Regulation as a forcing function for innovation feat. Micky Tripathi, HHS’ National Coordinator for Health IT

Creating economic value to drive collective action in a severely fragmented industry

Key Takeaways

• Appropriately tailored regulation helps coordinate healthcare progress and serves as a forcing function for innovation and progress when natural economic incentives fall short.
• The federal government can help address the “collective action problem” that occurs with complexity and market fragmentation by leveraging its regulatory presence in virtually every market via Medicare and Medicaid.
• The shift to value-based care incentivizes interoperability, as data exchange becomes a core part of delivering value rather than overhead. The 21st Century Cures Act goes further by mandating that data flow freely by default, with the option to penalize any organization caught data blocking.
• Notable aspects of HTI-1 include new health equity data standards (USCDI v3), the creation of a new Insights (pdf) program to publicly report industry-level EHR adoption and interoperability dashboards, and AI transparency requirements that facilitate better clinician decision-making. This lays the next level of groundwork for unlocking value from these data assets and modernizing medical best practices.

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Top 5 Quotes

• “The challenge that we have is what in political science and economics they call the ‘collective action problem,’ which is how do you get an industry to move forward in more of a synchronized way when it’s very, very fragmented? It’s not as if you can just get seven or eight large companies in the room like you can with banks or airlines and get an industry agreement among them. In healthcare, we don’t have that.”(10:34)

• “You see it in the 21st Century Cures Act, which basically said, interoperability is the natural state. The idea of information blocking is that you need to have a very good reason to interfere with or prevent that information from flowing. They weren’t thinking, ‘Oh, I need an ROI calculation.’ It was just that value will come to everyone through information flowing. Those who feel that it upsets their markets are the organizations who are basically making profits on the inefficiencies of the market. And obviously as a federal government, we’re gonna try to prevent that wherever we can.” (16:30)

• “It feels like across the board, there is a sense that we’ve spent a lot of time converting from paper to a digital foundation. And that took a lot of time and yes, it was messy, but in something like 10-12 years, we’ve completely converted the most complex sector of the biggest and most complex economy of the world from a paper-based system to one that is in many, many ways starting to become digitally native. And that’s a tremendous, tremendous accomplishment.” (26:42)

• “People say this all the time, ‘We’re going to reduce the cost of care.’ And it’s like, well, we’re not really going to reduce the cost of care. We hope to reduce the increase in cost growth. We hope to be more productive or efficient, getting more healthcare quality per unit dollar. What is the value of an improvement in my quality of life so that I have managed diabetes, or I don’t have my leg amputated, or any of those things that are about my QOL? How do we actually measure that in a value proposition equation in the same way as when I purchase a computer or a TV and make those estimates of what additional value I get for that next increment in capability?” (35:23)

• [T]hat’s one of the aspects of public goods – that the federal government needs to help to solve that inefficiency, that dimension of a market failure that is a public good. What is the value to our country of having an effective public health system? What’s the value to our country of having patients have as much information available to their providers to provide the best possible care? Those are all public goods that the market itself is not going to value in the ways that we as a country should want the market to value.” (38:15)

Tackling the Collective Action Problem

I recently spoke with Micky Tripathi, National Coordinator for Health IT, about how we can better define and unlock additional value in healthcare technology. With his unique view atop the regulatory hierarchy, we discussed driving innovation through policy levers, interoperability advancements, integrating emerging techniques like AI, the recent SDoH playbook, and key aspects of HTI-1 legislation.

A persistent challenge is that the highly fragmented US healthcare system suffers from a “collective action problem”— it lacks natural mechanisms to synchronize progress. As the only entity participating in every market, appropriately tailored federal regulation can serve as a forcing function by creating connections and standards that address systemic inefficiencies.

This is how interoperability came to be the primary focus of recent regulation. Data liquidity promotes widespread benefits through use cases like public health apps and coordinated care, but is often unlikely to provide entity-specific ROI that can motivate investment. Thus, the 21st Century Cures Act established that health data should flow freely – by default – with penalties and disincentives to discourage information blocking.

Policy as a Value Lever for Innovation

With a core digital infrastructure now in place, the industry is looking to innovate on top of this foundation. The industry still relies on proper regulatory action to incentivize new connections between disparate entities so we can deliver on the next generation of progress and value using these tools. This vision depends on deliberate policy to ensure open data sharing as a public good, enabling emerging techniques to drive better population health.

You can see this philosophy taking form with the many new policies and mandates published in late 2023, which in many ways was the ONC’s busiest year to date.

Recent ONC regulatory highlights include HTI-1 formally requiring any certified EHR be USCDI version 3 compliant. USCDI v3 is particularly notable for the addition of health equity / SDoH (social determinants of health) data elements that will power vital new data collection to identify and address care disparities, providing previously missing data components needed to spot at-risk groups. It also includes the first regulations for clinical transparency into the use of AI tools embedded within EHRs to enable better contextual decision making regarding benefits and risks.

The Biden-Harris administration’s recent SDoH playbook also focuses heavily on interoperability across all federal agencies to unlock additional value for the populace. Stay tuned for more on this playbook in the coming weeks as we haven’t provided a proper breakdown of the document since it was published in November.

Industry Opacity Continues to Inhibit Market Forces

In a landscape with opaque economics, simple value quantification remains difficult. For example, interoperability has traditionally been an overhead cost of doing business in a fee-for-service world, but the shift towards value-based care reimbursement incentivizes data exchange by making it a core service delivery component.

As Tripathi notes, the customers of health services – ie the patients or their caregivers – struggle to assess care options, which in many ways was reminiscent of Micky’s days working in the defense sector, where those economics also feature very asymmetric risk profiles. This manifests in suboptimal behavior related to public goods like community health and care coordination. Government policy helps correct this market failure.

The ONC’s unique regulatory purview allows calibrated policy fine-tuning. HTI-1 demonstrates sophisticated interplays between standards advancement, incentive structuring, and even emerging tech like AI oversight. But coordinated progress remains contingent on thoughtful regulation tuned to healthcare’s distinct lack of organic value drivers.