If HIT Plan A Doesn’t Work, What’s Plan B?


Pop quiz: Among early-stage companies that are successful, what percentage are successful with the initial business model with which they started (Plan A) vs. a secondary business model (Plan B)?

Harvard Business School Professor Clay Christensen studied this issue.  He found that among successful companies, only 7% succeeded with their initial business model, while 93% evolved into a different business model.

So let’s take this finding and reexamine our human nature. In light of these statistics, what makes more sense:

  • Defending Plan A to your dying breath?
  • Assuming Plan A is probably flawed, and anticipating the need for Plan B without getting defensive?

We question many of the assumptions underlying HITECH Plan A. We also want to talk about the need and content for Plan B in a constructive way.

In this essay we’ll discuss:

1) The Need for HITECH Plan B

2) Questioning Assumptions — Issues to Reconsider in Plan B

a) Rewarding Incremental Progress
b) Addressing Root Causes for Non-adoption of EHR Technology
c) Questioning Health Information Exchanges (HIEs) as Building Blocks for the Nationwide Health Information Network (NHIN)
d) Catalyzing Movement Toward Modular EHR Technology
e) Focusing Incentives on High Leverage Physicians
f) Recalibrating Expectations for EHR Technology Adoption
g) Getting Bang-for-the-Buck in Achieving Meaningful Use Objectives
h) Comprehensively Revamping Privacy/Security Laws vs. Tweaking HIPAA
i) Maximizing Sync Between HITECH and PPACA
j) Leveraging Potential for Patient-Driven Disruptive Innovation
k) Promoting EHR Adoption Beyond Hospitals and Physicians, e.g., long-term care, home health, behavioral health, etc.
l) Dumping Certification

3) Summing Up

1) The Need for HITECH Plan B

Please remember that we’re fans of HITECH – we’re supportive of the innovation and quality improvement it’s attempting to achieve and we’re supportive of the three major policy recommendations made by ONC (see post #3).

So why do we need a Plan B? John Mullins and Randy Komisar explain the rationale in their recent article in MITSloan Management Review, A Business Plan? Or a Journey to Plan B?

…what separates the ultimate successes from the rest is what they do when their first plan sputters. Do they lick their wounds, get back on their feet and morph their new insights into great businesses, or do they stick to their original plan?…There is a better way to launch new ideas….This better way is about discovering a business model that really works: a Plan B.

We want to start the discussion of PLAN B, not end it. Our point is not so much to specify what Plan B needs to be, but more importantly that we need to discuss Plan B openly.  HITECH Plan A has sooooo many moving parts.

Having a Plan B is not an admission of failure or a disgrace…it’s a necessity. Not discussing Plan B is the disgrace.

2) Questioning Assumptions — Issues to Reconsider in Plan B

The HITECH Act requires ONC to report to Congress on additional legislation or modifications to HITECH that might be needed for success. We’ll suggest some specific areas where we believe the assumptions guiding HITECH Plan A deserve reconsideration in HITECH Plan B.

a) Rewarding Incremental Progress

Let’s start with an issue that should be fairly easy…one with few if any sacred cows.

HITECH Plan A mandates that financial incentives for physicians and hospitals are structured as “all or nothing”, pass/fail.

At this point in the debate we see no one left in the room who still thinks this is a good idea. We’re not sure why anyone ever thought this was a good idea in the first place

On the other side of the debate, hospital associations, physicians, IT vendors and just about everybody else have argued that “all or nothing” makes no sense — it raises risk in participating in HITECH…thus there will be fewer participants and more failures. HITECH incentives should be based on incremental payments for incremental achievement of meaningful use objectives.

b) Addressing Root Causes for Non-adoption of EHR Technology

An implicit assumption of HITECH Plan A is that prohibitive cost is the major explanatory variable for non-adoption of EHR technology. HITECH also assumes that financial subsidies are the critical ingredient in creating a tipping point toward mass adoption — HITECH allocates $30 to $45 B (estimates vary) for financial incentives, yet less than $2 B for other adoption support activities.

We’re not so sure this basic assumption is correct. While cost is certainly one factor, there are many others:

  • Lack of usability of current EMRs
  • Loss of  practice financial productivity from EMR implementation
  • Forced changes in workflow with most EMRs
  • Culture issues
  • High failure rates and the perception of excessive risk

Does HITECH get at the root causes of  non-adoption of EHR technology? As we discussed in post #2, there is substantial evidence that large, important groups of physicians are sitting on the sidelines. What’s Plan B?

c) Questioning Health Information Exchanges (HIEs) as Building Blocks for the Nationwide Health Information Network (NHIN)

OK, now let’s talk about some sacred cows.

Under HITECH Plan A, ONC is allocating over $600 million in funding to for the development of health information exchanges. The assumption here is that the HIEs will develop sustainable business models and revenue streams for ongoing operations. This strikes us as wishful thinking:

  • Predecessors to HIEs — Community Health Information Networks (CHINs) in the 90s and most Regional Health Information Exchanges (RHIOs) in the 00s — failed to develop sustainable business models.  They were often loose coalitions of fiercely competing entities, with little reason for sharing data among themselves.
  • While RHIOs are conceived as collaborative community health exchanges, most HIEs today have been constructed as proprietary, closed networks.  They were created to advance business and competitive interests of a subset of hospitals and other care providers within a geographic region.  Can the technological infrastructures and mindsets migrate effectively to more open, interoperable models?
  • What about existing payment structures that 1) continue to reward physicians and hospitals for piecemeal work – tests, visits, admissions, procedures, and 2) continue to reinforce care providers viewing health information as a competitive asset rather than under the control of patients.  While in post #6 we expressed optimism for long-term changes in payment based on demos/pilots authorized by the PPACA, these changes are years away.

In turn, ONC has recently and proactively convened a group to develop NHIN-Direct, a set of specifications which will permit  using the Internet as the primary network for exchanging specific types of health information in a manner that is simple, secure, and scalable.

While we understand that NHIN Direct is not a complete solution to healthcare data exchange, we do wonder whether ONC has it’s priorities straight. Why is the default option to spend $600 million on a questionable construct of HIEs, when every other industry on the planet is successful in using the Internet as a primary network for information exchange?

d) Catalyzing Movement Toward Modular EHR Technology

The Interim Final Rule on Standards has an extensive discussion on 1) The value of creating modular EHR technology, and 2) The understanding that it will take time for vendors to create/adapt offerings in the form of EHR modules (see, e.g., pp. 37-42).

Note the internal incoherence in HITECH Plan A:

  • Hospitals and physicians are being incentivized to buy EHR technology ASAP
  • Yet, ONC recognizes the limitations of current technology and the need for market evolution. Physicians that buy today’s expensive, monolithic EMRs will not easily switch and adapt to modular technologies.  They may well be “locked in” to the older technology for many years to come.

How can this disconnect be minimized?  How could ONC immediately catalyze the evolution of modular technology through Plan B?

e) Focusing Incentives on High Leverage Physicians

HITECH Plan A assumes that all doctors:

  • Are of equal value in creating a scaled, national EHR network, and
  • Should be paid equal financial incentives.

We question whether these assumptions are correct. As we discussed in post #2,

  • Physicians in large groups are already much farther along in EHR adoption (71% have at least partially adopted); these physicians get a financial windfall from HITECH, and the potential for incremental adoption is by definition lower.
  • HITECH incentives directed at these large physician groups will do little to improve community-wide care coordination. Physicians in large groups are more likely to refer patients to other physicians within their group (who are already more likely to be using a shared EMR).
  • Specialists with larger incomes likely won’t be bothered with HITECH incentives, period.
  • The most critical and numerous group of adopters — small/medium primary care physicians — are most likely to sit on the sidelines. This group has the most leverage in improving community-wide care coordination since patients referrals will be made to outside specialists.

So why are we treating all physicians equally?

f) Recalibrating Expectations for EHR Technology Adoption

HITECH Plan A has the right idea in using financial carrots for EHR technology adoption: physicians and hospitals are provided financial incentives (carrots) through 2015, and are given increasingly stringent penalties (sticks) through 2015.

However, we ask whether the carrots and sticks are sufficient. Will it be necessary to increase incentives (at least for key physicians and hospitals), increase penalties, or even to go as far as Massachusetts has in requiring EHR adoption as a condition of medical licensure (more sacred cows).

g) Getting Bang-for-the-Buck in Achieving Meaningful Use Objectives

HITECH incentivizes adoption of “EHR technology”.  EHR technology is defined through specification of meaningful use objectives (EHR modules) — 25 for physicians and 23 for hospitals.

We’ll raise some questions here:

  • Which of these MU objectives provides the most value to patients? Evidence to answer this question doesn’t exist, and it’s highly likely that some MU objectives are more valuable than others.
  • Are EMRs really foundational to creating a broader NHIN? For example, the Nutting Report notes:

…[I]t is possible and sometimes preferable to implement e-prescribing, local hospital system connections, evidence at the point of care, disease registries, and interactive patient Web portals without an EMR.

  • What about technologies potentially in the pipeline for Phases II and III of HITECH, e.g., remote patient monitoring, personal health record connnectivity, medical device interoperability?

How could Plan B focus on incentivizing adoption of use of the highest value EHR technologies?

h) Comprehensively Revamping Privacy/Security Laws vs. Tweaking HIPAA

Deven McGraw argues that privacy/security should be viewed as foundational to effective health information exchange. See her insightful article Privacy As An Enabler, Not An Impediment: Building Trust Into Health Information Exchange.

HITECH Plan A makes major tweaks to existing HIPAA legislation. HIPAA was created in the 90s, before the broad use of Internet technologies. HIPAA did not anticipate patient use and control of personal health information.

If we’re going to do it right, Plan B should reconsider a comprehensive revamping of privacy/security legislation and harmonization of state/federal regulations. The Markle Foundation has already developed a Common Framework that can serve as a template.

i) Maximizing Sync Between HITECH and PPACA.

HITECH Plan A was enacted before the adoption of this year’s national health reform — the Patient Protection and Affordable Care Act.

For example, in post #6 we discuss how HITECH and PPACA payment reform demos/pilots are potentially synergistic, but are not in sync in their timing. How could Plan B create synergies between HITECH and PPACA?

The incentive payments for “meaningful use” of EHR technologies are really only the priming fluid needed to get the engine started;  the engine’s sustaining fuel tank is payment reform that offers to share dollars saved on health care delivery with accountable care organizations that have the vision, capital, management skill, and clinical IT necessary to become an order of magnitude more efficient than today’s providers.  We fail to see how today’s EHRs enable that kind of transformation and business model shift.   The incentives going to today’s EHRs are helping doctors and hospitals “skate to where the puck is today,” not where it will likely be tomorrow.

j) Leveraging Potential for Patient-Driven Disruptive Innovation.

In post #5, ePatient Dave took the lead in describing the concept and potential of patient-driven disruptive innovation.

We question whether HITECH Plan A is doing enough to leverage the potential enable and spark patient-driven disruptive innovation.  The $45 B question — would it be more effective and efficient to focus significant funding on “patient-pull” vs. “provider-push”?

k) Promoting EHR Adoption Beyond Hospitals and Physicians, e.g., long-term care, home health, behavioral health, etc.

HITECH Plan A presumes that hospitals and physicians are key leverage points in moving toward a digital health system.

While this seems intuitively plausible, this assumption is still worth reexamining, particularly in light of the evidence that many physicians are sitting on the sidelines. Should Plan B place more emphasis on incentivizing other care providers to adopt EHR technology?

l) Dumping Certification?

No discussion of HITECH Plan A would be complete without discussing everyone’s sacred cow of certification.

We do see the value of an EHR technology testing process – one that measures ability to achieve minimal privacy, security, and interoperability standards (i.e., not EHR functionality).

However, we continue to question the value of a broader certification process, particularly now that hospitals and physicians will be held accountable for their ability to achieve specific MU objectives. Isn’t certification redundant – adding the cost of measuring an intermediate activity without adding value? For amplification, see recent thoughtful writings by Will Weider and Margalit Gur-Arie.

.3) Summing Up

Let’s conclude by revisiting the original question: “Is HITECH Working?”

Bottom line: at this point we see mixed signals

  • On the positive side: hospitals are playing in the HITECH game, ONC is executing with careful attention and balance, EMR vendors are beginning to open their APIs and move toward creating platforms instead of products, and there is great potential to leverage patient-driven disruptive innovation toward EHR technology adoption.
  • On the cautionary side: many important physician groups are sitting on the sidelines, it’s questionable whether Walled Garden Proprietary EHR Technology Platforms will be sufficiently open to stimulate needed innovation, and many assumptions guiding HITECH Plan A need to be revisited.

In our introductory post, we characterized HITECH as being at the top of the third inning…there’s a lot of ballgame yet to play. It’s time BOTH to celebrate the hits delivered in early innings…AND time to revisit the original game plan.

Thanks for reading our series. We welcome your comments.

Vince Kuraitis JD, MBA is a health care consultant and primary author of the e-CareManagement blog where this post first appeared. David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on healthcare professional and consumer technologies.

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mrwRNCris BrinesRosana Simsonstop smoking helpVikram C Recent comment authors
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The national debt is a crisis that concerns me. I am concerned that, with me being so young, that all my money will go to taxes or that I will die working. According to CNN, in 2020 the average American will owe 155,000 in federal debt. The growing national debt will be consumed by interest rates and entitlements, such as Medicare and Social Security. Educational and defense programs will be left out in the cold as U.S. revenue pays on the national debt. Even with increased income taxes and working longer, a VAT (value added tax) may be needed to… Read more »

Cris Brines

When people turn 65 they are bombarded with sales information regarding Medicare Supplemental Insurance. They receive mailers from every insurance company and get called by every local insurance agent in the area. All of this information can be overwhelming and can make even the most astute shopper want to hide until the barrage of sales tactics subsides. The truth is all Medicare Supplement Plans are standardized by the Center for Medicare Services, which means every insurance company must offer the same exact plans. They cannot add additional benefits to these plans and they cannot take benefits away. The only difference… Read more »

Rosana Simson

A friend of mine told me about a site that offer 40% discount on health insurance.I tried this company.They are great.You can check their site.


Nate, change the topic if you want, but the bottom line is that the Bush tax cuts impoverished the Federal government massively without providing much benefit in the end, and the fact that the tax cuts went overwhelmingly to the wealthiest who then had excess capital (too many dollars chasing too few assets, creating asset bubbles) while the poorer 50% saw no wage growth relative to CPI despite large gains in efficiency and went into debt to sustain their accustomed level of demand and standard of living (credit cards, no money down mortgages) played large roles in the Bush Bust.… Read more »

stop smoking help

I have to admit, it seems pretty hopeless. Unfortunately, there are no decision makers who don’t have their hands in the deep pockets of their constituencies. There are simply no unbiased people to make law. While everyone is looking out for number 1, we’ll always have to bankrupt the futures of number 2, 3, 4, etc. Is that a bad thing? I’m not sure. We are now in the day and age when sustainability is the goal, despite the lack of resources. We want a socialistic future where we take care of everyone, yet we have a free market economy… Read more »


As usual with most of your posts – then what is your larger point? 60% 58.5% Pick anothe arbitrary point . . .


what would be an interesting discussion is what political ramifications will the Bush housing bubble create as far as the millions of relocated voters. Parts of the SW are far more liberal then they have ever been, histroically liberal sections of the country appear more conservative now though. Forbes or Fortune had a really great interactive migration map that showed this transition. How different was the electorate in 2008 becuase of population shift vs change in political ideology and will that change again in 2012?


Here is the info you need to do a correct analysis jd. As you will notice the number of new homes built under bush was far greater, especially after the clinton recession, then under Clinton. Far more real tangible job creating assets thus were made under the bush bubble then the clinton bubble. While yes it was a bubble atleast the masses got to enjoy Bush’s, unless you were a stock trader, which many of us became, the Clinton bubble wasn’t nearly as beneficial in its footprint.


JD you seem to agree with me, the Clinton stock bubble was far less productive and beneficial then the bush housing bubble, at least we have new housing to show for it. Where is our disagreement? And you totally butchered the analysis of new homes to existing, Of course existing home sales will always outnumber new home builds, you have existing stock of tens of millions. The correct way to compare would be the number of new home builds during the asset bubble compared to new home builds during a normal base line period. Come on kids if you can’t… Read more »


For what it’s worth, I agree with everyone that this is a terrible time to raise taxes in general because of the recession. But with the vast increase in the share of national wealth in the hands of 1% of the population, there is still a need to raise taxes on that contingent. And since they have so much money that is essentially being parked rather than being used productively, the multiplier effect (yes, I’m more or less a Keynesian) of redistributing that wealth will make it a net positive for economic growth.


Nate, really stupid of you to pick this fight on asset bubbles and new vs. existing homes. I’ll look it up for you. Here is the data on existing home sales during the bubble years. It peaked in 2005 at 7 million. In contrast, in 2005 new home sales were 1.2 million. In other words, a 6:1 difference back at the peak. And the asset bubble for securities was even less productive. All that money that went into stocks, how much of it actually was used to generate new capital investment and productive capacity? A tiny fraction. Most of it… Read more »


MG your really not that brite. Let me type this real slow for you;
Key word here being if, that implies that I am not currently being taxed at 60% effective rate. If I were then I would no longer be a business man. So…about that fibbing acquasation…..


Nate – Not necessarily I just don’t have religious dogma to ideas regardless of really how successful they are or generally spout nonsense as you typically do on here such as ‘The Bush tax cuts created more revenue then they returned.’ There is not a single way to prove or disprove this either way. What is much more likely is that the significant reduction in interest rates had a much more profound effect than the 2001 Bush tax cuts did. By the time the 2003 tax cuts were officially enacted, the recession had already passed. “As a business owner that… Read more »

Vikram C
Vikram C

Foreign Institutions own 28% of debt. Total debt is $13 trillion. China owns $877 billion. So it’s just 7%. Good luck defaulting based on the spy theories. The anecdotal stories are for gullible public and not international financial institutions. The drug theory is intriguing. I am sure Mexico catches a lot of narcotics. They should have been world power by now or Afghanistan which is world’s largest producer of opium. Now about oil, in a way feel happy that all oil is not drilled now. Once we run out of oil in 50 years Oil will sell at $20/gallon. Why… Read more »


Vikram, we have enough oil resources that we could drill all out for 20 years till a replacement technology was found and pay off the national debt in that time. The hit to GDP and corresponding loss in tax receipts from importing so much oil cost us that opportunity. My personal faviorte strategy for debt retirement is unilateral write off of chinese owned bonds. We have solid proof China has stole certain technologies, like Aegas for example, spelled wrong I think, it’s development cost was $x billion, we simply retire an equal amount of bonds they hold and send them… Read more »