# Presentation: 324695

## Interoperable Health Data Exchange and Reimbursement Reform

- Doug Emery
- Foundation for eHealth Initiative under agreement with HRSA

**Notes:**
[NO SCRIPT]

## America’s HIE challenge and opportunity

- What problems are we trying to solve?
- Lessons from the research

**Notes:**
Let me begin with some details of our recent research into HIEs...

## What Problems are We Trying to Solve?  Fragmentation

- A person’s health record can be scattered throughout the healthcare “archipelago”:
- Primary care provider
- Specialists
- Former healthcare providers
- Labs
- Pharmacies
- Imaging centers
- Insurance companies
- Patient’s records/memory
- Family members

## What Problems Are We Trying to Solve? Quality and Cost

- _Quality = Every patient gets the right care, every time_
- More complete information enables better care:
- Existing conditions
- Allergies
- Medications
- Providers also need access to clinical protocols
- _Reducing Cost: No one knows what anything costs_
- Medical errors can be costly
- Duplicate tests
- Lost time, inefficiency

## Paper Kills

## What Problems Are We Trying to Solve? Lack of Information

- Without reliable information, markets cannot work
- Physician comparison to peers
- Consumer choice of doctor, hospital, etc.
- Payers/purchasers reward better performance
- Researchers benefit from easy access to the information
- Identify new therapies
- Assess current therapies

## You Really Need Clinical and Claims Data to Make This all Work

## America’s HIE challenge and opportunity

- What problems are we trying to solve?
- Lessons from the research

**Notes:**
Let me begin with some details of our recent research into HIEs...

## Why is HIT/HIE adoption behind other industries?

- Health care economics militate against patient-centric, point-of-care data collection and use
- Reimbursement approach fragments and distributes information to non-aligned institutions
- Asymmetries give payers and providers reason to silo rather than share data and capitalize on its potential

**Notes:**
The essential question is:

Why doesn’t US health care look like other sophisticated industries that have electronically transformed themselves? And, why are the emerging HIEs, specifically designed to bring this about, experiencing difficulties in obtaining start-up capital and sustaining revenue from their operations?

The answer is simple: the economics of our health care system militate against the mobilization of interoperable data where it is most needed – at the point of care.

Chiefly, the manner in which we reimburse care transforms clinical information into complex and fragmented information streams. This fragmented information is controlled by mutually non-aligned institutions that have little financial interest in bearing the costs of standardized data. 

In fact, asymmetries give plans and providers powerful incentives to silo information and gain profits over the value that might be produced in a transparent market. 

Without innovation on the frontier of information science that facilitates adoption and diffusion of integrative information feedback, asymmetries and opacity will continue to dominate American health care finance and production.

## Realities of financing HIE: 70 years of third-party FFS medicine

- Payment system encourages volume and fragmentation of care
- Fee for service is paid through individual component services
- Not based on total episode of care or quality/outcome
- Result: slim margins left over for innovative system approaches.
- Return on Investment for HIEs is there, but it’s not attractive to private sector investors.
- As a result, strong argument for public investment

**Notes:**
HIEs are forming as a response to system asymmetries, but the reimbursement mechanisms of health care erect, and institutionally embed, daunting obstacles.

Because most health care reimbursements are made on a fee-for-service basis through tens of thousands of CPT-4, ICD-9 Level 3, DRG and NDC codes, only the slimmest margins are left over for capitalizing information exchange investments. 

Because fee-for-service bears little relationship to clinical reality and the value of delivered healthcare from the patient’s point of view, no pricing mechanisms exist that signal a functioning marketplace. 

Fee-for-service alters budgetary dynamics such that each agent in the system maximizes its profits not though value optimization, but through volume maximization in an institutionally fragmented production chain. 

Thus, no substantive market exists for RHIO products and services that would generate sufficient revenues to pay down the rather large startup funds needed to build expensive technology hubs that make interoperable data possible.
As a result, HIEs have little resort to investment or lending institutions, and must rely on public/philanthropic grants and small stakeholder advances usually based on intuitive leaps of faith rather than reasoned business cases. 

## Lessons from the research

- Two markets in health care
- Understanding risk is key
- Episode of care is the socio-economic reality of care (global fees)
- Reimbursement reform and HIE are mutually dependent
- Reforming health insurance alone will not solve our problems

**Notes:**
Because the communication of value is central, our model must explore the ways in which HIEs create value.

Four generalized observations about value creation emerge, as detailed below: respectively, social capital, human capital, exchange functionality and market transformation.