A Marketplace Poised for Interoperability

Date: August 31st

Time: 6:23pm

Location: Metro North, the Henry Hudson car

A nice quiet ride home along the Hudson this evening with a bright orange sunset dropping down behind the Palisades, and a beautiful reflection of the fiery orb on the still river water. . . How’s that for an attempt at romantically descriptive prose?

So, where we left off earlier this week: Meaningful Use Stage 2 was announced and everyone immediately started dissecting and analyzing what it means to the marketplace. And as I mentioned, NYeC has been working on several programs that are poised to amplify this new wave of market momentum. But before we jump into the specific programs, and how we can collectively work together on this, let’s talk about interoperability. (If you don’t want to read a short dissertation on standards and interoperability, skip down to the section titled “Marketplace Need? No Question.”)

In the high tech world, there are literally hundreds, if not thousands, of interoperability standards that allow two or more different components from different companies to work together easily. There are interoperability standards that you probably know about, like USB and Bluetooth, and the lesser known standards that are used inside computers and software to enable companies that build end-user products to easily assemble them with components from different manufacturers without getting tied to any single manufacturer. Dell, HP, Apple, Lenovo, and others can select from a wide range of hard drives to put into your new computer because the data connector, power connector, and data transmission protocols have all been standardized by those industries—not new news, just bringing it into the discussion.

Standards open up and enable markets. Let’s talk through an example. If your cell phone only had a proprietary wireless technology for talking to a matched proprietary wireless headset, you would have no choices—you would be stuck with whatever your cell phone manufacturer designed and offered you, at whatever price they set. But as the Bluetooth standard emerged, and became ubiquitous on cell phones, there is now a marketplace of hundreds of wireless headsets to choose from, made by hundreds of manufacturers, for all different types of usage. And your purchase decision isn’t limited to one—the only one that will work with your cell phone—your purchase decision can be principally based on price and features. As we all know, the wireless headset marketplace is a competitive environment now. Vendors have to compete on price and features. And that, in turn, has forced those vendors to innovate in order to compete for business.

Marketplace competition creates innovation on new features, and is naturally a price driver. In this particular marketplace the dynamic was enabled by the Bluetooth wireless standard, USB enabled innovation, and price competition for wired devices (keyboards, mice, printers, backup storage, etc.). The JPEG file format was one of the standards that opened up the consumer digital photography market. There are numerous examples. This is not new news—it is a market strategy that has been employed by countless markets for a couple of decades.

So, how does this happen?

In general, there are three paths:

  • One company creates a standard that becomes the de facto standard because it has achieved marketplace dominance, and then the rest of the marketplace is largely forced to adopt that standard. The Microsoft file formats for Word, Powerpoint, and Excel are examples. These became the de facto industry standard file formats for documents, presentations, and spreadsheets. Because of the dominance of the Microsoft Office software in the marketplace, a company that choses to build competing software products for editing documents, presentations or spreadsheets couldn’t enter the market without making their software compatible with these de facto standards. Apple’s competing software, Pages, Keynote, and Numbers, needs to read/write the Word, Powerpoint, and Excel file formats because they are the de facto standards. In 2008, under pressure from several US and international governments, Microsoft published their proprietary file formats and have been working with an international standards body to open them up. Of course, they still control the file format standards for their latest versions of software. Adobe also created a de facto standard with the Portable Document Format, or PDF, which was kept as a proprietary standard by Adobe until 2008, when they essentially pushed it out into the open standards world.
  • The “industry” comes together and forms an alliance to develop a standard that is collectively owned, licensed, maintained, and marketed by a corporate entity that has representative and distributed governance across the industry. The USB Forum is an industry alliance of hundreds of companies that contribute to the development and maintenance of the USB set of standards. There is a WiFi Alliance, and a Bluetooth Special Interest Group. The credit card industry has a set of standards which enable credit cards to be used in millions of devices worldwide, as does the DVD industry. In all of these examples, the industry came together to drive standards because participants decided that they could collectively generate more revenue by enabling broad adoption of standards, thereby creating a much larger marketplace. Each of those particular industries decided, collectively, that they would all benefit by growing the overall marketplace—while also acknowledging that this would move the market to compete on price and features.
  • The government can also drive standards into the marketplace. The government can either develop standards, help the industry develop them through grant programs, or select a standard from the industry and force the industry to comply. If the government believes that a marketplace needs standardization (which may be for a variety of reasons) it can use a couple of different levers to try to move the marketplace to adopt. There are hundreds of standards that are directly referenced in laws and regulations—in most cases for consumer safety. The American National Standards Institute describes this on their website. In some cases, government can use its powers to nudge a stagnant marketplace or to address a monopolistic practice. These powers generally come in two forms: The government’s own purchasing power is used to purchase only products that comply, in order to set a standard, and that market dominance is sufficient to force a majority of the market to standardize; or the government actually sets a law or regulation that forces compliance. As we’ve seen through the Meaningful Use program, the federal government is using its purchasing power to try to influence the EHR market to adopt standards: If you want a piece of the $50B in stimulus money, you need to build an EHR product that is Meaningful Use Certified, and moving forward, that Certification is going to include a greater level of technical interoperability. But the threat of greater marketplace control is out there. The government could decide to take a heavier hand on regulating interoperability—and one could easily see HHS needing to do this on behalf of patient safety, similar to the way the FDA controls medical devices and their software to protect the patient.

Marketplace need? No question, it’s becoming a marketplace demand.

It goes without saying that the health IT marketplace is a complex place which has embraced standards in some areas and fought against standardization in others. Arguably, one of the principle drivers for some of the lack of interoperability has been the lack of need. If you only have a couple of healthcare providers in a community who actually use an electronic health record system, the ability to move data electronically across the community is obviously limited (what good is a single FAX machine?), then sharing information electronically couldn’t be a reality. And if the workflow, which is driven by the payment system, doesn’t really reward coordinated care, why would the providers and vendors seek to share their information? Interoperability would then naturally have a low marketplace value—neither the customers nor vendors would value it, and it wouldn’t get true product development attention. If the marketplace doesn’t value the ability to move patient records between disparate systems, why would the vendor community spend resources to develop interoperability in their products? But the marketplace is changing rapidly on a few fronts:

  • Meaningful Use has pumped over $50B into the marketplace, and now EHR adoption across all healthcare provider market segments is looking more and more like a high-tech hockey stick adoption curve. We can actually start to see believable EHR adoption graphs showing the healthcare industry crossing “the tipping point,” and breaking 80% adoption within 5 years. When a majority of the healthcare world has an EHR, nobody is going to find it acceptable to have to print patient records in order to share them.
  • There is a strong push towards team based or collaborative care, thanks to various forms of healthcare payment reform. The physician community is increasingly aware of how the inability to easily move around patient data is preventing them from the efficiencies and quality improvement activities in which they are being given incentives to participate. The marketplace is starting to value the ability to easily move patient records between disparate systems, and the demand for these capabilities has increased dramatically.
  • Lastly: Each year, a larger portion of the healthcare workforce has life experiences that include the Internet. Email, Google, iTunes, social media, and blogs have been a part of their lives since they were in high school. They know innately, obviously, the efficiencies that Internet tools provide for communication, assimilation of information, collaboration, and the increase in productivity and quality that come through their usage. And as this Internet savvy workforce continues to grow, and as the adoption of EHRs at the point of care continues to grow, we hear more and more stories from healthcare providers essentially relaying their disappointment in the EHR vendor marketplace in ways that continuously point back to the lack of interoperability standards.

“So, EHR vendor, you’re telling me that if I want to share records with the clinic down the road, I need to convince them to abandon their current EHR product and move to yours so we can share patient records through your proprietary exchange? And then we are locked into your proprietary exchange?”

Or, “Your EHR product doesn’t connect or share records as part of the basic product? I have to pay you or a consultant for customizations that enable your product to share data with the other providers I work with? And I have to pay annual support for those customizations on top of the basic product?”

Or, “If I don’t like your product two or three years from now because you increase the support costs or you don’t fund R&D efforts so the product becomes stagnant, I can’t easily get my patients’ data out of your system, buy a new system from a different vendor, and move my data? You’re going to try and sell me a product that locks me into a relationship with you because you intentionally are making the costs to move prohibitive?”

Now, I don’t want to be seen as beating up on the EHR vendor community. As I pointed out, the need for interoperability was low given where the market was a couple of years ago. But that has obviously changed, and I’ll make the point again:

The marketplace is starting to value the ability to easily move patient records between disparate systems and the demand for these capabilities has increased dramatically.

I need to wrap this up for today, the sun is setting and my boys need a story before bed. Next week I’ll tell you about how NYeC has been working with the EHR vendor community and the ONC to help address this marketplace demand—and how we now need your help. Goodnight.