Hospitals, the New Center of the Universe

Jan. 1, 2007

In an era of emerging community connectivity, the hospital is the center of the universe—not the government, not payers and not independent physician practices, but the hospital. If emerging community connectivity transpires, it will derive its existence from (and owe its existence to) hospitals

In an era of emerging community connectivity, the hospital is the center of the universe—not the government, not payers and not independent physician practices, but the hospital. If emerging community connectivity transpires, it will derive its existence from (and owe its existence to) hospitals.

And what exactly is “emerging community connectivity?” This politically-correct phrase includes RHIOs, LHIOs, RHINs, HINs or any of the other alphabet soup collection of acronyms that are applied to projects that involve connecting the disparate members of a given healthcare community together for data sharing and collaboration. The argument is pretty simple, as follows:

Hospitals have a business case for community connectivity. At the very core of hospital business is fostering relationships and offering “value-added” services to physicians so that admissions are directed to the hospital. Especially with the recent revisions of the Stark Law, hospitals can now legally offer a broad range of sponsored IT services to help solidify the physician-hospital relationship (and keep the admissions flowing). Moreover, it is especially important for hospitals to invest in a community project because it helps align them with one of their primary customer groups—physicians.

Hospitals have capital. Community connectivity projects require capital and sponsorship. The current strategy, at the public policy level, is to offer government grants to kick-start regional projects, a strategy that is probably not sustainable. Armed with a business case, the hospital—in contrast to the mainly fragmented hodge-podge of physician practices—has the capital to invest in major community projects.

Hospitals have IT expertise. Implementing and supporting community projects requires project managers, system analysts and help desk personnel, all of whom currently exist within the hospital—e.g., real positions and real people. Granted, the historical legacy of hospital IT is represented by administrative and billing systems. However, hospitals, like the rest of healthcare, are rapidly embracing the deployment of clinical systems.

Hospitals have information and need information. Community projects are all about the delivery and distribution of patient information. Hospitals generate a tremendous amount of information about patients that is useful to the admitting physicians including discharge summaries, operative reports, labs and special studies.

Community connectivity provides a much more efficient way of delivering this information to their EHR-powered physicians without having to build a myriad of unsustainable point-to-point interfaces. Additionally, hospitals need information from the ambulatory world, particularly at an increasingly common point of entry, the emergency department. Recent JCAHO provisions regarding medication reconciliation, requiring the documentation of all meds that a patient is on upon admission, simply heighten the need to collect information from the ambulatory world.

Hospitals are a trusted partner. All of the institutional characteristics of hospitals—access to capital, IT expertise, even access to information—are also characteristics of payers. When given the choice between payers and the hospital to manage a community project, whom are the doctors going to choose? Is the choice not an obvious one, given the working relationship that physicians maintain with hospitals?

Hospital-driven Networks: The Downside
The notion of hospital-driven community networks is appealing because it means that something would actually get done, for the simple reason that it is in the hospital’s self-interest to do so.

But what, if any, are the trade-offs? The biggest one is that hospital-driven communities are built on serving their self-interest, not on advancing a public policy objective. Self-interest is a good thing, because it generally means that objectives get accomplished—but it doesn’t necessarily address macro public policy concerns, which, in this case, are lowering cost and improving quality of care for all patients within a community, not just those affiliated with a particular hospital.

Because hospitals compete for physician attention and patients, hospital-driven community networks, in those communities where there are multiple hospitals, will result in a Venn diagram-like matrix of competing IT communities within the same region. Although this is superior to our currently fragmented state of affairs, it is not healthcare IT utopia envisioned by public policy planners.

This competing network dilemma is probably most relevant in urban centers. For communities in which there is just one primary hospital, hospital-driven networks represent a compelling and uncomplicated model for community projects (although the business case will be based more on quality of care, lowered interface costs and lowered result delivery costs than on attracting physicians).

Who Owns the Network?
There is not an easy answer for the very reasonable objection regarding competing networks within a given community.

Certainly the “traditional” RHIO, if there is such a thing, is a quasi government-like attempt to pull all of the competing players together under one happy tent for the collective self-interest of patients, payers and service providers. While the objective—improved care and lower cost—is appropriate, this model struggles when it arrives at the business case for each of the individual players: Who pays? What is my return? How does this impact my ability to compete? Most importantly, who owns the network?

The current and appropriate solution to the issues noted above is the creation of third party, non-profit organizations with representatives from the major constituencies of the RHIO to manage and staff the network and to set policy and procedures. Appropriate, yes. But slow, cumbersome and a major barrier to the initiation of community networks—also yes, yes, yes.

Paradoxically, the best example and most successful case study of a “hospital” driven network is the Veterans Administration. Despite its sprawling expanse of 1,400 hospitals, 14,800 physicians and 61,000 nurses, it can implement an integrated information system without having to worry about external competing interests. There is a single organization from which the organizational leadership can deploy a comprehensive and unified solution on behalf of its very well defined constituency. As a result—and because of innovation and foresight by the VA leadership—this previously ridiculed system is now a model for quality of care and efficiency.

The VA leadership, while doing a terrific job, is not inherently superior to the healthcare leadership of the private sector; they are just playing with a different set of cards.

Hospitals at the Helm
Collective self-interest requires a leap of faith on the parts of multiple players—and that is why the majority of the current RHIO efforts have been dependent on grants and subsidies. Very few organizations are willing to be the first to jump. Private self-interest is much less complicated.

In the absence of a compelling “public” model (which is how I would characterize many RHIO efforts), the only alternative is a “private” model, such as the hospital-driven community. The hospital-driven model does not preclude cooperation and joint participation between competing hospitals; it is simply not dependent on competing hospitals to cooperate to get things started.

For a given region, a hospital may take the lead in an emerging community network, later to be joined by other members of the healthcare community, including other hospitals, when the network is established. However, the implied caveat is a serious one: The sponsoring hospital will have “gatekeeper” rights to who participates since, after all, they “own” the network.

Fortunately or unfortunately, these issues directly loop back to the conflict between public and private interests. Medicare and Medicaid notwithstanding, healthcare in America is a private affair, organized and managed by a complex network and web of private entities.

The government, as the single largest payer in this largely private network, is appropriately attempting to encourage a “public” infrastructure over a largely private industry. Based on efforts to date, it appears unlikely to succeed, due to difficulties of reconciling competing interests within a given community. After the grants and subsidies finally run out, hospital-driven networks—even with their weaknesses—will be the best bet for taking us where we need to go.

Bruce Kleaveland is the CEO and principal of Kleaveland Consulting, Seattle. Contact him at [email protected].

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