Unbiased Analysis of Today's Healthcare Issues

“The medical marketplace is broken”

Written By: Jason Shafrin - Apr• 16•14

This quote is from David Blumenthal, a physician and former Harvard Medical School professor, who was the national coordinator for health information technology between 2009-2011.  He describes in an interview for the Atlantic why adoption of electronic medical records has been so slow in the U.S.

From the patient’s perspective, this is a no-brainer. The benefits are substantial. But from the provider’s perspective, there are substantial costs in setting up and using the systems. Until now, providers haven’t recovered those costs, either in payment or in increased satisfaction, or in any other way. Ultimately, there are of course benefits to the professional as well. It’s beyond question that you become a better physician, a better nurse, a better manager when you have the digital data at your fingertips. But the costs are considerable, and they have fallen on people who have no economic incentive to make the transition. The benefits of a more efficient practice largely accrue to people paying the bills. The way economists would describe this is that the medical marketplace is broken.

Are we beyond hope? The answer is no.

When the benefits of using better technology are “internalized,” as the economists would say, there has been much more rapid, complete, and effective adoption of electronic medical records. So, the VA: the benefits are internalized, because the VA has to live within a budget. In private health-care organizations like Kaiser or the Geisinger plan in Pennsylvania, or the Group Health Cooperative in Puget Sound, electronic medical records were adopted decades ago, and are widely used and highly effective. You don’t need a thought experiment to find living, breathing examples of what happens when the incentives work right.

ACOs can help in this area. By increasing provider size, providers will be able to internalize more benefits and also benefit from economies of scale. On the other hand, ACOs may decrease competition. Large providers–with EMRs–may dominate the market and work to increase pricing power. Higher prices are passed on to consumers in the form of higher premiums. Thus, ACOs may offer higher quality care, EMRs, and integrated services, but it remains to be seen if they can–or will want to–hold down prices.

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One Comment

  1. Bob Mounger says:

    I have had physicians tell me that they have patients that go to other doctors in the same building that use the same software but they cannot share information because of HIPAA.

    My experience of the VA with an 89 year old Father-in-Law WWII combat vet is that every doctor in the VA has a different HIPAA form, every question a family member asks requires a different additional non-HIPAA form, only one family member can be on that additional form at a time, & then they tell you over and over again to fill out the same forms because they continually get lost. Hardly a model of communication.

    Oh, & Father-in-law’s brother died in a VA hospital last year, & his children got a bill for $175,000 because the VA retroactively decided that they had been overpaying for his care the last four years of his life.

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