Nancy Fabozzi's Blog

Potential Impact on Health IT as US Adjusts to Republican Sweep in Election 2016

09 Nov 2016


Nancy Fabozzi, Principal Analyst, Digital Health

The stunning outcome of the 2016 presidential election has left us long on questions and short on detail as to what this decisive win portends for healthcare markets in general and health IT specifically.  Market impact will ultimately depend on how quickly Republicans are able to enact key healthcare reforms which will hinge on their ability to successfully work through Democratic opposition. On the morning after the most disruptive election in American history, what we can surmise about areas of IT that offer the greatest upside for growth during the coming months and years?

Trump’s healthcare plan will be focused on lowering costs and driving competition. He vows to repeal the Affordable Care Act and replace it with a free-market system based on patient choice and private insurance. Trump has said he wants to cover everyone but opposes an individual mandate to do so. He wants to reduce barriers to the interstate sale of health insurance, provide full tax deduction for individual insurance premiums, offer inheritable HSAs, stimulate drug price competition by allowing more overseas drug imports, allow Medicare to negotiate drug prices, and promote greater price transparency across all healthcare markets. Republicans advocate a “premium support model” for Medicare that would guarantee enrollees with an income-adjusted contribution toward a plan of their choice, with catastrophic protection. For Medicaid, Trump supports block-grants for states, replacing ACA subsidies for low income Americans.

Overall, we anticipate a market with many new challenges but expanding opportunities for innovative health IT vendors focused on key areas. The good news is that the basic trajectory of digitally-enabled healthcare transformation will stay the course so we can expect limited disruption in the need to continue investments in EHRs, RCM, cybersecurity, data analytics, population health management, and other core health IT solutions. And, once we have clarity on the Republican’s plan, we could expect to see these markets pick up steam in the latter half of 2017 as customers embark on new purchasing.

In terms of growth potential, we foresee three key health IT market segments that could emerge in a stronger position under President Trump – 1) health insurance IT especially health insurance marketplaces; 2) consumer health IT; and 3) telehealth. Health insurance exchanges will likely become increasingly important as states, employers and insurance carriers seek to streamline and improve benefits administration while enabling more consumer choice. HIX solutions are in line with Trump’s market-driven focus and we expect more start-ups and innovation in this area. Consumer health IT will continue to expand especially in areas that provide direct data and information to consumers about their own health status as well as new tools to drive consumer decision support to enable smart healthcare purchasing. In the event that many consumers lose their health coverage or end up with less comprehensive policies, we foresee an uptick in “DIY” solutions such as telehealth services provided directly or via channels like retail pharmacies. 

Predicting the Future of Healthcare and the Evolving Role of Doctors

11 Apr 2016

Expect Not a Doctorless Future but a Future with Less Doctors

While the traditional doctor-patient relationship and mode of interaction has many positive benefits, it is a highly expensive and inefficient model (at least in the US) that denies access to medical care to a large swath of the population. Why? Because a) there are not enough doctors to serve all patients, and b) many people cannot afford to go to doctors - increasingly, even if they have health insurance.

There is great concern about a growing shortage of doctors in the US (America’s facing a shortage of primary-care doctors). There is also great concern about unsustainable medical cost inflation and the lack of affordability of basic healthcare services.  Is there a better way to provide high quality and low-cost medical care beyond the traditional doctor-centric approach?

Doctors are extensively and expensively trained and are some of the highest earning professionals in the US. As a society, we have given individual doctors a great deal of control over healthcare decision-making and allocation of expenditures and yet have some of the poorest health outcomes relative to expenditures among all the countries of the world.  Thus, one could argue that the US model that places the highly paid doctor at the top of the medical care hierarchy is broken and what’s needed instead is a flatter medical care team that incorporates non-physician care-givers to handle more routine tasks. This is absolutely the trend in US healthcare today, with nurses and physician assistants taking on greater importance as pressure grows to find a more efficient and effective means of providing greater access to medical care at an affordable cost.

Payment reform is also driving the trend to expand responsibilities among the medical care team. Fee-for-service reimbursement is still the predominate healthcare payment system in the US although that's changing rapidly with the move to value-based reimbursement (VBR) which puts more onus on doctors to be accountable for patient outcomes.  The advent of VBR along with the doctor shortage is opening up the need to incorporate a more diverse set of actors to manage all aspects of patient care. The role of information technology (IT) is a key facilitator of this paradigm shift, and holds great potential to expand access to care and empower both physicians and non-physician caregivers as well as patients themselves.

Today, the traditional doctor-patient relationship is being disintermediated. Lower cost, non-physician care givers will be able to safely and effectively take on more medical responsibility with the aid of advanced IT systems deployed across all care settings, including the home.  In addition, a variety of IT, med tech, and scientific innovations combined with cultural and socio-economic changes are coming together to create a future where we will rely less on human doctors (and other human caregivers) for routine primary care and medical treatment. That inevitably means that we will depend more and more on IT, and yes, eventually, this technology will absolutely replace some of the work that human caregivers, including doctors, are doing now. The notion of "doctor" and even “nurse” will be expanded and advanced to include digital or "electronic" doctors and virtual care. It may be hard for some to imagine now but I believe that people will come to accept this mode of medical care as quite natural, convenient, and appropriate—and it will happen sooner than we think due to the cost pressures facing the US healthcare system. 

The short-term implications of the looming US doctor shortage will likely mean that access to care will become even more difficult for some segments of the population. The good news is that we are entering a renaissance of innovation in digital health and scientific innovation that will revolutionize medical care.   Many great minds are at work to figure out how we can move beyond our dependence on an expensive, doctor-centric model of healthcare to a more expansive system that can better solve some vexing issues around cost, quality and access.  The Qualcomm Tricorder X Prize is one example of how technology is enabling this transformation. The pieces have not all come together yet but they absolutely will.

Does this mean we face a dystopian future dominated by cold, analytic medical cyborg "electronic" doctors? I absolutely do not see it that way. Many aspects of life that influence our health and well-being are in dimensions that are beyond the traditional focus of our healthcare system. We must devote greater focus and greater financial resources to these areas which include things like our social interactions, community settings, housing status, nutrition, transportation, employment, stress levels, and so on—the so-called "social determinants of health". Perhaps if we shift more dollars away from high-cost, doctor-centric traditional medical care we can open up more resources to devote to other types of care giving, with human and non-human intervention, that can positively impact our health.

So what about doctors? They won’t disappear anytime soon. Yes, we will still need and depend upon doctors of medicine and surgeons to care for us when we are sick – under certain situations.  However, as a society, we will start to make the transition away from the notion that all medical care must necessarily be dictated by a physician.  Honestly, do we need to pay a doctor $200 for a blood pressure check in this day and age? National health systems must start planning for a future that is less dependent on doctors – and that’s not necessarily such a bad thing. 

Health Data Moonshot: IBM Takes it to the Next Level with Truven Acquisition

25 Feb 2016


Truven Health Analytics may well be the jewel in the crown for IBM Watson Health

Nancy Fabozzi, Principal Analyst, Connected Health

25 February 2016

The health IT industry is gearing up for its biggest event of the year next week when Las Vegas hosts the Healthcare Information and Management Systems Society (HIMSS) Annual Conference and Exhibition. This huge tradeshow is where vendors usually roll out the big announcements for new product launches and deals. One of the biggest splashes at last year’s HIMSS event was made when IBM announced its new healthcare business division centered on Watson, the company’s cognitive computing platform that leverages natural language processing and machine learning to derive new insights from vast amounts of data. IBM Watson Health provides cloud-based analytics to government and commercial payers, health systems, life sciences organizations, patients, and others. The launch of Watson Health last April was accompanied by the announcement of two acquisitions in the population health and disease management space, Explorys and Phytel, as well as expanded strategic partnerships with Apple, Johnson & Johnson, and Medtronic. Over the course of 2015, IBM Watson Health continued to line up some impressive deals, most notably its $1 billion acquisition of Merge Healthcare, a large medical imaging and picture archiving company, and a landmark partnership with CVS Health, the leading US retail health clinic, in which CVS will leverage Watson for the prediction and management of common chronic conditions.

Big Blue’s health IT deal momentum certainly seems to be continuing in 2016. Last week and, interestingly, right ahead of the HIMSS show, the company announced its acquisition of Ann Arbor-based Truven Health Analytics for $2.6 billion in cash, which makes this not only IBM Watson Health’s biggest deal to-date but bigger (in terms of value) than all its combined deals for 2015. Truven Health Analytics sells healthcare data and analytics solutions to customers across the care continuum. Some of the company’s brands include MarketScan®, Micromedex®, Advantage Suite®, ActionOI®, 100 Top Hospitals®, CareDiscovery™, and more. Truven also provides a range of consulting healthcare capabilities, bolstered by its acquisition of two LEAN performance management consulting capabilities in 2014 - Simpler Consulting and Joan Wellman & Associates.

Truven was formed in 2012 when Veritas Capital acquired the healthcare business of Thomson Reuters for $1.25 billion. The company has approximately 2,500 US and global employees; 2015 revenues are estimated at around $544 million. Last year, the company was said to be considering an IPO valued at $3 billion.

The Truven Value Proposition for IBM

For IBM Watson Health, this deal is not only big but a potential game-changer. While IBM has made a lot of very smart choices over the past year in building out the Watson Health business, carefully putting together the essential building blocks needed to educate and nourish the vast medical brain that is the Watson Health Cloud, the coming together of Watson and Truven creates a new and important dimension to the business that we feel will propel IBM to an entirely new level. Here’s what IBM gets from this deal -

Scope – Watson, like all cognitive computing platforms, needs to consume a wide array of data to be useful. Watson already incorporates patient clinical data including medical images and can now pull in crucial cost and payment data from Truven, including detailed coding on disease categories, diagnoses, treatments, and medications. Fully understanding the true costs of care across disparate settings is one of the most complex yet imperative data needs and vital to enabling the transition to value-based care and population health management. Healthcare organizations will never successfully move away from fee-for-service business models to assume new risk-based reimbursement models without this foundational knowledge.

Market Reach - The acquisition gives Watson Health a considerably expanded customer base with the incorporation of 8,500 new healthcare clients including federal and state government agencies, commercial payers, employers, hospitals, doctors, and life sciences companies.

Scale - Watson can now crunch data on a huge number of patients. Truven has accumulated data on the cost and treatment of over 200 million patients. Its cloud-based data set and health claims data will be integrated into the Watson Health Cloud, eventually creating a database encompassing 300 million lives.

Talent – With Truven, IBM Watson Health will grow to around 5,000 employees across the US and internationally. Truven’s talent pool features a strong roster of hundreds of healthcare experts including clinicians, policy experts, economists, and consultants.

Culture and Brand Equity - The deal seems like a strong cultural fit, oftentimes a key factor in M&A success. The companies share important DNA in terms of commitment to R&D and innovation and belief in the transformative potential of predictive data analytics in healthcare. Truven is a proven and well-established vendor of analytics solutions within the payer, provider and pharma space; some of its brands have been around healthcare for 30 years or more.

Data Analytics is the Future of Healthcare but the Complexity of This Evolution is Extraordinary

To say that healthcare is rapidly evolving is the understatement of the decade. The digitization of data brings many new opportunities and challenges. First, clinical, financial, and administrative data exit across numerous silos that are the legacy of our convoluted fee-for-service payment system. Many of these data are, unfortunately, inaccurate, inconsistent, or incomplete. Healthcare organizations large and small have often done a poor job of data collection, governance, storing, sharing, and as is increasingly clear, protecting the privacy and security of personal health information. But digital health data is here to stay and will only grow in size and importance with advances in medical science and, especially, cognitive computing. The potential for the application of these health-related data to solving complex issues of quality, cost, and access is one of the most exciting and transformative developments in the history of medicine. But data must first converge before it can be properly analyzed, cleansed, and applied and this takes considerable computing power, scale, reach and financial resources.

Medical milestones are not easy and the application of cognitive computing to healthcare is on par with—or even beyond—other great transformative medical advancements like the discovery of DNA, germ theory, or vaccination. We are just beginning to comprehend its potential and the possibilities for the future are breathtaking. However, getting there will not be easy. The incorporation of advanced analytics into the healthcare system and clinical workflow requires a whole new way of thinking and acting. There will be many bumps along the road as the industry figures out how to do this, and how to pay for it. The signs are that it’s going to be a tougher and longer road than is being currently acknowledged. But the journey can’t even begin without gathering together comprehensive data resources that can be put to work to solve these problems.

Why IBM is Positioned for Success in Healthcare Cognitive Computing

Healthcare is a very big ship to turn around but turnaround it must. IBM Watson Health is building a foundation to transform an industry. It has the potential to not only reshape scientific discovery but more importantly to improve healthcare delivery by expanding access to care while at the same time facilitating greater financial and operational efficiencies that are so desperately needed.

More often than not, and especially in the US, change in healthcare is steady and incremental rather than big bang. Healthcare has more complexities and entanglements than almost any other industry and things just take longer to accomplish. But IBM is committed to putting the right pieces together. In the course of slightly less than one year, the company has spent $4 billion growing its repository of health data assets. This is part of the company’s broader corporate turnaround strategy to increase its focus on next generation health IT, or as CEO Ginni Rometty calls it IBM’s” moonshot." The addition of Truven to IBM’s existing data assets across all its businesses creates a massive new health data powerhouse that is uniquely positioned to take the lead in the increasingly competitive health data analytics and cognitive computing space. It’s an ambitious plan and IBM has faced criticism and naysayers about the viability of its healthcare business model. Is Watson ready for the market? How is this data being applied? How is it making a difference? Where’s the beef? We think many of these questions are misguided and that the market needs to stop expecting instant gratification, especially in healthcare. Rather, market watchers should keep in mind the massive magnitude of what is going on here. Getting healthcare organizations to embrace cognitive computing is not analogous to getting consumers to adopt smartphones. Incorporating advanced predictive data analytics in healthcare is a very complex endeavor for any technology company. Market watchers need to consider the broad, long term view. Where are we headed and why? What do we need to get there? In terms of healthcare, IBM understands this holistic vision better than almost any other technology vendor.

What’s Ahead for IBM and Health IT

As we head into the HIMSS conference, it is interesting to reflect on the past five years in health IT. It’s been a wild ride, with literally hundreds if not thousands of start-ups of every kind, including in the analytics space. We’ve seen billion dollar valuations based on a lot of fluff. But, today, there is growing sentiment that the party’s over, with signs that the market is coming back to reality as witnessed by cancelled or delayed IPOs and falling valuations. And it’s not just happening in health IT. Silicon Valley is retrenching from all IT. Investors funded fewer U.S. startups in the fourth quarter of 2015 than any period in more than four years. We think the health IT market is entering a new phase in which it will strongly favor large established vendors like IBM. And Big Blue is making all the right moves to grow their lead. Overall, IBM’s acquisition of Truven Health Analytics looks like a win-win-win— for the investors, for the healthcare industry, and, ultimately for patients. We applaud IBM’s continued efforts to solve the grand challenge of improving healthcare. It will be interesting to see if any more big announcements will come out of HIMSS. Stay tuned!

First Week of April 2014 - Good News, Bad News Week for the Health IT Industry

04 Apr 2014

First, the bad news (and it IS bad). On April 1, 2014, President Obama signed into law the Protecting Access to Medicare Act (HR 4302). The new legislation provides a temporary (one-year) fix for the Sustainable Growth Rate (SGR) which calls for cuts in Medicare reimbursement to physicians. On March 27, a proposal to delay the start of ICD-10 to October 1, 2015 was attached—seemingly out of the blue—to the SGR bill, which was then approved by the House and Senate without much discussion or debate before it was signed by the President.

At the time of this writing, there was no official response from CMS but plenty of other stakeholders have weighed in on the new delay. The general consensus is one of disappointment and frustration, especially among larger hospitals, IDN's, and payers, most of whom were ready to proceed with ICD-10 this year. These constituents have been highly critical of the delay, citing wasted time and efforts that will ultimately result in higher expenditures and loss of critical momentum that could have significant downstream impact on other critical IT projects.

The biggest concern about ICD-10 has been coming from small physician practices and specialty practices, key stakeholders of the American Medical Association (AMA), an organization that has been highly critical of the ICD-10 timeline—and one that holds significant political sway in Washington. The key question now is how will constituents make use of the extra time? Some payers and providers will continue testing and training in order to minimize disruption when—and if—the ICD-10 conversion takes place. Some may lobby that the wisest course is to skip ICD-10 altogether and just wait to move to ICD-11 in 2018. In our opinion, the arbitrariness of this move by Congress is very disturbing and could have negative implications for Meaningful Use (MU) down the road. Some providers and others are now even doubting that MU penalties, set to begin in 2015, will ever be enacted. That assumption, which is not unreasonable given how Congress has acted with SGR and ICD-10, could further undermine and railroad momentum for MU.

Now for some more positive news, and a bit of a sigh of relief—for now anyway. Another important development pertains to patient safety and health IT. On April 3, 2014, a joint report was issued by the Food and Drug Administration (FDA), the Federal Communications Commission (FCC), and the Office of the National Coordinator for Health Information Technology (ONC), entitled FDASIA Health IT Report: Proposed Strategy and Recommendations for a Risk-Based Framework. The report, which was mandated by Congress, discusses the development of a risk-based framework for health IT.

The report's recommendations are not binding and do not create new requirements but rather provide suggestions on how to further the discussion on patient safety and health IT. The three areas of health IT discussed in the report are administrative (primarily billing and financial functions), health management (primarily documentation and data exchange and management), and medical device-related IT. With regards to administrative and health management IT, the FDA says that they believe in "a limited, narrowly-tailored approach that primarily relies on ONC-coordinated activities and private sector capabilities". Furthermore, the report finds that no new areas of FDA oversight are needed for those areas at this time. However, the report does call for the creation of a Health IT Safety Center, which would be a public-private entity, created by ONC, in collaboration with FDA, FCC, and the Agency for Healthcare Research and Quality (AHRQ), and with involvement of other Federal agencies and health IT stakeholders. As for medical-device related IT, an area which potentially poses the greatest risks for patient safety, FDA is already focusing on this and will continue to do so.   Functionalities that fall under this category include computer aided detection software (mHealth-related products), remote display or notification of real-time alarms from bedside monitors, and robotic surgical planning and control, among other areas.

Overall, the report takes a very collaborative approach which will incorporate public commentary and debate. In summary, the FDA, FCC, and ONC say they are devoted to creating a health IT risk framework that promotes innovation, protects patient safety, and avoids regulatory duplication, an attitude which should be welcomed and embraced by health IT vendors.

FDA Promotes Transparency and Patient Engagement with New Website

30 May 2013

The FDA Patient Network

On April 23, FDA Commissioner Margaret Hamburg, M.D. announced the launch of The FDA Patient Network website in a blog post on the FDA site. Hamburg states that the “FDA Patient Network website is an interactive tool for educating patients, patient advocates, and consumers on how their medications—both prescription and over-the-counter—and medical devices move from the realm of idea to the realm of the marketplace.” The objective, according to Hamburg, is for patients to have a bigger voice so they can “get informed and get involved” to help the FDA improve patients lives. The feature rich website is designed to provide a “one stop shop” for patients seeking information about a variety of drug and medical device issues including the safety and effectiveness of new therapies; locating clinical trials; potential warnings and adverse effects; information about the FDA’s process for approving medical products; methods of engaging with FDA representatives; and a variety of other issues. According to a recent article in Healthcare IT News, author David Harlow states that the FDA Patient Network was developed “after nearly four years of research, focus groups, usability testing” and that the “win goals for the website are “promoting the educational mission of the FDA, and promoting opportunities for patient advocacy within the FDA.” In launching the new website, the FDA hopes to “expand the role of patients beyond the select group of patient representatives and to engage a wider audience of patients in new and broader ways.”

FDA's Office of Health and Constitutent Affairs

The new FDA patient portal is a user-friendly way for people to interact with FDA officials through meetings, webinars, chats, email, and other venues so that they can have a more active role in the research and development of essential medical products. The website is an extension of the FDA Patient Network, a program begun in 2011 as part of the FDA’s Office of Health and Constituent Affairs (OHCA). The OHCA was formed in 1987 in response to growing levels of patient activism emanating from the HIV/AIDS community. Since its founding, OHCA has continuously evolved in its efforts to help patients navigate the complexities of the FDA and promote the patient perspective in all FDA activities, especially through its Patient Representative program. FDA Patient Representatives are usually people who have a history of a particular disease and are thus selected as a voice for patients’ concerns. In 1991, the first Patient Representative served on the FDA’s Antiviral Drugs Advisory Committee for HIV, and by the mid 1990’s, Patient Representatives had voting privileges on FDA Advisory Committees for cancer therapeutics. By 2001, the role of Patient Representatives was further expanded to include serving as consultants to medical product review divisions as well as taking part in decision-making at meetings between the FDA and medical product developers. Today, the FDA currently has more than 160 Patient Representatives participating in the program.

Patient Engagment Movement Will Impact All Sectors of the Healthcare Market

The patient engagement movement is shaping up to be a significant cultural shift impacting stakeholders at every level of the healthcare system. The many drivers of this trend include greater consumer access to medical information via the Internet as well as the need for patients to take on increased financial responsibility for their healthcare costs, particularly with the rise of high-deductible health plans. Undoubtedly, a certain lack of trust stemming from the complexity of the U.S. healthcare system plays a role in patients’ demanding more open channels of communication including more information about the arcane mechanisms of the development (and pricing) for products and services. In addition, consumers are increasingly demanding more information about the safety and effectiveness of various healthcare products and services. Manufacturers and providers must recognize that the era of the passive patient is over. Developing new and innovative strategies for engaging patients is a critical survival strategy in today’s highly competitive marketplace. The FDA has been very proactive over the years in their efforts to involve patients and their advocates in the decision-making process. The FDA has been ahead of the curve in anticipating the growing demand of patients seeking more transparency and greater input into their healthcare decisions. Open communication and ease of access to information are the core ingredients to successful patient engagement. The FDA Patient Network website is a valuable resource that will help medical consumers easily access authoritative resources about critical issues concerning their medical treatment. We commend the FDA for this new effort and hope that it will serve as an example to similar patient engagement efforts among government agencies, advocacy organizations, providers, manufacturers, and health IT vendors.



More Calls to End Fee for Service: A Look at Recommendations from the National Commission on Physician Payment Reform

18 Mar 2013

“Our nation cannot control runaway medical spending without fundamentally changing how physicians are paid.”

The National Commission on Physician Payment Reform, March 2013

In March 2012, the Society of General Internal Medicine (SGIM) assembled an expert commission to look at ways of changing physician reimbursement in order to improve patient outcomes and control exploding expenditures. One year later, on March 4, 2013, SGIM’s National Commission on Physician Payment Reform (NCPPR) released its recommendations which call for transitioning most physicians out of the traditional fee-for-service (FFS) reimbursement system over the next decade. The NCPPR is an independent commission comprised of twelve members representing various realms of academia, industry, and government. The commission is chaired by former Senate Majority Leader William “Bill” Frist, M.D. and Steven Schroeder, M.D. of the University of California, San Francisco. Robert Wood Johnson Foundation (RWJF) is a co-sponsor of NCPPR along with SGIM.

Recognizing the reality of how entrenched the FFS system is in the U.S. healthcare system, the NCPPR foresees a two-phase transition period. First will be a five-year period designed to address the most pressing flaws and inefficiencies in physician reimbursement practiced by government and commercial payers. This phase should incorporate the majority of physicians in a mix of new payment models and tighter controls on traditional FFS. This initial phase will be followed by another five-year period where remaining physicians will be brought into a fixed-payment reimbursement system.

NCPPR's Recommendations for Transitioning out of FFS

The following summarizes NCPPR’s core recommendations -

    • Stand-alone FFS payment is inherently inefficient, causes problematic financial incentives, and should mostly be eliminated and replaced by a fixed-payment model.
    • A five-year transition period should begin, incorporating testing of a reimbursement system based on quality and value with the goal of broad adoption within ten years. Features of this transition should include -
      • Encouragement of behavior that improves quality and cost-effectiveness and penalizes misuse or overuse of care
      • Government and commercial payers should increase annual updates for evaluation and management codes; updates for most procedural diagnosis codes should be frozen for a period of three years
      • Eliminate higher payment for facility-based services that can be performed in a lower-cost setting
      • Incorporate quality metrics into the negotiated reimbursement rates in FFS contracts
      • Encourage small physician practices accepting FFS to form virtual relationships and share resources to achieve higher quality care
      • Focus initial fixed payment programs on areas where significant potential exists for cost savings and higher quality such as chronic care populations
      • For providers in fixed payment models, incorporate measures to safeguard access to high quality care, assess the adequacy of risk-adjustment indicators, and promote strong physician commitment to patients
      • Eliminate the Medicare Sustainable Growth Rate (SGR)
      • Pay for repeal of the SGR with cost-savings from the Medicare program including both cuts to physician payments and reductions in inappropriate utilization of Medicare services
      • Increase the transparency and diversify membership for the AMA’s Relative Value Scale Update Committee (RUC) that sets rates for Medicare reimbursement. In addition, CMS should develop an open, evidence-based, and expert processes to establish and update relative values

FFS and Lack of Pricing Transparency - The Root of All Evil?

The fee-for-service reimbursement system is characterized by separate payments for each medical procedure, office visit, or ancillary service. There is growing consensus that FFS simply does not encourage clinicians to practice cost-effective medicine and instead encourages them to perform more procedures (and more complex procedures) in order to earn more money or, perhaps, to practice defensive medicine due to fear of malpractice lawsuits. In addition to causing cost inflation, FFS is widely believed to contribute to the crisis in primary care, where 60 million patients lack access to a physician due to a growing shortage of providers. This is because the FFS system encourages higher payments for procedures performed by specialists verses primary care providers. It’s no surprise that healthcare cost inflation is a situation that is causing considerable angst across a wide swath of U.S. society, particularly as patients are paying an ever-greater portion of the bill. As Steven Brill noted in his brilliant piece published in Time Magazine on Feb. 20, 2013 (Bitter Pill: Why Medical Bills Are Killing Us), “Health care is eating away at our economy and our treasury”.

It's Not Going to Happen Over Night

Moves towards alternative payment methods for physicians and bundled payments are not new to the U. S. healthcare system, but are gaining considerable traction today thanks in no small part to the Accountable Care Act (ACA). Fixed or bundled payments for healthcare are believed to drive efficiencies that help control overall costs. Public and private health insurers, as well as employers, recognize the importance of changing the way physicians are compensated so that the provision of care and the payment for services is more closely aligned with preventive services, improved clinical outcomes, and enhanced patient safety. The NCPPR report adds to the momentum for the need to address the inherent inefficiencies around FFS reimbursement and to demystify the pricing of medical services. In calling for a phased transition period, I believe the NCPRR lays out a realistic time frame for achieving the transformation away from FFS, particularly given the influx of new patients coming into the system as a result of ACA.

The End of FFS Does Not Mean the End of Administrative and Documentation Hassels

The move away from FFS to a fixed payment environment presents considerable financial risk for physician practices and they will need time to adjust their workflow. Physicians will be strongly motivated to put systems and procedures in place that will help them effectively manage financial risk-informed contract negotiations with payers. In the short term, this will likely result in a higher burden for administrative and clinical documentation requirements for physician practices. During the next five years, expect to see a continued flurry of new products and services specifically desgined to help smooth the many pain points associated with transitioning out of FFS. The move to value-based reimbursement is already a key driver for health IT systems; the momentum will accelerate going forward.

PubMed's Pre-Formulated EHR Search - A Great Resource for Healthcare Market Research

29 Jan 2013

Confused about EMRs, EHRs, PHRs, HIE, HIO, RHIO, HL7, IDC-10, LOINC, ONC, and on and on with the alphabet soup of digital health? Here’s one great resource you’ll want to get familiar with.

The U.S. National Library of Medicine (NLM) is a major participant in the development and promotion of electronic health records (EHRs) and the home of the PubMed website, which provides free access to MEDLINE, “the NLM database of indexed citations and abstracts to medical, nursing, dental, veterinary, health care, and preclinical sciences journal articles”. Click here for more details on PubMed. The PubMed website offers a handy way to keep up-to-date on key government programs, citations to peer-reviewed journal articles, and other sources of information pertaining to EHRs and related aspects of health information technology by grouping key resources on one page—part of their “topic specific queries” service. The MEDLINE/PubMed Search & Electronic Health Record Information Resources website features a variety of useful features for sophisticated researchers and novices alike, including links to additional information resources from NLM, the U.S. Department of Health & Human Services (HHS) and other government agencies, associations and foundations, international organizations, and more.

One of the most helpful tools on the site is a link to a very convenient, pre-formulated search of journal literature indexed in PubMed as well as details on the (very comprehensive) search strategy. This feature can really save time when you just want a quick look at the latest articles (citations are listed chronologically; PubMed is updated five days per week).

Please be aware that, for the most part, this search will not bring you into the full-text articles. However, some citations will have links to the publisher’s website where you can either purchase the article in full-text or, in some cases, retrieve the article for free. (PubMed’s electronic health record search results page indicates that 4,994 free, full-text articles related to the EHR search are available in PubMed Central.) If the citation does not have a link to a full-text source, you can save the citation and retrieve the article from a medical library.

PubMed offers a variety of ways to narrow a search, including searching only for free full-text, full text available, abstract included, or by other criteria. Refining a PubMed search is something you’ll want to learn how to do given the volume of articles. As I said, the search strategy is very comprehensive and really covers a range of health IT issues, not just EHRs in the strictest sense. Included in this concept is health information exchange (HIE), personal health records (PHRs), and numerous other areas. For example, the electronic health record pre-formulated search brings up a total of 37,388 citations, beginning with the first article from 1957 (something about “health cards, in Portuguese…) to the most recent article added as of today (January 29, 2013) on enhancing patient safety with EHR usability. (BTW, this looks like a great article! Patient safety is one of the key issues I’m tracking this year. Here’s the cite and link - Middleton B, Bloomrosen M, Dente MA, et al. Enhancing patient safety and quality of care by improving the usability of electronic health record systems: recommendations from AMIA. J Am Med Inform Assoc. 2013 Jan 25. [Epub ahead of print]).

Another really great feature of this pre-formulated search is a bar chart showing results by year. This provides a quick look at how the topic is tracking in terms of numbers of articles published in the peer-reviewed literature. Looking at this graphic, it is immediately apparent to see the dramatic uptick in health IT articles over the years. Just for fun, I ran some numbers to see look at the increase in articles over a few ten-year periods. In 1980, there were 87 articles based on the search strategy, which increased to 621 articles in 1990, amounting to a compound annual growth rate of 21.7 percent. This seems logical as this is really the period when PC’s became ubiquitous throughout industry. From 1990 to 2000, when there were 1,114 articles, the annual growth rate declined (or stabilized) to 6.3 percent. Looking at the period of 2002 to 2012, we can see that the annual growth rate in the number of articles has increased a bit, but not much, to 7 percent (see chart). Not surprisingly, the period from 2009 to 2010 saw a 16.7 percent increase in articles, undoubtedly influenced by HITECH.


Anyway, the main point is, NLM’s PubMed is a great resource to keep up with studies on health IT. Even though much of the literature is targeted to a “professional” audience, business researchers should be aware of the value of medical literature as a an important tool for tracking industry trends. While a PubMed search will not link to citations of proprietary market research studies that provide in-depth market and business analysis like we do at Frost & Sullivan, a review of the clinical medical literature is a key component of any thorough market analysis pertaining to the healthcare industry.

One in Three American Adults Use the Internet to Diagnose Medical Conditions but Majority Still Depend on Healthcare Professionals for Information

17 Jan 2013

Findings from a recent study by the Pew Research Center reveal that thirty five percent of U.S. adults have gone online within the past twelve months to diagnose a medical condition that they, or someone else, might have.

Source: Susannah Fox and Maeve Duggan. Health Online 2013, Pew Internet & American Life Project, January 15, 2013. 

The study is the latest health-related survey conducted as part of Pew’s Internet & American Life Project that began in 2000 with the objective of measuring the social impact of the internet across the U.S. population. Health Online 2013 contains responses from 3,014 U.S. adults obtained from telephone interviews conducted from August 7 to September 6, 2012. In addition to an analysis of how people use the internet for medical diagnosis, the report covers a range of issues around general health information seeking behavior including a look at the most common health-related topics searched for online. Survey data are segmented by respondents’ gender, age, income, educational level, and insurance status. The report also looks at the use of smartphones in searching health information as well as peer-to-peer health information seeking behavior.

Select Findings

The study identifies two key categories of user types segmented from the 81 percent of the U.S. population that uses the internet—specifically, “online health seekers” and “online diagnosers”. Online health seekers are those that say they looked online for health information within the past year. This category consists of 72 percent of the total internet user population, with women, younger people, white adults, and those in higher income and education brackets dominating. Of this population, the vast majority, or 77 percent, began their search with a search engine such as Google, Bing, or Yahoo; 13 percent began with a health information specific website like WebMD; 2 percent began at a more general site like Wikipedia; and 1 percent began at a social network site like Facebook. Online diagnosers are a sub-segment (59 percent) of online health seekers and categorized as those that say they have gone online specifically to identify a medical condition they or someone else might have. This group constitutes 35 percent (one in three) of U.S. adults. Of this population, 53 percent say that they followed up with a clinician after their web search while 46 percent did not.

Additional findings of interest include -

  • 41 percent of online diagnosers ultimately had their diagnosis confirmed by a physician
  • 52 percent of smartphone owners have looked up health information on their phone, compared with just 6 percent of other cell phone owners
  • 26 percent of online health seekers have been asked to pay for access to information while just 2 percent did so

The study authors conclude that, despite the relatively large number of people seeking health-related information online, most people are still dependent on their healthcare providers for direct, or offline, information. Specifically, the study finds that 70 percent of all U.S. adults sought information, care, or support from a doctor or other health care professional; 60 percent sought information or support from friends and family; and 24 percent sought information or support from peers (those with similar conditions).

Implications for Providers and IT Vendors

People are naturally curious about medical conditions and often seek to learn more via numerous on-and offline channels. Today, many Americans are taking a more proactive approach to managing their healthcare and seek to have a more informed interaction with their providers. Thus, it comes as no surprise that many people turn to the web, or “Dr. Google”, for health-related information. But what are some of the pros and cons of doing so? In terms of pros, the internet offers immediate, 24/7 access to information, especially when the web is accessed through a mobile device like a smartphone. As indicated in the Health Online 2013 report, most people start a health-related query at a search engine like Google as this is the most familiar and user-friendly option. Google allows one to “cast the net widely” in terms of the initial search strategy (which can be good and bad). The fact that large numbers of people use Google to look for health information or to diagnose symptoms is also beneficial for health researchers. Aggregated online search behavior is now being analyzed to track health trends across a defined population. The Google flu tracker has been in the news quite a bit lately and is a good example of this.

On the downside, there are many concerns about the trustworthiness, or authority, of medical information found on the open web in additional to potential problems with lack of information specificity, accuracy, and timeliness, all of which can result in potentially harmful misinformation. Most people deploy unsophisticated and very general online search strategies that can yield millions of results from millions of sources and, usually, only the top few results are selected for viewing. In addition, the quality of information found through search engines can vary significantly, which may lead a person to over- or underestimate the seriousness of the situation.

Healthcare providers are entering into a new era of outcomes-based reimbursement which will entail the need to maximize the quality of care to ensure the greatest safety and efficacy. As a result, providers will increasingly step up efforts around patient education. Many providers will employ online solutions like patient portals that will offer a way for people to easily seek out health related information in addition to performing other communication and administrative tasks with their providers. We foresee a great uptick in the adoption of patient portals during the coming years and firmly believe that this technology can go a long way in helping patients get access to information that can help them understand and better manage their health status. However, even if a provider offers a patient portal, it is still highly likely that many, if not most, people will continue to use the internet to access health-related information. Therefore, it is important that providers have a strategy to educate patients about the smartest way to use the open web when seeking health information and to encourage them to reach out to qualified health professionals when they have questions about the information they find on via Google, Facebook, or even through peer-reviewed medical literature found through WebMD or Medline. Health IT vendors must also keep close tabs on how online searching behavior is evolving among various population segments and use that information to develop products with user-friendly search capabilities that closely mimic the Google experience albeit it with more targeted and robust search results.

Providers should take comfort in the fact that the Pew research confirms that they are still the central source for health information for most people. Also, the fact that people are becoming more comfortable with searching online for information, as opposed to in person or via a phone call, is also encouraging for providers who are thinking about deploying a patient portal.

Accountable Care Movement Taking Hold Throughout the Market, Surprising Many Industry Thought Leaders

12 Nov 2012

The November 2012 issue of Health Affairs takes a look at the rapidly emerging market for Accountable Care Organizations (ACOs). Among several articles about ACO’s in this month’s issue is an informative piece by Harris Meyer that provides a good overview of where things towards the end of 2012. Meyer, H. Many Accountable Care Organizations Are Now Up and Running, If Not Off to the Races. Health Affairs, 31, no. 11 (2012): 2363-2367. Available at


ACO Demographics

The article points to research from Leavitt Partners indicating that, as of early October 2012, a total of 318 public and private ACOs were in existence in 48 states, with another 26 ACOs in the planning stages. Out of the total 318 ACOs, 161 work with private payers, 126 with public payers, and 31 with both private and public payers. The majority of the ACOs are sponsored by hospital systems and independent practice associations, while others are sponsored by commercial payers or nonprofit community organizations. The article mentions that, even though hospitals have taken the lead in ACOs up ot this point, there is a growing trend for more physician groups to get involved in ACO formation. At this time, most of the ACOs are based in larger metropolitan areas, particularly in Southern California and Boston. Other states and cities picking up in ACO formation include Minneapolis, Detroit, and central Ohio. In addition, Medicaid ACOs are starting or are planned in Massachusetts, New Jersey, Arkansas, Utah, Colorado, and Oregon. The article mentions the experiences of several public and private ACOs across the country including North Texas Specialty Physicians and Texas Health Resources, Optimus Health Partners in north central New Jersey, Advocate Health Care in Illinois, Dignity Health in California (formerly Catholic Health West), and University Hospitals in Cleveland.

The Purpose of ACOs

ACO’s are primary care focused entities designed to improve the quality and efficiency of patient care by enabling better coordination of care among a range or providers and settings. They are designed to operate with a global budget that will be used to care for a defined patient population. There is a considerable financial risk component to the ACO model. Specifically, if ACOs are able to meet or exceed designated performance standards, they will share cost savings. However, ACOs may also lose money if performance standards are not achieved. Even though many ACOs in existence today do utilize a fee-for-service model, it is hoped, although not proven by any means, that ACO’s can ultimately help to “bend the cost curve” by shifting providers from volume-based fee-for service reimbursement to performance-based global payments per members.

As Meyer points out in the Health Affairs article, it’s too early to tell whether public and private ACOs can accomplish their goals around reducing costs and improving quality. The provision of healthcare services in the U.S. is complex, multi-faceted and notoriously difficult to coordinate across an extremely fragmented delivery system. Furthermore, ACO’s depend heavily on primary care providers who are in increasingly short supply. Another concern is that implementation costs for ACOs, including administrative infrastructure and health IT systems, could be so high as to cancel out any potential savings resulting from better care coordination. Finally, many ACO’s should expect to confront challenges in branding and building awareness of the concept of accountable care among key stakeholders including physicians and patients. Nascent ACOs must have strategies in place to explain why these new organizations could be of value to them and to encourage them to consent to sharing their health data across the ACO so that it can be leveraged to improve quality and efficiency.

Overcoming Initial Skepticism

When CMS released the initial ACO regulations on March 31, 2011, there was a great deal of skepticism among many analysts—including yours truly—about the feasibility of the market taking to what was seen as a significantly complex and rather risky new model of care. However, the initial rules were subsequently revised and relaxed a bit so that, as is now increasingly apparent, more participants have been encouraged to take the plunge. This is the case for ACOs catering to public payers (that is, Medicare and Medicaid), and private commercial insurers like Aetna, UnitedHealth, and others. In fact, our recent discussions with industry thought leaders indicate that 60 to 80 percent of the commerical payer market is currently moving in the direction of ACOs. So, no doubt about it--the ACO movement is gathering steam. Whether or not they will ultimately be successful is another issue.

What's Driving the ACO Movement?

If we take a closer look at what is driving the ACO movement, we can point to three key issues—1) the impact of healthcare reform; 2) growing concerns about excessive costs; and 3) market consolidation. Clearly, the fact that we now have more certainty about the fate of the Affordable Care Act (ACA) is a major driver for ACOs. The re-election of President Barack Obama pretty much removes the majority of lingering doubts about ACA, ensuring that focus will now shift away from debating its legitimacy to implementing its key provisions. As reality sinks in, the need to transform patient care becomes more clear and that means ACOs will continue to grow and will, in fact, accelerate quite rapidly. Complaints about the excessive costs of healthcare are nothing new. However, there is growing consensus that fee-for-service simply does not encourage clinicians to practice cost-effective medicine. Most industry thought leaders believe that the U.S. healthcare system is irrevocably moving away from fee for service. The key focus now is on controlling costs and preparing for shifts in payment models. As the healthcare market rationalizes in response to market pressures, horizontal consolidation and vertical integration will continue to drive the development of ACOs. Hospitals will continue to merge and physicians, who have been slower to form ACOs than hospitals, are increasingly recognizing the need to form strategic partnerships with hospitals and/or be owned by them outright.

Where Things are Headed

The move to ACO’s will result in integrated, coordinated entities that depend upon data analytics and metrics to ensure the quality of care and contain costs. Such entities must be enabled by a robust IT infrastructure. It is inevitable that ACO’s will need to extensively leverage health IT to effectively carry out their mission. The core IT infrastructure for ACOs includes EHRs, HIEs, business intelligence and predictive analytics, clinical decision support, and patient portals including PHRs. None of this comes cheap. Cost estimates for building the IT infrastructure for ACOs range from $1 million to $4 million and up, depending on the number of providers involved in the ACO.

No one really knows if ACOs will fully deliver on their promise to improve care and control costs. What we do know is that the experiment is well underway and there will likely be many bumps in the road. Expect to see an increasingly elastic definition the concept of an ACO and adjustments in how these organizations are formed and operate to transform healthcare. The move away from fee-for-service and towards integrated, accountable, value-based care requires extensive capabilities in health IT.

We expect the ACO movement to be a key market driver for health IT purchasing over the next 12 to 24 months.

Access, Action, and Attitudes: ONC Accelerates Efforts to Engage Consumers and Patients with Health IT

14 Sep 2012

The Seventh Annual National Health IT Week, sponsored by the Health Information Management Systems Society (HIMSS), the Institute for e-Health Policy, and the College of Healthcare Information Management Executives (CHIME), took place during the week of September 10, 2012. National Health IT Week features a variety of live and online events hosted by numerous partners and sponsors including nonprofit associations, academia, industry, and government agencies, all designed to raise awareness of the importance of health information technology to enabling health system transformation. As part of their participation in this event, the U.S. Department of Health and Human Services (HHS) in conjunction with the Office of the National Coordinator for Health Information Technology (ONC), held its second annual consumer health IT summit in Washington on September 10. The Summit brought together a variety of constituents across public and private sectors focused on efforts that encourage the use of health IT among consumers and patients. A video from the conference posted on YouTube presents a conversation between Dr. Farzad Mostashari, National Coordinator for Health IT, ONC, and Lygeia Ricciardi, Acting Director, Office of Consumer eHealth, Office of the National Coordinator for Health Information Technology, HHS in which they discuss ONC’s comprehensive strategy for driving consumer engagement.  In the video, Dr. Mostashari and Ms. Ricciardi outline three core elements seen as essential to moving the needle forward: 1) Access, which means getting information into the hands of patients and caregivers; 2) Action, which pertains to engaging consumers to use information to improve health; and 3) Attitudes, which is about how increased access and action enable new attitudes about the traditional roles of patients and providers. Key announcements from the Summit that further depict ONC’s efforts on this three-point strategy for consumer engagement include:

  • Push to Leverage Blue Button-Type Functionality: “Blue Button” refers to a VA-led initiative launched in 2010 that allows veterans to download their personal medical information by clicking a blue button on a secure website. The Blue Button approach is a simple and straightforward way for patients to gain access their health data. The program is very popular and more than half a million veterans have already downloaded their records. ONC is strongly encouraging technology vendors and providers to extend this concept to the broader patient population. Dr. Mostashari emphasized that these stakeholders must focus on the “view, download, and transmit process” via blue-button type technology as a key way to drive consumer engagement. ONC has also established a Twitter hashtag of #VDTnow to encourage people to post about their efforts in this area.

  • Stage 2 Meaningful Use Raises the Bar on Patient Access: The recently released rules for Stage 2 calls for hospitals and physicians to confirm that 5 percent of patients access their medical information online. ONC designed this requirement to help motivate patients and providers to get more involved in their own care. The 5 percent requirement in the final rules is a compromise from the proposed rules which called for confirming that 10 percent of patients access information online—a requirement that was widely contested by providers. ONC believes that the lesser requirement should, nonetheless, still be quite helpful in encouraging their goals for patient engagement via health IT.

  • Two New Workgroups Formed to Assist Policy-Making: ONC announced plans to add two new workgroups to its advisory Health IT Policy and Standards committees that will focus exclusively on patient engagement. Members of the public will be able to nominate committee members to serve on those committees

  • Results of PHR Video Challenge: This past July, ONC launched a video challenge to promote PHR use. The "What's in Your Health Record??" invited people to create a brief video depicting ways in which they are getting access to their personal health information. The contested was intended to inform the public of their legal right to access their health records and to illustrate the importance of how being informed and involved leads to better care.  Six awards totaling to $7,700 were presented at the Summit.

Patient-Centric Care Means Patients Need to Be in the Information Loop

We hear a lot about how health IT can enable “patient-centric” health care. The patient-centric concept can mean a variety of things. From a provider’s perspective, it has mostly pertained to using technology that integrates disparate sources of information so that there is a “single source of truth” offering a complete, comprehensive view of a patient’s history and status. Access to this information is also important for patients and their family members. Thus, a truly patient-centric health care system must include patients in the information loop, and that means using information technology. Acknowledgement of the need to engage consumers and patients with health IT is not new but efforts are accelerating and taking on more urgency. As with provider health IT, ONC, providers, and technology vendors are emphasizing potential improvements in the quality of care and as well as patients’ rights to their own data as the reasons for their interest. However, another very important driver of this movement to consider is the shift to accountable care and bundled payments. In a health care system where reimbursement will increasingly be based on the concept of value (defined as the overall quality of care in terms of process and outcomes that is derived from total resources expended), the issue of patient compliance takes on a particularly critical role. Problems around patient compliance have long been seen as a critical factor influencing outcomes. The physician and care team can do everything right but if the patient is non-compliant with treatment protocols, outcomes are often negatively impacted. This is one of the core dilemmas in health care and it grows in importance with value-based reimbursement. Thus, in an era of reform and transformation, there is no getting around the fact that people must take on more responsibility for their own health care. Patients need to be accountable too. For payers and providers, this comes down to changing human behavior, a difficult-- but not impossible—challenge. That means efforts will accelerate to help develop informed and engaged consumers of health services. Those efforts will include shared decision-making, actively tracking and monitoring compliance with treatment protocols, and having ready access to their personal health data and various educational tools. A variety of approaches and technology tools are needed to enable patient engagement including PHRs, patient portals, mobile apps, telehealth solutions, and remote patient monitoring. Not all patients will be able to participate equally in health IT—and many never will do so, realistically. However, as more innovative and user-friendly technology tools like Blue Button features become more widespread, cultural attitudes about health IT will inevitably change among larger numbers of patients as they have among health care providers. The VA experience is proof of this concept. Using health IT tools will become more comfortable and natural for people and will ultimately pervade every aspect of their health care experience, from the initial point of engagement with payers and providers on through active treatment, post-treatment, and ongoing monitoring and maintenance.

Pay Attention to the Voice of the Patient

The need to engage patients and consumers is greater now than ever as witnessed by accelerated activity among numerous public and private entities. Patient behavioral change is a key component of health system transformation and the “voice of the patient” must be a key focus for all market participants. A comprehensive, concerted effort among all stakeholders is necessary to ensure success.

A New Era in Health Data Analytics: The Key to Health Care Transformation

13 Aug 2012

Health IT Needed to Transform Patient Care

The provision of health services is an exceptionally data-intensive endeavor. Of course, other industries are also very data-intensive but the health care industry has notably lagged in making use of advanced information technology (IT) solutions to manage and process vast troves of data. Health care data includes clinical medical information collected at the point of care, financial information resulting from highly complex billing and claims processing, and voluminous administrative and demographic data required as a result of significant legal and compliance requirements--all of which provides a rich resource for gaining knowledge and insight into best practices. Unfortunately, in health care, disjointed data is collected across highly fragmented systems that are still often predominately paper-based or, if electronically-based, are not usually amenable to interoperability with electronic systems used by various payers, providers, or government agencies. The whole thing is mess and everyone knows it but the good news is that this situation is rapidly changing today with the new emphasis on all things health IT, particularly advanced EHRs and new methods of health information exchange. Over the past decade, especially during the last five years, health care providers, including hospitals, have considerably accelerated their use of clinical IT systems such as EHRs. Thanks in no small part to the strong push from the federal government in the form of financial incentives provided by the HITECH Act, hospitals are focused on installing new EHR systems and digitizing clinical information that has traditionally been locked in paper-based silos. The growing adoption of health IT is key to the government's goals to transform our health care system, as laid out in the ONC's Federal Health IT Strategic Plan for 2011-2015 and summarized in the following chart -


 Growing EHR Adoption Drives Analytics Evolution to Next Phase

The growing use of EHRs is a very positive development on the road to health system transformation. In the next phase, newly digitized clinical data will be combined with financial and administrative data to yield new insights that will improve the quality, efficiency, and safety of patient care. Over the past 20 years or so, hospitals have steadily increased their knowledge and capabilities around digitally gathering and analyzing financial and administrative information. Thus, the digitization of financial and administrative data is further along in the hospital setting than is clinical data. Furthermore, the use of business analytics or business intelligence has been in place in most hospitals to some degree. Unfortunately, most hospitals have yet to adopt sophisticated analytic approaches to the data generated from their new EHR systems, and they particularly have not yet integrated clinical data with financial and administrative data.

Installing EHRs so that clinical data can be digitized and shared is the first step towards transformed health care. As EHR adoption grows, hospitals will need to aggressively move towards new processes and strategies to leverage clinical, financial, and administrative health data for the benefit of individual patients, patient populations, and the nation as a whole. Health care reform, the move to accountable care, and the prospect of bundled payments, or value-based reimbursement, are key drivers for the need to derive advanced insights from all forms of digital health data. Gaining value and insight from health data requires advanced, cloud-based data analytics solutions that pulls in data from all sources to provide both real-time and predictive insights, unlike the traditional retrospective, business intelligence approach of the past that mostly focused on financial analysis. Health data analytics is really a whole new approach to the analytics process that will impact every aspect of hospital operations.

It is clear that the future of health care will be increasingly driven by advanced health data analytics utilized at every point of care. We believe that the urgent need to transform our health care system will require hospitals to increasingly invest in advanced data analytics solutions to monitor end-to-end care delivery across a variety of settings as well as to provide comprehensive reporting on performance and quality measures to a variety of stakeholders. Understanding the key imperatives driving this phenomenon is essential. We take an in depth look at this issue in our new report, U.S. Hospital Health Data Analytics Market, 2011-2016: Growing EHR Adoption Fuels A New Era in Analytics, part of Frost & Sullivan’s Healthcare & Life Sciences IT Growth Partnership Service program.


U.S. Supreme Court Upholds the Affordable Care Act; Health IT Market Will Accelerate Across the Board

13 Jul 2012

Summary of Supreme Court Ruling

On June 28, 2012, the United States Supreme Court, in a 5-4 decision, found that the Patient Protection and Affordable Care Act’s individual mandate is a tax and thus allowable under Congress’ constitutional power to levy taxes. Under the law, most people, save those who quality for exceptions based on financial or religious considerations, are required to purchase health insurance or be subject to a penalty payable to the IRS amounting to 1 percent of their income starting in 2014. The penalty will increase with time. The Supreme Court’s decision leaves the majority of the law in place, with the exception of the Medicaid funding formula. Specifically, the majority of the court agreed that the law's expansion of Medicaid to an estimated 16 million people by 2019 is unconstitutional as written and that the federal government cannot threaten to withdraw existing Medicaid funds from states if they choose not to expand Medicaid. It is expected that this aspect of the ruling will impact the extent to which some states participant in the Medicaid expansion called for under the law, at least initially. While the ruling is seen as a win for the Obama administration, the next hurdle facing the Affordable Act (ACA) will be the November Presidential elections, as the Republicans have vowed to repeal the law if they win the White House. Even in the event that the Democrats retain the Presidency, it is highly likely that certain provisions of ACA will likely be repealed and/or revised in the coming years, e.g., the controversial tax on medical device manufacturers.

Market Impact

Overall, we see the Supreme Court ruling on ACA as a very strong positive for heath IT. Despite the prospect of a Republican win in November, most industry experts believe that there is more clarity now about how health system transformation is shaping up--and the headwinds are strongly in favor of an even more aggressive adoption of EHRs and related technologies. Clearly, this trend has been accelerating for the past several years, due in no small part to The Health Information Technology for Economic and Clinical Health (HITECH) Act, enacted as part of the American Recovery and Reinvestment Act of 2009. But beyond that, we see that the culture and attitudues around health IT are changing as well. We firmly believe that the ACA ruling will result in an even more widespread acceptance of the inevitable changes that will reshape the financing and delivery of health care in the United States. Specifically, the health care system will be increasingly characteristed by a greater volume of patients, many of whom are new to the system; a greater number financially disadvantaged patients coming into the system; and, most importantly, more patients with complex, chronic illnesses, often exacerbated by years of no access or poor access to health care services. This situation requires that providers gain every advantage in terms of facilitating access to care for more patients while simultaneously driving comprehensive improvements in quality, safety, and cost-efficiency. Such improvements simply cannot happen without the greater use of health IT. As providers come to grips with the new reality, those health IT stragglers, namely small physician practices and some small hospitals, will increasingly come on board out of sheer necessity. Many of these providers will be required to merge with larger practices, join an ACO, or get bought out by a hospital/IDN.

Below is a summary of some potential near-term and long-term impacts of the ACA ruling on key health care market participants:


With regard to EHRs, the ruling will probably not have much of an impact for large hospitals and academic medical centers as they have been strongly focused on EHRs anyway due to HITECH. Projects are well underway; contracts have been signed. Large vendors with fully integrated systems for hospitals and ambulatory practices have been winning big and this will continue and accelerate. Growing consolidation presents operational challenges for health IT implementation, especially when providers are on separate EHRs. This could slow the path to Meaningful Use (MU) for some providers. As a result, there may be some push back on MU measures and timelines due to growing consolidation as well as the need to ramp up other IT systems in preparation for 2014, particulary financial systems for revenue cycle management (RCM). We see a big opportunity for hospital RCM. Hospitals need to quickly get very smart about managing financial risk and reducing bad debt. The onslaught of newly insured patients coming into the system will require robust RCM capabilities including patient engagment at the pre-certifcation stage. While the fact that patients will be insured is good, hospitals will need to be very efficient about collecting co-pays and deductibles because nothing can be left on the table due to Medicare cuts and the growing numbers of Medicaid patients.


There will be vendor displacement because of consolidation for all sectors of the market; large hospitals to some degree, but especially for mid-sized and smaller hospitals. Smaller hospitals (under 150 beds or so) are most likely to get absorbed into larger systems. Financial imperatives will be overwhelming for many and vendors serving that market are likey at increased risk. In addition, some large legacy vendors, especially those with weakness on the ambulatory side, will continue to get displaced. Hardest hit vendors will likely be those serving the small ambulatory medical practices. These practices will increasingly need to partner with a larger provider and will eventually go onto the larger system’s EHR. The next six months are very risky for vendors serving this market as some providers delay upgrade/purchasing decisions waiting for outcome of elections and/or seek to partner or get bought out. Add that to the need to spend more money for Stage 2 MU certification and these vendors face very difficult market conditions that will undoubedtly cause many to go under. Looking out over the longer term, the distinction between ambulatory and hospital EHRs will largely disappear over the next decade. We will likely see a move to open, cloud-based platforms that are interchangeable among all providers and care settings. Provides will select applications and modules that are relevant to their practice, e.g., EHRs, patient portals, PHRs, etc. However, user interfaces/usability may be more standardized due to regulatory oversight due to patient safety concerns.


The short term impact will likely be somewhat negative for payers but they have been expecting this so and much of the downside has already been accounted for in their business plans. Long term, we believe ACA is a strong positive for the insurance industry. We will likely see an acceleration in payers interested acquiring health IT companies as they need to have more access to quality data and provider performance metrics. As for state health insurance exchanges, we do expect some uptick in activity to form exchanges over the next several months; however, some states will be waiting until 2013 (after the elections) to move fully forward on this. The issue of health insurance exchange is a very political issue in many states. Thus, the process will likely be contentious and characterized by fits and starts as the market settles, much like what has taken place over the past several years with public health information exchange organizations.


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