I’ve written often of the values of a bottom-up, private market approach to Health Information Exchange (“HIE”) deployment.  The implementation and successful, deep, broad deployment of HIE brings with it competitive advantages that include better care, improved physician alignment, enhanced referral flow, and higher patient affinity and satisfaction.  Such benefits occur directly from improved information flow and better information delivered to the right provider at the right time improves care and creates an environment in which care providers prefer to work and patients prefer to receive care.  The corresponding return on investment makes the bottom-up market-driven model self sustaining.

I’ve said and written numerously when considering HIE, a health system should think, “competition first, then cooperation.”  The purpose of this nifty quote is to re-direct those that would consider a top-down, publically funded program predicated solely on the values and virtues of inter-health system cooperation.  Such top-down approaches have failed abysmally.  At this point, I don’t believe I need to enumerate the litany of failed public HIE initiatives.  In fact, my recommendation to our federal and state governments is to reconsider such public funds and direct them to other initiatives more appropriately served by the government.  In my opinion, driving market activity with public funds is a precarious endeavor wrought with great danger and instability especially when considering public HIEs operate at the whim of an administration powered by political and fiscal priorities often unassociated with the provision of care.

A bottom-up, free market approach to HIE does not preclude cooperation.  In fact, private HIE is justified using a simple guide:  competition first, then cooperation.  Inter-health system cooperation is not simply empty words placed in a free-market thesis to appease those searching to serve the public good.  Rather, it is a necessary and inevitable aspect of the private HIE market, as benevolence ultimately results from the invisible hand of self-interest.  Let’s consider why.

1. Risk Mitigation.  Health systems wishing to enter into a quality-based, shared risk reimbursement model must assess how to maintain quality care while mitigating risk.  Generally, such reimbursement models are defined by a specific patient population, not a provider population.  As a result, absent a complete geographic monopoly, which is extremely rare, a health system that enters a risk sharing reimbursement model cannot positively control all aspects of care vis-à-vis the care of the covered patient population.  This is true because health systems and their affiliated physician population cannot ultimately control where a patient chooses to seek care.

The best way to combat this phenomenon is to ensure patient health information is liberated and flows freely to all those that may deliver care to a covered patient.  In areas where physicians split referrals across entities serving overlapping and tangential communities, leveraging the HIE asset as a means to share critical clinical information appropriately spreads (i.e., dilutes) risk and helps mitigate what is otherwise a complete loss of control over patients for whom the health system is financially responsible.  Better information flow equals less risk and better economics.

2. Consumerism.  It is well documented in books like How We Decide (Jonah Lehrer) and Blink (Malcolm Gladwell), for example, that consumers don’t necessarily like too many choices but do seek out some choice – even in a highly inelastic environment such as healthcare.  Without choice, consumers, which in this case are patients and physicians, feel squeezed and hobbled by those that limit choice.  It is important progressive healthcare organizations that have chosen to leverage HIE for competitive advantage ultimately allow other organizations to participate in established exchanges.  Doing so provides health systems and smaller community hospitals two important features:

- First, when such progressive organizations offer health information exchange to additional providers in and near their community, they appear at once benevolent and confident in their own services.  Simultaneously providing such service to those that may have been competitors in the past offers patients and physicians in the community care options with comparable HIE capabilities, which will inevitably keep the patients and physicians comfortable in the notion that choice is available.  Absent the perception of choice, patients and physicians will seek alternatives and potentially disregard the community entirely as one in which choice is so limited as to call into question quality.

- Second, smaller community hospitals have an opportunity to band together, tied by the string of efficient, secure, enhanced information flow, and appear larger and more cohesive to the consumer market without losing individual hospital and health system identities.  This is particularly important now as there is a tendency in the industry for consolidation to gain scale in an unfavorable economic environment.  Ironically, not only does this approach enable smaller organizations to remain independent and appear larger, it offers such organizations better information flow, which invariably leads to better care.  No one would argue the point that better care equals better economics.

So, there you have it.  I absolutely believe establishing a market-determined competitive advantage through HIE is critical and the only means by which a truly sustainable business model can be established for health information exchanges.  But, my strongly held belief that it’s about competition first, then cooperation necessitates both sides of the equation.  For the system to truly grow and thrive, cooperation will emanate from a functional market supporting and advocating health information exchange.