ONC and FTC on Health IT Market Competition

ONC: Promoting Competition to Achieve Our Health IT and Health Care Goals
October 7, 2014, Jodi G. Daniel, J.D., M.P.H., Director, Office of Policy , and
Karson Mahler, J.D.,  Policy Analyst, Office of Policy

ONC has long recognized the need to foster innovation and competition to achieve the nation’s health IT and health care goals. The HITECH Act charged us with enabling the electronic use and exchange of health information—information that will support consumers and facilitate better quality and more efficient care.

A competitive and dynamic health IT marketplace fundamentally supports that mission by encouraging and rewarding innovation that drives improvements in the technologies and services providers and consumers need to strengthen our health care system.

ONC and the Federal Trade Commission (FTC) have begun collaborating in new areas to advance our shared commitment to promoting competition in health IT markets while ensuring that health IT is a driver of quality and value in health care.

In March of this year the FTC convened a two-day public workshop, Examining Health Care Competition. Not only did we participate in a panel discussion, but the workshop also included a session on health IT opened by comments from Karen DeSalvo, the national coordinator for health IT.

At the workshop, we heard plenty of reasons to be encouraged about ways that competition is working to deliver interoperable systems and services. As one presenter put it, since 2009 the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs have inspired the most rapid growth in information technology adoption in any industrial sector in recent history. And with new payment and delivery reforms under the Affordable Care Act, demand for health IT products will continue to grow as providers migrate toward new business models that depend on health IT and health information exchange (HIE) for quality measurement, analytics, population health management, and risk-based contracting.

Despite successes, however, a clear takeaway from the FTC workshop was that health IT markets are not functioning as efficiently as they could be. Commonly cited concerns included:

• A lack of transparency and comparability for health IT products and services, including accurate and complete information about costs and limitations. Without this information, health IT purchasers may find it difficult to exercise informed choice in the marketplace, despite the availability of competing products and services.
• A lack of interoperability across health IT products and services, which panelists and commenters explained may limit the potential of health IT and HIE to support improvements in health and care delivery. Because of the lack of mature and widely adopted industry standards for interoperability, a good deal of innovation to date has occurred within what some panelists termed “walled gardens”—closed information sharing networks often based on expensive and proprietary health IT solutions adapted to the needs of existing health care delivery systems. As market-based reforms shift provider incentives towards new care delivery models that reward quality and value, there is a risk that some providers may find themselves “locked in” to rigid technologies or information sharing networks. As a result, these providers may find it prohibitively expensive to switch to new technologies that offer superior value, capabilities, and opportunities for delivering higher quality and more efficient care.
• Business practices that inhibit or block the electronic sharing or transfer of health information. We also heard concerns regarding developers or providers who restrict information exchange with users of other EHR products or HIE services. Such conduct could include policies or practices that prevent or make it difficult to establish connections (or “interfaces”) to other systems. It could also include price or other contractual terms that limit “data portability” in the event that a provider decides to switch to a different health IT vendor’s product.
• ONC and FTC intend to work more closely in the coming months to understand these and other competitive issues involving health IT—issues that may limit the ability to realize the goals for interoperability and improved patient care. The FTC’s companion blog post reflects our common commitment to competition as a driver of quality and value in health care, with health IT a vital part of competitive markets.

ONC and FTC are cooperating and sharing information to better understand market dynamics related to health IT. In consultation with FTC, ONC will formulate policies that advance patient care through competition and innovation. Government policy may be able to improve transparency, promote interoperability, create incentives for quality, and reduce barriers to competition and innovation.

For example, to promote more transparent health IT markets—and consistent with HHS’s larger commitment to health care transparency—ONC publishes certification test results and requires health IT developers to disclose certain costs associated with certified health IT products. We also work with industry and other stakeholders to advance core technical standards and functions that reduce the costs of entry and open up opportunities for innovators and new technologies.

We expect to continue to build on and expand these efforts going forward as we encourage greater market transparency by the private sector.

ONC will continue to actively monitor health IT-related business practices that could impede progress towards interoperability or harm competition or consumers. We will also share information and our industry awareness with FTC and assist the Commission to monitor and investigate questionable practices.

As we develop the draft nationwide interoperability roadmap, we know a competitive and dynamic health IT marketplace is essential to achieving the vision. Wherever possible, we will use our authorities and coordinate with other agencies to promote transparency in health IT markets, empower purchasers to make better decisions, and eliminate barriers to competition and innovation...
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FTC: Promoting healthy competition in health IT markets 
Tara Isa Koslov, Office of Policy Planning, Markus Meier, Bureau of Competition and David R. Schmidt, Bureau of Economics | Oct 7, 2014

The FTC has been a consistent proponent of competition in health care markets, utilizing our full range of study, advocacy, and enforcement tools. We are equally proud of our track record in promoting innovation and responding to new technological developments throughout our 100-year history. The FTC is well-positioned to monitor competition in today’s burgeoning health information technology (IT) marketplace – relying on our combined expertise in health care, technology, and health-related privacy and data security issues.

At the FTC’s March 2014 Examining Health Care Competition workshop, one panel focused on advances in health care technology, including electronic health records, health data exchanges, and new hardware and software platforms used by health care providers and payers. As panelists explored the competitive landscape, they discussed the goals of interoperability, the potential for health IT to facilitate greater efficiency and coordination of care, and the need to promote continued innovation. They also warned of potential threats to competition from high switching costs, data lock-in, misguided standard-setting activities, and other features of health IT systems and platforms.

Our technology panel benefitted greatly from the participation of two senior officials from the Office of the National Coordinator for Health Information Technology (ONC), the federal agency charged with oversight and coordination in this important area. Since the workshop, FTC and ONC have strengthened our relationships, and we continue to collaborate on many levels. For example, FTC competition and consumer protection staff are playing an active role on the Federal Health IT Advisory Council, the interagency working group that helps to develop the federal health IT strategic plan.

We support ONC’s efforts to develop an “interoperability roadmap” [pdf] and related guidance that will promote competition, efficiency, innovation, and coordination of care, while achieving ONC’s overall policy goals. We are working with ONC staff to identify potential competition issues relating to health IT platforms and standards, market concentration, conduct by market participants, and the ability of health IT purchasers to make informed buying decisions. ONC’s companion blog post highlights some of the areas of mutual interest.

In return, we are benefitting from ONC’s expertise and industry knowledge as we learn more about how health IT markets operate, which health IT features are desired by providers and patients, and what types of conduct may benefit or harm health IT competition and innovation. ONC staff are helping us to evaluate issues that may be worthy of additional FTC research, advocacy, and investigation.

FTC staff, together with our ONC partners, will continue to pay close attention to developments in health IT markets. We already know that competition is central to improving health care quality and outcomes, reducing costs, and improving the consumer experience. We and ONC agree that competition in health IT markets is equally important to drive quality and value in health care.

See also The Jason Report.
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"Healthy competition?" Is this stuff simply naive? Isn't that what the Meaningful Use incentive money was to have stimulated? Or, did MU "distort" private market incentives? Now four years out, the feds are gonna promote "competition" precisely how, absent any more funding? What options remain? "Regulation," we are always told, "inhibits competition and innovation," right? It simply inures to the benefit of incumbents, right?

"Free Market" evangelists love their Holy Canon of competition -- until it gets too effective, whereupon they clutch their pearls and poignantly decry "predatory competition" (i.e., those markets with crappy, increasingly nil margins because of -- well -- too many eager ("ruthless"?), adroit ("ruthless"?) competitors and too much price "transparency").

OK, let's recap some Peter Thiel, from a prior post.

4. THE IDEOLOGY OF COMPETITION
CREATIVE MONOPOLY means new products that benefit everybody and sustainable profits for the creator. Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival. So why do people believe that competition is healthy? The answer is that competition is not just an economic concept or a simple inconvenience that individuals and companies must deal with in the marketplace. More than anything else, competition is an ideology— the ideology— that pervades our society and distorts our thinking. We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it—even though the more we compete, the less we gain.

This is a simple truth, but we’ve all been trained to ignore it...

3. RUTHLESS PEOPLE
The competitive ecosystem pushes people toward ruthlessness or death.

A monopoly like Google is different. Since it doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products, and its impact on the wider world. Google’s motto—“ Don’t be evil”— is in part a branding ploy, but it’s also characteristic of a kind of business that’s successful enough to take ethics seriously without jeopardizing its own existence. In business, money is either an important thing or it is everything. Monopolists can afford to think about things other than making money; non-monopolists can’t. In perfect competition, a business is so focused on today’s margins that it can’t possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.

MONOPOLY CAPITALISM
So, a monopoly is good for everyone on the inside, but what about everyone on the outside? Do outsized profits come at the expense of the rest of society? Actually, yes: profits come out of customers’ wallets, and monopolies deserve their bad reputation— but only in a world where nothing changes...

So why are economists obsessed with competition as an ideal state? It’s a relic of history. Economists copied their mathematics from the work of 19th-century physicists: they see individuals and businesses as interchangeable atoms, not as unique creators. Their theories describe an equilibrium state of perfect competition because that’s what’s easy to model, not because it represents the best of business. But it’s worth recalling that the long-run equilibrium predicted by 19th-century physics was a state in which all energy is evenly distributed and everything comes to rest— also known as the heat death of the universe.

Whatever your views on thermodynamics , it’s a powerful metaphor: in business, equilibrium means stasis, and stasis means death. If your industry is in a competitive equilibrium, the death of your business won’t matter to the world; some other undifferentiated competitor will always be ready to take your place.

Perfect equilibrium may describe the void that is most of the universe. It may even characterize many businesses. But every new creation takes place far from equilibrium. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.

Tolstoy opens Anna Karenina by observing: “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

Yeah. I'm not sure I'm buyin' all of Thiel without reservation (in terms of general economic theory), but he make some great points. With respect to "fostering competition," recall my February 23rd, 2014 Interop post:

“We should not prescribe specific functionality for the EHR other than interoperability and security.”
 - John Halamka

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Updated, annotated: on the (misnomer) “interoperability” side, from my recurring blog rant.

One.Single.Core.Comphrehensive.Data.Dictionary.Standard

One. That’s what the word “Standard” means -- er, should mean. To the extent that you have a plethora of contending “standards” around a single topic, you effectively have none. You have simply a no-value-add “standards promulgation” blindered busywork industry frenetically shoveling sand in the Health IT gears under the illusory guise of doing something goalworthy.

One. Then stand back and watch the private HIT market work its creative, innovative, utilitarian magic in terms of features, functionality, and usability. Let a Thousand RDBMS Schema and Workflow Logic Paths Bloom. Let a Thousand Certified Health IT Systems compete to survive on customer value (including, most importantly, seamless patient data interchange for that most important customer). You need not specify by federal regulation (other than regs pertaining to ePHI security and privacy) any additional substantive “regulation” of the “means” for achieving the ends that we all agree are necessary and desirable...

See also my post Will the API be the savior of Health IT "interoperability"?

...[A]bsent a solid foundation, it's difficult to see how we erect a durable and useful complex "interoperable" health IT/HIE structure based on myriad proprietary elements.

Visualize going to Lowe’s or Home Depot to have to choose among 1,848 ONC Stage 2 CHPL Certified sizes and shapes of 120VAC 15 amp grounded 3-prong wall outlets.

Yeah, I know, it's not a perfect analogy (analogical perfection is what's known as "redundancy" or "tautology"). Still, the "data" that comprise electricity are free electrons on the move. They have two fundamental attributes, volume (amperes) and pressure (voltage; recall "W=VA"?). Health IT data are ASCII collated binary voltage state representations (ignoring the legacy EBCDIC) comprising numeric and textual symbols (images being specific encodings of the former).

120VAC electrons are rather effortlessly "interoperable." Only proprietary opacity keeps health IT from achieving similar efficient, utilitarian "patient-centered" convenience...

The conundrum:

"Efficient Markets Hypothesis 101: Opacity = Margin."

apropos, let me recap some JD Kleinke, from my June 2011 post "Use Case"

HIT market failure. The underlying cause of Joe’s death is health information technology (HIT) market failure. If the state of U.S. medical technology is one of our great national treasures, then the state of U.S. HIT is one of our great national disgraces. We spend $1.6 trillion a year on health care—far more than we do on personal financial services—and yet we have a twenty-first-century financial information infrastructure and a nineteenth-century health information infrastructure. Given what is at stake, health care should be the most IT-enabled of all our industries, not one of the least. Nonetheless, the “technologies” used to collect, manage, and distribute most of our medical information remain the pen, paper, telephone, fax, and Post-It note.

Meanwhile, thousands of small organizations chew around the edges of the problem, spending hundreds of millions of dollars per year on proprietary clinical IT products that barely work and do not talk to each other. Health care organizations do not relish the problem, most vilify it, many are spending vast sums on proprietary products that do not coalesce into a systemwide solution, and the investment community has poured nearly a half-trillion dollars into failed HIT ventures that once claimed to be that solution. Nonetheless, no single health care organization or HIT venture has attained anything close to the critical mass necessary to effect such a fix.

This is the textbook definition of a market failure. All but the most zealous free-market ideologues recognize that some markets simply do not work. Indeed, reasoned free-market champions often deconstruct specific market failures to elucidate normal market functioning. The most obvious examples of such failures (such as public transit and the arts) are subsidized by society at large because such subsidies yield benefits to the public that outweigh their costs. Economists refer to these net benefits as “positive externalities,” defined as effects that cannot be captured through the economic equation of direct cost and benefit.

The positive externalities of an HIT system approaching the functionality of our consumer finance IT system include reduction of medical errors like the one that killed Joe Wilson; elimination of tens of thousands of redundant and expensive tests, procedures, and medications, many of which are not only wasteful but harmful; and the coordination and consistency of medical care in ways only promised by the theoretical version of managed care. These public health benefits are well beyond the reach of a health care system characterized by the complexities of medicine and conflicts of multiple parties working at economic cross-purposes. They are trapped outside the economic equation, positive externalities of a stubbornly fee-for-service health care system that inadvertently rewards inefficiency, redundancy, excessive treatment, and rework...

Hmmm...

According to [modern economic] theory, everything works like clockwork. If certain individuals (and, by extension, firms) make erroneous choices (rationality does not preclude errors), then other market participants will rush to take advantage of these errors, swiftly correcting the anomaly. Those who acted erroneously will soon realize their error and learn from it. Rational individuals may make mistakes from time to time, but they learn from these mistakes, never repeat them, and improve themselves.

Moreover, the theory says that despite its flaws (neoclassical economists acknowledge that conditions of perfect competition do not actually exist), the free-market mechanism functions in the best possible manner, efficiently determining prices. Prices , as set by the forces of supply and demand, are always fair reflections of real value. There are no “hidden” values or other anomalies. Firm belief in the rationality of individuals leaves no room for accepting concepts such as speculation or instability. At any given time, the market reflects reality and leads to optimality, provided that it operates freely, without any intervention or any meaningless, inefficient regulation. The closer we get to the conditions of perfect competition, the closer both the economy and society get to optimality.

Finally, markets and rational actors— firms and households— do not require any kind of guidance or protection. The system will balance itself in the best possible manner and will find its way. Any central intervention might offer some short-term relief, but it could also sow the seeds of even more serious anomalies and problems.

According to mainstream economic theory , free-market capitalism is more or less perfect and stable, provided that it can operate without any hindrance. But if everything works like clockwork, as the theory claims, then why is the economy frequently hit by violent crises? Why do we see extreme volatility and instability, even in foreign exchange and stock markets, which approximate the features of perfect competition like no other market?

Papadogiannis, Yannis (2014-08-12). The Rise and Fall of Homo Economicus: The Myth of the Rational Human and the Chaotic Reality (pp. 61-62). CreateSpace Independent Publishing Platform. Kindle Edition.

Ahhh... What do I know?
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UPDATE

Lagging interoperability stymies quality
Efficiency continues to suffer and care is not as safe as it should be
Neil Versel, October 13, 2014

Stage 2 of meaningful use is supposed to be about interoperability of data, with electronic records flowing securely between sites as needed to help hospitals and doctors provide better care. But the number of attestations to Stage 2 – just 25 hospitals and 1,277 eligible professionals nationwide had attested to Stage 2 in August, according to CMS – has been anemic, and there is plenty of anecdotal evidence suggesting true interoperability is a long way off.

Meanwhile, efficiency continues to suffer and care is not as safe as it should be.

At a Washington conference on the future of healthcare this month, national health IT coordinator Karen DeSalvo, MD, said that in the absence of interoperability, EHRs will have limited effect on care quality.

"We have to remember that health IT is a tool," DeSalvo said several times that day. "Health is more than healthcare and that health IT goes far beyond electronic health records," she added.

Some now are suggesting that it might be time once again to rethink health information exchange, while many are touting application programmer interfaces as a smart way to connect EHRs to each other and to external data sources...

 Of ourse, he's referring to clinical care efficiency, not "economic efficiency." And, again Will the API be the savior of Health IT "interoperability"?

DeSalvo said the API strategy is merely one way to achieve interoperability, and she praised EHR vendor Cerner for showing "how useful it can be." But interoperability of health information is not exactly easy, and it is not a panacea for all that ails healthcare.

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ERRATUM

From THCB:

Six Sigma vs Ebola
By SAURABH JHA, MD

If another case of Ebola emanates from the unfortunate Texas Health Presbyterian Hospital, the Root Cause Analysts might mount their horses, the Six Sigma Black Belts will sky dive and the Safety Champions will tunnel their way clandestinely to rendezvous at the sentinel place.

What might be their unique insights? What will be their prescriptions? ...

They would be careful in blaming the electronic health record (EHR), because it represents one of the citadels of Toyotafication of Healthcare....

The problem solvers might offer five prescriptions:

1. Sensitivity training for all physicians.
2. Mandatory courses on Coursera on Quality and Safety.
3. A must watch video for all healthcare workers on the importance of communication, with real patients who have been harmed by lack of communication.
4. Six Sigma liaison person in the hospital and an identifiable safety champion for each clinical section.
5. An app for Ebola.

I suspect they will tell us that when everyone is responsible for everything no one is responsible for anything.

That when nurses try to be doctors (and accountants for CMS) and doctors try to be managers (and accountants for CMS) there will be a de facto shortage of doctors and nurses...

But only physicians can beat the decline in judgment induced by the epidemic of noisy irrelevancy. If we fail, managerialism will fill its space, leading to further decline, then even more managerialism, a vicious cycle...

Ouch.

MORE ON MARKETS AND COMPETITION

Jean Tirole, Nobel Economist, from Bloomberg BusinessWeek:

The government worries mainly about “horizontal” mergers in which one company buys another that does the same thing. But there’s also a risk in vertical combinations. A monopolist in one part of the production chain–say, a computer operating system–might be able to extend its market power to neighboring links on the chain.

The Chicago School of antitrust economics, personified by the likes of failed Supreme Court nominee Robert Bork, argued in the 1970s and 1980s that attempts to extend a monopoly “vertically” would be irrational because a company could get all the benefits of its market power without merging with one of its customers or suppliers. The Chicago School’s theory was so influential that it caused the Justice Dept. to remove “vertical integration” from the things to watch out for in its official merger guidelines.

The downside of that is less competition and possibly higher prices. The upside is that vertical combinations can encourage competition. “Competition law therefore has to weigh these two considerations against each other,” the Nobel committee wrote in its general-interest explanation of the prize.

“Tirole’s analysis of vertical contractual relationships quickly gained academic acceptance, and it has contributed to a significant revision of competition policy, especially in the U.S.,” the scientific paper explains...

Okee-Dokee. Precisely how unfettered vertical monopolization can "encourage competition" escapes me. Unless, say, it was -- in the case of Health IT -- a regulation "monopoly" in the form of a Data Dictionary Standard?

Another JD Kleinke quote:

"An economist is someone who sees something that works in practice and tries to figure out whether it will work in theory."

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CODA

 Ya THINK?
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More to come...