We should have seen it coming, really. It was entirely predictable, and the most recent RAND report proves it.

We incentivized comprehensive IT adoption, making it easier to bill for every procedure, examination, aspirin, tongue depressor, kind word and gentle (or not) touch without first flipping the American healthcare paradigm on its head, if such a thing is even possible.

According to analysis by the New York Times, hospitals received $1 billion more in Medicare reimbursements in 2010 than they did five years earlier. Overall, the Times says, “hospitals that received government incentives to adopt electronic records showed a 47 percent rise in Medicare payments at higher levels from 2006 to 2010 … compared with a 32 percent rise in hospitals that have not received any government incentives …”

To paraphrase the mantra of Bill Clinton’s successful 1992 presidential campaign: It’s the system, stupid. More specifically, it’s the business model, stupid, the fee-for-service system in which electronic health records are enabling tools.

It’s also the law of unintended consequences. You know … you take action, planning on this but instead you get that.

Like the introduction of cane toads in Australia to kill beetles (they couldn’t jump high enough). Like letting mongooses loose in Hawaii to manage the rat population (they preferred native bird eggs). Like Kudzu, the insatiable vine that’s devouring the South.

According to the authors of the RAND report, the problem is with the incentive structure that encourages more tests and procedures. Well, of course it is. Doctors and administrators have a clinic or hospital to run. They have expensive invoices from Epic and Cerner to pay. They can now track and bill for all this stuff they used to not get paid for. Are we surprised?

And meanwhile, fee-for-service leads us down a contradictory rat hole of massive healthcare costs and lousy public health.

But, here in the beginning stages of healthcare reform, I’ll argue that we should banish the doom and gloom until we can see the bow of the boat going over the falls. Some organizations—in the current parlance we might call them extant Accountable Care Organizations (ACOs)—are getting it right and getting paid for quality results, and RAND holds them up as noteworthy exceptions:

The U.S. Department of Veterans Affairs: Tell Joe citizen that the VA is one of the nation’s best healthcare systems and he generally responds with unsavory adjectives attached to “liar.” But it’s true. Since the VA reinvented itself in the 1990s, statistics show the agency outperforms the private hospital sector. By how much? The Congressional Budget Office found that over a five-year period in the 2000s the VA’s costs went up 1.7 percent while Medicare costs rose 29.4 percent. Oh, and a nurse at the VA invented bar coding at the bedside, creating a simple innovation that benefits all of healthcare.

Intermountain Healthcare: Like the VA, Salt Lake-based IHC spent decades developing a homegrown health IT system, working deliberately with physicians to test and make improvements based on results. The result is that IHC has made significant improvements in quality and outcomes at lower costs.

Kaiser Permanente: Working with Epic, Kaiser has spent billions (yes, with a “B”) on making comprehensive health IT a tool in an integrated healthcare delivery system. According to the Commonwealth Fund, Kaiser has engineered a host of quality improvements yielding measurable improvements in patient health.

These are examples, once again, of integrated healthcare delivery systems. And the common thread among them is the use of EHR as a tool designed to enable a comprehensive care improvement process:

Create a coordinated care improvement / cost management plan.
Develop the electronic system—or implement it, in Kaiser’s case—the plan requires.
Tinker, tinker all the time to make essential improvements.

For far too many hospitals, the current healthcare overhaul skipped the first step and it remains to be seen whether facilities and organizations will engage in the third. And the systems they’re putting in originated in billing and “Frankensteined” into something that addresses clinical concerns to facilitate billing. (For those keeping track at home the common thread here is billing.)

Heritage matters. Some systems are designed and configured—and effectively used—to enable billing, and others are used to enable improved care and controlled costs.

The success of the VA, IHC and Kaiser raise fundamental questions about what kind of organizational structure can facilitate success in this brave new healthcare world. Will the U.S. become a patchwork of regional healthcare organizations? We know that corporate healthcare is gobbling up independent physicians. Are the days of private doctors performing services and getting paid for them coming to an end? Maybe they are. Maybe they should be.

Because what we’ve done in the past has not worked out the way we hoped.

Like cane toads and kudzu.

Despite the best efforts of the federal government to plan the ongoing healthcare transformation and turn the healthcare ship of state in a controlled and deliberate manner, I don’t think they know exactly what’s going to happen. They’ve put the incentives in place, and they’ll soon introduce more focused on interoperability and accountability of care, but they aren’t exactly sure how it will turn out.

But neither do the authors of the RAND study. While they identify the fee-for-service business model as a fundamental stumbling block on the path to meaningful reform, they don’t offer any recommendations on how to alter the underlying structure.

So, we don’t know exactly where this boat we’re all in is headed. Probably best to listen intently for a distant roar and then paddle as if your life depended on it.

Edmund Billings, MD, is chief medical officer of Medsphere Systems Corporation, the developer of the OpenVista electronic health record.


6 Responses for “It’s the System, Stupid: Reversing the Law of Unintended Consequences”

  1. Lynn Bailey says:

    Kaiser did a two steps forward one step chacha for awhile and almosf gave up several times. Watching from the patient’s perspective the process is still confusing and opaque . I hope your observations of successful implementation are contagious.

  2. Interesting that of the 3 examples here, one has cut costs and two may have improved quality. Is there an example of a system that did both? Looking for a dirt cheap, high quality, world renown, integrated system here….

    Steering a huge boat into the unknown hoping for the best is not sound business strategy. Destroying infrastructure that is working perfectly fine for other nations and building up infrastructure that is not deployed anywhere else and has been shown to be detrimental to citizens in other sectors, is not only not sound strategy, but could be construed as dishonest and exploitative.

  3. If the “boat” metaphor helps describe where health care is going, and we’re not sure where that is, then it makes sense for those in charge to provide or at least keep a log.
    It would record inputs (weather, coastal features, cargo lifetime) with their decisions (outputs), to track the ships usage and quirks, for the next captain, the ships owners, or in the event of calamity.

    Idiosynchracies, culture, fashion and the captains expectations (this is the way it was done before) can also steer the ship, and a log can show this too, allowing more feedback into (re)training and the best use of available resources by comparing approaches.

    If the public, as well as being patients, visitors and revenue sources could also be inspectors, their input and fresh perspective could provide yet another feedback mechanism.

    Can someone walk into a hopsital with a new idea?
    If they did, would it be logged or tracked?

    I hope such opportunities won’t continue to be a missed ones.

  4. Ronda Wells MD says:

    My dad is a VAH patient. Yes, his MD there found a prostate CA his outside doctor missed. But the VA required my dad to stop a diabetic drug (that he had been on for 25 years) at age 78 because the VAH had no safety data on it past that age. The new diabetic drug, which costs more, can cause pancytopenia and may raise the risk of death in heart failure patients. Guess what he has now? Heart failure and severe anemia for which no other cause has been. He’s now in a non-VAH hospital yet again for heart failure. The VAH is admirable but certainly not perfect. No system will be.

  5. Remona says:

    Here are my thoughts on the Durabrand Waffle Maker. This is a
    recipe for a Belgian waffle that is truly a sweet, sumptuous and nutty concoction.

    Parts of the waffle would stick to the waffle maker, which would be frustrating for me.

  6. Rajat Dhameja says:

    Expansion of residency programs and increase in Primary care providers may close gaps in healthcare coverage and access.

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