-price drugs available but to the drugs for which those PBMs get the best deals from drug companies. Why would a PBM want to publish any of its actual prices on its Web site? This is health care's third-dirtiest little secret: Paper may kill, but obfuscation pays-and not just for PBMs, but for hospitals, nursing homes, and health insurers, all of which publicly claim to want to disclose data on September/October 2005
H I T POLIC Y ''It is noteworthy not that so few practices computerize their clinical activities hut that so many actually do." dancy and excess could find such change costly"'^ This is health care's seconddirtiest little secret: One organization's unnecessary medical product or service is another's revenue stream. Physicians' adoption of HIT. The list of economic impediments to HIT adoption is as long (and grim) as the list of impediments to health care system reform. A steady stream of researchers marvels at the low penetration of electronic medical record (EMR) systems in physicians' offices, when the greater marvel is that any physician, at his or her own personal expense, would install a system that (1) costs upward of $24,000 per physician in the short run, (2) promises to reduce billable services in the long run, and (3) saves money for every health care stakeholder except the adopting physician.'^ Add interoperability to the list of features of the EMR, and each of these three economic effects is magnified. Even the most mundane and interoperable HIT stumbles on the simplest economic obstacle: Physicians have a dozen reasons for not exchanging at least some e-mail with established patients, but the reduction in billable office visits—the most obvious— rarely makes the hst. Given these many economic obstacles, it is noteworthy not that so few practices voluntarily computerize their clinical activities but that so many actually do. The insurer WellPoint experimented with this problem by controlling the direct cost, offering 25,000 of its high-volume physicians an e-prescribing device free of charge. The popular press did its usual glass-half-empty health care reporting: An Associated Press reporter noted that one-quarter of physicians did not accept the systems, rather than the more quantitatively relevant fact that threequarters did.^° The bold, unprecedented WellPoint program is an object lesson for the federal government, showing how removal of the direct cost hurdle can have a major impact on physicians' adoption rates and how a critical mass payer can, when motivated, break up the HIT market failure with a directed subsidy. PBMs' and pharmacies' interests. Beyond the physician's office, examples of the power of economics to obviate HIT adoption pervade the system. The large chain pharmacies could just as easily redirect maintenance prescriptions to their own mail-order operations, but how then would they sell patients birthday cards, candy bars, and shampoo? The PBM companies cutting into the market shares of those chain pharmacies make their money by switching patients not to the lowest-price drugs available but to the drugs for which those PBMs get the best deals from drug companies.^^ Why would a PBM want to publish any of its actual prices on its Web site? This is health care's third-dirtiest little secret: Paper may kill, but obfuscation pays—and not just for PBMs, but for hospitals, nursing homes, and health insurers, all of which publicly claim to want to disclose data on 1252 September/October 2005