Stark Exceptions Establishing Cartels?

Stark law exceptions were intended to remove barriers to Health IT adoption, allowing hospitals to pay for hardware and software for Physicians. In part: “The items and services must consist of hardware, software, or information technology and training services that are necessary and used solely to receive and transmit e-prescription information.” How is this going to shake out in reality?

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Traditional USA market forces already do not work well with Electronic Medical Record software. Aka “The Microsoft of Medicine” has not and likely will not emerge. EMR’s are a public good and governed by those economic rules but are being treated as a private good. Those rules include susceptibility to market failure by among other things, the “noise effect” from too many competitors and by ‘information asymmetry’. Information symmetry is necessary to form a true market and occurs when both buyers and sellers have sufficient information about a product for a transaction to occur.

Clearly market failure has occurred with Electronic Medical Record software. There are hundreds of competitors. Information symmetry does not exist with proprietary electronic medical record software. So far, Certification Commission for Health information Technology (CCHIT) certification has reduced the number of competitors in ambulatory care to about 70. It is for now a weak certification that misses the point, particularly with interoperability and makes no effort at all to remove proprietary barriers.

In the hospital space, the Stark law exceptions will further cement a local monopolistic hold that a few companies have on these large and lucrative customer systems by extending them into private physicians offices. This is being done as we speak. One can only hope that private physicians will not be enticed by centralized control of their data, even for ‘free’, by proprietary EMR companies. While local unification to a few systems is good, granting instant local monopolies to proprietary EMR companies is a very high price to pay and may not achieve important goals. Some of the prices to be paid are: the un-ethical ‘black box’ practice of medicine, the illusion of interoperability, freedom of an organization to grow and extend its own nervous system beyond what the EMR corporate agenda is, non-portable training, monopolistic pricing, business failure, buyouts, lengthy delays for needed software, chronic integration problems and unverifiable security.

The detrimental effects of granting proprietary companies local monpolies on EMR software by well meaning but misguided lawmakers, administrators, hospitals and physicians will not be felt for some years. By that time the decisions will be difficult to reverse and a fresh start may not occur until, in my experience, 9 or so years have passed.

Fortunately, market failure will probably continue to occur despite the Stark exceptions just as it has occurred for the previous 2 decades with Electronic Medical Record software. A large proportion of medical decision makers with no good software knowledge or training are vulnerable to a sales pitch, particularly one for a proprietary Stark exception ‘free’ EMR which is not free at all. These decision makers are still launching a smorgasbord of proprietary EMR’s with no real unity in sight, a stuck market share, or monopoly control by a cartel of large corporations at its end.

The obvious answer that is in harmony with economic rules for public goods is that non-profit advocacy for and insistence on EMR’s licensed with Free and Open Source Software (FOSS) can eliminate the insurmountable barriers that proprietary software automatically puts in place. Economic history has shown that advocacy in a public goods environment works. Shining examples are organizations such as WorldVistA which has a completely FOSS licensed, CCHIT certified, based on the proven VA VistA system EMR (WorldVistA EHR/VOE 1.0). Others include local initiatives that have FOSS principles. Approximately 8 vendors currently will support WorldVistA EHR/VOE 1.0. There are other EMR vendors smart enough and brave enough to use FOSS licenses exclusively such as MirrorMed/ClearHealth and Ultimate EMR with rumors that Misys will be FOSS licensing its product. Organizations such as these, WorldVistA and its participating vendors should be supported with service contracts, public and private funding to establish information symmetric, true markets for EMR’s.

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