Health Information Sharing and the Role of Market Competition and Government

An interview with David Blumenthal M.D., President of The Commonwealth Fund.

Health information sharing is critical for improved care coordination and clinical integration.  Yet barriers still remain preventing the easy exchange of health data. The federal government has historically been very active with incentives for health information exchange. However a new administration may mean a increased role in private companies to define future change. To learn more about these dynamics, we sat down with opening key note speaker Dr. David Blumenthal.

Pulse: One of the new features that we’ve launched this year at the Wharton Health Care Business Conference is called Tech Talks, which is a platform for innovative technology companies to share their ideas and vision for where health information technology is going.  You’ve mentioned in the past that health information exchange is a team sport, but competition may not be.  Can you talk about how you see solutions for that tension?

Dr. Blumenthal: There are a variety of ways to address the fact that there are strong market based incentives in the US healthcare system not to share information.

One solution is to increase the financial incentives for organizations to make information available concerning patients in a way that is useful. Value based payment, up to and including capitation, is one very important motivator for information sharing.  In that regard, I use the examples of Kaiser Health Plan and the Veterans Administration as two organizations that have often led the effort to exchange health information, and they do so because they both have a strong incentive to know everything about their patients, and to share and receive information to make sure that their patients get the care they need and nothing more than the care they need. To the extent that you internalize risk and internalize data in a compensation system, you create incentives to exchange information as organizations compete for market share.

In the fee-for-service world, those incentives are much less powerful. In a world where volume and price are the key to success, keeping information about patients can increase patient loyalty and reduce the chance they will go elsewhere for their care – that makes sharing health information a lot less interesting.  In that situation, information becomes proprietary value, and sharing becomes much more threatening.

I think financial incentives that encourage taking responsibility for cost and quality tend to promote information sharing as part of a value creation proposition. It may not do everything you need but it encourages it.

There is another part of this that has to do with the vendor incentives.  Interoperability is critical to making it easy for organizations to move in and out of vendors, because if you can move information easily between systems that means you can swap systems in and out more easily, and therefore you can, as a provider organization, execute more influence on the suppliers by threatening to change. The absence of effective standards for information exchange becomes a real barrier to effective competitive markets on the supply side.


Pulse: In a sense that alternative payment models can help drive or create the umbrella that is available for information exchange, do you feel that was one of the underlying reasons for MACRA and has that created opportunity for greater information exchange and collaboration?

Dr. Blumenthal: I think it is too early.  We are just into the first implementation of MACRA.  The earliest implementation began effectively this January.  I hope it will have that effect.

You shouldn’t expect that people will understand their own economic interests immediately. Old habits die hard, and it may take a while for organizations that are at risk for cost and quality of care to realize that they have a fundamental interest in sharing information and can execute the agreements that enable exchange.

There is the realization and then also the execution. I think this is a longer term proposition, one that will evolve over time.

I would also point out that there are plenty of examples of active exchange of information in the US healthcare system.  They are not the rule, but they are not totally the exception either. There are well functioning state-based and community-based exchange mechanisms that are working as we speak and have been working for years. There are certainly circumstances where market forces have been overcome by other forces. Mostly they are community influences.

The other spur to information sharing, as that comment suggests, is government action. As part of the 21st Century Cures Act which passed in the last session of congress, there are important penalties for what’s called “information blocking”. Those penalties apply to both providers of care and vendors. The penalties for engaging in information blocking are as much as $1M per incident. If the new administration chooses to enforce this regulation as I hope it will, that will be a significant non-market regulatory spur to information sharing, and sometimes when markets don’t work in the interest of consumers - in this case, patients – there is a role for government in making sure consumers are protected.


Pulse: Generally speaking, how have you witnessed companies evolving their thinking about competition in the health care market?

Dr. Blumenthal: Over the course of my career, health care markets have become more like other economic markets, at least in form. That is, health care entities are expected to compete the way companies compete in other markets and they have felt permission and encouragement to treat other organizations in their marketplace as competitors rather than potential collaborators.  The purpose of this of course has been the theory that competition will lead to higher quality and lower cost.

What happens in those circumstances, is varied. Health care markets do depart in some major respects to other markets in their functioning.

It has been hard to demonstrate with clarity or convincingly that the current structure of healthcare markets has resulted in lower cost. There may be times when they result in lower cost per unit of care but not in overall number of units provided and in fact until 2010-11 healthcare costs were going up very fast and without mitigation in sight. The only times that we’ve seen effective cost control in the US has quite paradoxically been when prices have been regulated, or recessions have reduced the purchasing power of companies and consumers. While we have seen a philosophical and practical move toward competition, I’m not sure that we can yet site competition as having solved our major healthcare problems.

There are times when the publication of information proves very salutary, so transparency can be very powerful as a behavior change. The best examples are transparency around quality – through Medicare care data, for example. We’ve seen only rare instances of transparency on price – not on cost, but on price – for example, in Massachusetts where the attorney general released pricing data. That has unfortunately not proven as successful as one might have hoped in constraining the growth of health care costs.

There are many reasons why transparency is of mixed effect, but there are examples where embarrassment and shame have proven very powerful in changing provider behavior. Providers do not like to be seen as underperforming on quality and when quality information embarrasses them they tend to change behavior out of professional pride rather than necessarily fear of loss of market share, although that may be a factor.

So it’s a complicated market. There is evidence that consolidation is not good for price control, which is what you would expect in a market. So it might be concluded that if consolidation raises prices, then competition lowers prices. That seems to be true for the hospital market. But price may very well be different from cost and the fact is that overall cost is the product of price and quantity. Even if you lower your prices for a unit of service, you can more than compensate for the bottom line by increasing the quantity of services provided. That is something that competing providers have proven extremely clever at doing.


Pulse: What themes can we expect from the new administration on changes with health policy?

Dr. Blumenthal: The new administration and the Congress are two different entities at this point.

I have no idea what to expect from the Congress, except that it will be change and there are a whole raft of scenarios that are possible. The only thing I think we can say with certainty is that no one knows what is going to happen.

On the administrative side, that is on the executive branch side, I think we will see a slowdown in the enforcement of the current law. I think we will see the administration do everything within its power to weaken the Affordable Care Act, to reduce the effectiveness of the individual mandate, to reduce the effectiveness of federally facilitated marketplaces, to reduce enrollment in marketplaces, to make it possible for states to exercise more authority over their Medicaid programs and to add more requirements as conditions for qualification for Medicaid.

The administration can’t block grant Medicaid, but they can grant waivers with considerably more discretion and more easily including provisions that are great departures from past practice with respect to Medicaid. I would expect to see the rate of increase in newly insured Americans decline and potentially the number of insured Americans decline in the first years of the new administration. This is pending any changes in the law, which could create a new arrangement that the new administration would support which might reverse erosion of insurance.

On terms of delivery system improvement, Mr. Price, should he be confirmed, isn’t likely to be an advocate of federal leadership for healthcare reform. I think he would reduce the rate and number of experiments. I think he would leave much more discretion to the private market. I think he would accept whatever the private market offers in terms of innovation, change, and evolution.

I’m quite confident that he would implement MACRA because he was a congressional supporter of MACRA. However, I have no idea whether he would continue to experiment with other risk-bearing compensation arrangements such as accountable care organizations, the bundled payment arrangements, capitation for end stage renal disease payments or for other disease specific arrangements. I would expect to see a much less active federal leadership on delivery system reform.


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David Blumenthal, M.D.

President, The Commonwealth Fund

David Blumenthal, M.D., M.P.P., is president of The Commonwealth Fund, a national philanthropy engaged in independent research on health and social policy issues.

Dr. Blumenthal is formerly the Samuel O. Thier Professor of Medicine at Harvard Medical School and Chief Health Information and Innovation Officer at Partners Healthcare System in Boston. From 2009 to 2011, he served as the National Coordinator for Health Information Technology, with the charge to build an interoperable, private, and secure nationwide health information system and to support the widespread, meaningful use of health IT. He succeeded in putting in place one of the largest publicly funded infrastructure investments the nation has ever made in such a short time period, in health care or any other field.

Previously, Dr. Blumenthal was a practicing primary care physician, director of the Institute for Health Policy, and professor of medicine and health policy at Massachusetts General Hospital/Partners Healthcare System and Harvard Medical School. He is the author of more than 250 books and scholarly publications, including most recently, Heart of Power: Health and Politics in the Oval Office. He is a member of the Institute of Medicine and serves on the editorial boards of the New England Journal of Medicine and the Journal of Delivery Science and Innovation. He has also served on the staff of the U.S. Senate Subcommittee on Health and Scientific Research and is the founding chairman of AcademyHealth, the national organization of health services researchers.

Dr. Blumenthal received his undergraduate, medical, and public policy degrees from Harvard University and completed his residency in internal medicine at Massachusetts General Hospital. With his colleagues from Harvard Medical School, he authored the seminal studies on the adoption and use of health information technology in the United States. He has held several leadership positions in medicine, government, and academia, including senior vice president at Boston’s Brigham and Women’s Hospital and executive director of the Center for Health Policy and Management and lecturer on public policy at the Kennedy School of Government. He served previously on the board of the University of Chicago Health System and is recipient of the Distinguished Investigator Award from AcademyHealth, an Honorary Doctor of Humane Letters from Rush University and Honorary Doctors of Science from Claremont Graduate University and the State University of New York Downstate.