Who owns health care's most valuable information?

Physician Executive, Sept-Oct, 2006 by Joe Flower

Got a Safeway card?

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If you do, then the Safeway grocery store chain can know as much as it wants to know about whether you like Skyy vodka, whether you buy Pampers in the super family box, and whether you go for organic foods.

No big deal? Maybe, maybe not.

What about the pharmacy at Safeway? They know if you are taking birth control pills, or AIDS drugs or anti-psychotics.

No big deal? No big deal--your pharmacy has always known this information, and besides, they are covered by Health Insurance Portability and Accountability Act (HIPPA). They can't just sell that information, or trade it out to a business partner.

But let's take another step here and see how new technologies can shift power structures and business relationships to re-shape health care.

We have had bar codes for 30 years. They carry UPCs--Universal Product Codes--that identify the product. So every Safeway can know how many Diet Cokes and Foster Farms Frozen Chicken Thighs they have sold--and so can the distributors and manufacturers who supply them.

The new thing is RFIDs--radio frequency identification chips. They carry EPCs--Electronic Product Codes--that identify not just a product, but whatever particular object you put them on, whether it is a truck, a pallet, a carton, or an individual item like, for instance, a bottle of pills.

RFIDs, with the suitable infrastructure of hardware and software, allows the industry to track individual items from manufacture right to end user. It will likely soon be possible for the distributor or manufacturer to know not just that the Rite Aid at Fifth and Main sells 47 packages of Ventolin per week, but that Mr. McNally refills his Ventolin prescription every 52 days, on average.

Business intelligence

The health care industry is full of articles, presentations and research papers about how useful this information will be, how it will streamline distribution, lower costs, and keep down tampering, diversion and counterfeiting.

It is also full of discussion, even heated arguments, over who owns this valuable information. Whether information gathered outside of medical channels, through electronic scanning and cross-characterization of databases among retailers, distributors and manufacturers, becomes subject to HIPAA restrictions is a regulatory question of Talmudic complexity. But big money will be weighing in on the side of using the information commercially.

Imagine that distributors, device manufacturers and pharmaceutical companies gain direct, case-detailed access to your patients and potential patients. Imagine that you run a respiratory clinic, or a sleep center.

Imagine your patients receiving e-mails or postcards, individualized to their case, from someone else across town, saying that they can provide the service better, faster or cheaper. Your crosstown rival received this information from their suppliers--a pharmaceutical company, a device manufacturer, or a distributor--as part of a joint attempt to drum up more business.

Does this seem farfetched? Health plans are already up to their elbows in the massive job of restructuring their entire business models around just such deep, massively individualized information.

Of course, health plans do not need to derive the fact that Mr. McNally has asthma. They just need to slice and dice that information. And they are exceptionally eager to find ways to use that information to hold down costs. They express their eagerness in their investments: Aetna, for instance, is spending about $300 million per year, and United has spent over $2 billion in the last three years on business intelligence infrastructure.

If it is not already true, it soon will be true that the health plans know more about your business than you do. Any hospital CEO worth her salt can tick off exactly which doctors bring in the most business.

But every doctor incurs costs as well--sometimes huge costs as the hospital expands or acquires new equipment to meet the doctors' needs--and few hospital executives could tell you which doctors bring in the most profit.

Hospital charges are clear enough, but they are mostly based on air and hand-waving--most hospitals could not really tell you what the average cholecystectomy costs them (including not only labor and supplies, but general overhead and amortized capital costs), much less what Mr. Mancuso's actually cost.

By bringing powerful and ever-evolving analytical engines to bear on claims information, health plans are rapidly gaining the ability to discern not only which doctors bring you the most business, but which make the fewest mistakes, which are the most efficient providers of care, which are the most profitable for themselves and for the hospital.

They will also be able to tell which patients (for instance) are over-utilizing and would be cheaper under more intense case management, and which are under-utilizing and need to be prodded to take preventive steps. They are getting their arms around both your doctors and your patients in ways that providers typically have not been able to.