A Lesson in Health Care Innovation…from the Government?

Government gets a bad rap in American politics. Not all of it is undeserved, mind you, but one thing that isn’t deserved is the accusation that the public sector is unable to innovate. In fact, for some of the innovations that matter the most—like electronic medical records—the public sector might just be our best bet for progress.

Consider the example brought up by Jack E. Lohman, a Health Beat reader who comments on Wisconsin politics. Responding to one of my posts, Lohman offered information about VistA, the Veteran Administration’s electronic health records system. Lohman notes that VistA works by “instantaneously search[ing] for patients around the country with similar diseases and lists the physicians’ treatments and successes, grouped by the most common treatments.” In other words, it aggregates and cross-compares data to see which treatments have worked for which kinds of patients.

This information is then matched up with “a one-time, lengthy health questionnaire that would be turned over to the physician for evaluation.” Translation: patients are surveyed to see where they fit in the VistA database so that doctors can better assess their situation. (This might sound familiar: it’s similar to Germany’s system of “diagnosis-related grouping,” which I mentioned in a post last month).

VistA is a great tool—and, I would argue, one that exemplifies the benefits of getting the public sector involved in health care IT.

One of the biggest concerns surrounding heath care IT is the cost inherent in making a paradigm shift. A 2006 JAMA study showed that health care providers are worried about IT transitions primarily because of start-up costs (installation, consultation, training, etc), ongoing costs (such as compliance with privacy laws—no small matter, given the ambiguity of HIPPA) and the potential loss of productivity as employees learn the new system.

But because the VA is not a profit-driven health care provider competing with other for-profit providers, it can shoulder the costs of an IT transition without panicking: there is no imperative to out-do the other guy. We often focus on market competition as a catalyst for innovation, but it also can inhibit long-term thinking. Few profit-driven establishments will choose guaranteed immediate costs, even if they know the costs could lead to far-off rewards.

A public health care system like the VA is a long-term proposition—once you enter the VA system as a patient, you’re liable to stick with it for a long time. The administration will reap the full benefit from its investment. One worry for health care providers today is that slogging through an IT transition will not just mean increased costs, but also that these costs will not be made up in the future.

A private practice, for example, may worry that if it shells out IT transition expenses now, its current patients will up and leave for a new provider in the future. Thus each patient represents a potential net loss: money was dedicated to designing a system around these him or her, but the provider won’t see the benefits of more efficient care in the future if (s)he leaves.

VA coverage, on the other hand, is universal enough for the system to recoup investments that are costly in the short-term. Because all veterans are covered– and most who go to the VA tend to stick with it for much of their care—the VA can take comfort in the fact that paying more for patient services today will translate into future savings. The more efficient care that comes from good health care IT will be realized under the same umbrella.

At the same time, the VA has an easier time slogging through the transition process without worrying that employees are less productive, because it defines productivity differently than private practitioners. There is no fee-for-service schedule in the VA. Doctor salaries are determined by three criteria: a base pay level, matched to years of VA service; a regionally-based market pay, which fluctuates as-needed to keep VA salaries competitive in different areas; and performance pay, linked to quality of outcomes (e.g. quality of care, timeliness, patient satisfaction).

Thus, in the VA system, the volume of patients seen or number of procedures administered is not a pressing consideration. Time itself is not commoditized—it’s kosher to spend time doing something other than seeing and treating patients.

This may sound oddly heartless—don’t we want doctors to spend all the time they can with patients? But the point here is that the VA incentive structure does not value doing more for its own sake; it values results. And so, relatively arduous transitions like learning to create electronic medical records carry with them a lower opportunity cost for the VA than for other providers. Volume—and by extension, time—is not the primary driver of compensation.

The universality of VA coverage also benefits IT transitions through economies of scale. Because the VA covers so many patients, it has more leverage bargaining with providers. And because it has better bargaining power, it can reduce costs outside of IT adoption, and thus better shoulder the transition. Further, because more people benefit from a one-time IT adoption process, the accumulation of savings will be high. One big payment now is offset by a huge number of smaller savings in the future.

By contrast, smaller health care operations (e.g. private practice physicians) can’t handle the costs of IT implementation nearly as well because they lack the scope and scale of the VA. What they pay up front is not only riskier, but will not be balanced by as many smaller savings—because fewer patients are covered.

The final way in which a public-sector system like the VA is well-suited to the IT transition has to do with its comprehensive, top-to-bottom management of patients. In the VA model all electronic records speak the same “language,” i.e. they are compatible and can speak to each other. One system of records is managed by a single authority that covers a wide array of health care needs.

By contrast, more market-driven innovation runs the risk of incompatibility: different providers will create different platforms and data formats in order to protect their market share. The result is an electronic tower of Babel.

Indeed, two of the biggest issues with current efforts at creating regional electronic networks are consistency and accuracy. Too often, it is difficult to match patients to records that might be incomplete or incorrectly linked. Juggling various systems means more opportunities for hiccups.

Unfortunately, in a market-based situation—where various electronic network providers are competing to contract with hospitals, or even the government—the incentive to maintain this fragmentation is high. Competitors want to protect their proprietary platform and “beat out” competitors in order to consolidate their market share. Competitive advantage demands a certain degree of secrecy.

By contrast, the public sector is not engaged in a turf war: VistA is open source software, freely available under the Freedom of Information Act

Ultimately, here is what everyone needs to understand about healthcare IT: Electronic medical records are an innovation that will produce important long-term benefits—but only after high short-term costs. This makes the IT transition a real bear for most health care providers—but not the VA. It just goes to show: progress isn’t always synonymous with markets.

12 thoughts on “A Lesson in Health Care Innovation…from the Government?

  1. Once the wrinkles, eg HIPAA compliance, are worked out, EMR’s should advance the quality of care delivery. The elephant in the room is how these would be financed. With low reimbursements and high overhead, eg skyrocketing medmal premiums, many docs can barely meet payroll, let alone invest in EMR’s.

  2. This was supposedly new info? From WSJ —

    May 30, 2007
    Op-Ed Contributor
    Physician, Upgrade Thyself
    By THOMAS GOETZ
    SAN FRANCISCO
    GO into almost any medical office, hospital or clinic in the United States and your records will still be handled the old-fashioned way — on paper ..
    Health care providers have been dreaming about electronic records for so long that the idea has begun to seem like vaporware, a never-to-be-realized fantasy similar to flying cars and jetpacks. But there is already a clear software standard, an open-source system that’s low-cost, easy to use and readily available. It could be the key to the health care system we ought to have already.
    The program, WorldVistA, is based on the Veterans Affairs Department’s electronic-records system, called VistA (short for Veterans Health Information Systems and Technology Architecture — and yes, they beat Bill Gates to the name) ..

  3. I work for a Federal statistical agency that has some functions quite similar to those at the Census Bureau. We ported a generic system developed and written by Census to our agency — it was a project similar to what you suggest could be done with the VA’s software.
    It was not a project for IT virgins! We were successful, but it was because top management said that it “would work.” Otherwise our different organizations never would have held together for the implementation of this system.
    It seems unlikely that a medical group with the budget and willingness to undertake such an implementation would not already have an automated system.

  4. The VA definitely has benefits with it’s IT solution, despite the fact that access and other issues plague the system.
    Nevertheless, widespread IT adoption, in a way that will achieve the outcomes we desire, will require significant funding.
    Government funded/provided EMR would be a solution we’d welcome in our group.

  5. The problems spoken of here apply to small practices. Kaiser Permanente, the Cleavland Clinic, Geisinger, and many university hospitals to name a very few are already implementing EMRs. They are spoken of like some far-off marvel but they are already here. The big organizations above are having little trouble funding the projects.
    I agree, though, I don’t see yet how small clinics and individual docs will be able to implement EMRs.
    VistA may be great for data, I don’t know, but it sure isn’t one of the easier systems to use.

  6. My take: CPOE, VistA, doctor rating websites

    1) Boston’s BI-Deaconess’ CIO on proper computerized provider order entry (CPOE) implementation (which can also be extrapolated to EHRs): “CPOE must be a system created by the clinicians, not inflicted on them.”

  7. Personal Health Records system collects all information pertaining to the patient, which includes past medical history of the patient, laboratory test results, medications etc. This allows doctors to have instant access to patients’ data, and can give right treatment with no delay, it offers secured storage of data. Regardless of the region and time, the authorized users can access the data for various purposes such as better treatment for patients, research of critical and peculiar cases, to avoid repetition of tests and etc.

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  9. Once the wrinkles, eg HIPAA compliance, are worked out, EMR’s should advance the quality of care delivery. The elephant in the room is how these would be financed. With low reimbursements and high overhead, eg skyrocketing medmal premiums, many docs can barely meet payroll, let alone invest in EMR’s.

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