Health IT's Effect on Inter-Hospital Competition

Back in 2007, before the HITECH Act and other federal incentives began to spur the healthcare industry as a whole toward interoperability, Minnesota passed a law requiring all hospitals to have interoperable electronic health records by 2015.

This incentive, coupled with the prevalence of larger, resource-rich delivery systems in the state, meant by the time the meaningful use program was introduced, many of the larger health systems and hospitals in the state had already implemented EHR systems and were beginning to explore how to use the technology to improve care delivery, according to Paul Kleeberg, MD, clinical director of the REACH regional extension center serving Minnesota and North Dakota and CMIO of Stratis Health, a nonprofit that promotes innovation and collaboration in healthcare.

This early effort, much of it focused on health information exchange to improve care continuity, required hospitals and health systems to work together. "In those years I saw significant cooperation between different health systems to leverage their EHRs to improve care," says Dr. Kleeberg. He says initially there was concern over the executive team's competitive willingness to share proprietary data, but the physicians and other advocates of HIEs and other collaborative efforts saw it as an effort that "would raise all boats" and help all providers improve their business.

These early efforts led to more collaboration between local providers, says Dr. Kleeberg. Because virtually all Minnesota hospitals are nonprofit (all but two small specialty hospitals, according to the Minnesota Hospital Association), there's naturally a more collaborative atmosphere between many of the hospitals, he says, and implementing and using the technology built upon that pre-existing penchant to cooperate to bring the hospitals and health systems closer together. "The adoption of health IT in our community did lead to community," he says. "It led to working together to improve quality."

About three-quarters of hospitals nationwide currently participate in some sort of HIE, according to HIMSS. Spurred on by the meaningful use program and the need to collect more data to run a successful accountable care organization or avoid readmission penalties, hospitals and health systems are coming together to engage in what would have previously been seen as an anticompetitive practice to improve the care in their communities while meeting government regulations.

This does not mean, however, HIEs and health IT adoptions have made hospitals and health systems less competitive. "They're as competitive as they've ever been," says Daniel Chavez, executive director of the San Diego Regional Healthcare Information Exchange. Providers all have vested interests in health IT to improve care and optimize workflows, and all need to participate in efforts like HIEs to achieve their business goals. But using the same tools, even shared tools, is a way for hospitals as organizations to remain highly competitive rather than become more collaborative, he says.

This is seen most acutely in the hospitals that don't have the resources to acquire these IT tools. The high costs of implementing EHRs and other technologies are increasingly causing smaller hospitals to join forces with larger, IT-rich organizations to gain access to the resources needed to remain competitive in their local markets. Rob Edwards, director of strategic initiatives at Lexington-based UK HealthCare, a large tertiary-care system, says smaller, community hospitals from across the state have been approaching UK HealthCare about partnerships that would give them access to UK HealthCare's IT arsenal to avoid being overshadowed by another community hospital with a more sophisticated IT infrastructure. "They're aggressively looking to find partners," he says. "They need those relationships for the security and the resources."

The trend of smaller hospitals looking to align themselves with larger, technologically advanced organizations to remain viable is not limited to Kentucky. "I've seen a lot of hospitals just realize they don't have the funds to keep investing in health IT," says Ted Reynolds, vice president of health solutions at CTG Health Solutions, a national consulting firm, headquarted in Dallas, focusing on helping healthcare organizations optimize their use of technology and business solutions. And without the IT resources, they're unable to compete. "I'm seeing more and more of these organizations either trying to work with larger organizations or looking into outright acquisitions or mergers," he says.

Mr. Reynolds expects the need for sophisticated health IT systems to accelerate provider consolidation "until a few dominant providers shake out" in each market. However, these providers with top-tier IT, thanks to changing reimbursement structures that are reducing margins and making market shares all the more important, will remain as competitive as ever, he says.

Even as provider organizations maintain their competitive relationship with one another, like in Minnesota, the advent of health IT is bringing together individual executives and physicians who want to share best practices and discover new ways to improve care delivery.

Across the country, organizations like the College for Healthcare Information Management Executives and the ONC-funded regional extension centers have been hosting workshops and discussions that bring together the individuals responsible for successful IT implementation to share advice and best practices.

"They help to break down the competitive barriers," says UK HealthCare's Rob Edwards, who also serves as executive director of the Kentucky Regional Extension Center in Lexington, of the regional conferences his center hosts on meaningful use attestation and other health IT-related topics.

"They realize they're all on the journey together," he says.

More Articles on Health IT:

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