All health care is local

The Archdiocese of Boston is considering selling the Caritas Christi hospital network, according to a story in the Globe a couple of weeks ago. I hope they don't sell it to a national healthcare chain, because I think that would be a setback to the ongoing effort to create a sustainable regional connectivity infrastructure in the Commonwealth.

What's the connection between the two? The business case for HIEs relies on vertical synergies -- hospitals, physicians, and insurers who share the same patients and collaborate locally to make the handoffs of care coordination as smooth as possible. The value driver here is economies of scope -- getting value by better coordination across the different layers of healthcare services.

This runs at odds with the horizontal synergies that drive national healthcare chains -- hospitals across the country, for example, who share the same management and suppliers, but NOT the same patients. These chains focus on economies of scale -- getting value by better production coordination in a single layer of healthcare service (such as hospitals or insurers). Think Starbucks. Think Walmart.

Vertical strategies are inherently patient-centric, whereas horizontal strategies are provider- centric (or insurer-centric) . Problem is, the quality of care in the US already suffers from being too provider-centric. Horizontal strategies make sense in many industries -- in healthcare, they will make a very bad situation even worse.

In practical terms, a national chain entity will be much less likely to participate in a local HIE, because their IT strategy will be driven by the goals of their national parent, not their local partners. And while their national goals aren't necessarily contrary to local goals, they usually are. And even when corporate and local goals are aligned, it's usually coincidental, it takes a lot of effort to convince corporate management that they're aligned, and it's nearly impossible to coordinate project plans even when the goals are aligned.

Massachusetts is a national leader in regional collaboration in health IT. The biggest reason for this is that the leading players in health care in the Commonwealth are non-profit, Massachusetts-based, Massachusetts-focused companies. This is true on the supply side, where the biggest players are Partners, Caritas Christi, CareGroup, Baystate, Fallon, Berkshire, and Hallmark Health, among others. It's also true on the (commercial) demand side, which is dominated by Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim, Tufts, and Fallon.

Of course it's not all roses and sunshine here, and we still have a long way to go, but the strength of these local players -- who have the incentives and discretion to make local decisions -- creates a fertile (though still fragile) environment for HIEs. We need more local leadership, not less, and I'm thus nervous that the HIE movement will take a step backward if the second biggest hospital system in the state becomes an outpost of a national behemoth.

An analyst quoted in the Globe article stated that Caritas would benefit from a national chain merger because it would "help them coordinate the installation of new information systems...".

The question is, coordinate with whom?


Full disclosure: Caritas Christi and many of the other healthcare entities mentioned in this blog are members of my Board of Directors, and one of the the Caritas Christi hospitals is a participant in our pilot projects. I have not discussed or consulted with any of these entities regarding the issues that I've written about here.