Upping in ante in Pittsburgh: the health information exchange arms race

A few weeks ago, UPMC announced an agreement among nine area systems to spend $4M over the next two years to launch a health information exchange called ClinicalConnect. Reportedly, Highmark (and presumably the West Penn Allegheny hospital system it is in the process of purchasing) requested to be a part of the initiative but was refused.

Building electronic connections across hospitals – particularly between community systems (such as the non-UPMC participants in ClinicalConnect) and tertiary centers such as the UPMC facilities – helps make transitioning patients easier by making full patient records readily available across settings. All else being equal, easy referrals to UPMC facilities should tend to mean more referrals.

In this context, the list of participants in ClinicalConnect is interesting: the eight systems represent about 3K of the 11K hospital beds in a 100 radius around Pittsburgh, or over 60%+ of the “non-aligned” hospital bed capacity (that is, not part of UPMC or the West Penn Allegheny system). Further, these are the most important hospitals in the area most likely to generate referral flows for tertiary care: the average hospital size of the eight non-UPMC participating systems is ~260 beds while the average size of non-participating hospitals in that 100 mile radius is ~110 beds (excluding West Penn system hospitals).

Of course, in the near to medium term, all else won’t be “equal” for Highmark members given the contract dispute: UPMC facilities will be out-of-network and therefore much more costly for members to receive care. As long as they are with Highmark, these patients will get their care outside UMPC settings (presumably to the benefit of West Penn Allegheny facilities).

But for other lives – most importantly, Medicare lives (the bulk of which do not participate in Highmark Medicare Advantage and which represent a disproportionate share of hospital volumes and revenues) – “all else” should still be “equal”. Indeed, for Medicare lives which can often have the most complex hospital histories, an easy transfer of information will be even more important than for commercial lives. (By the way, UPMC’s HIE strategy dovetails nicely with its program for incentivizing physicians to adopt EHRs – specifically two preferred EHRs: Epic’s EpicCare (directly supported by UPMC) and Allscripts MyWay, both with connectivity with UPMC hospitals).

The net impact for UPMC should be to exchange current Highmark’s commercial and Medicare Advantage patients currently going to UPMC for Medicare FFS patients currently going to West Penn Allegheny. Since Medicare eligible tend to go to the hospital 2.5-3x as frequently as <65’s, UPMC does not need to achieve anything like a 1-to-1 exchange to make up the volume gap.

Highmark promptly announced plans to launch its own HIE, but it is starting far behind in the race. (It also launched a program to provide its own incentives on top of government incentives for adoption of Allscripts EHRs — presumably as a way of minimizing the degree to which physicians adopt UPMC’s EpicCare).

The HIE investment won’t be a big problem. $4M is a drop in the bucket compared with the $500M commitment Highmark has made for West Penn or compared to the billions of dollars of healthcare cost at stake in the duel between Highmark and UPMC. But HIEs take a lot of time to set up (UPMC reports that they have already been working together for 2 years). Further, busy hospital CIOs of the big community hospitals may be much less receptive to managing two HIE efforts and be much less engaged in the early stage moves. Physicians may become frustrated with the relative difficulty of working with West Penn (vs. the relative ease of transitioning records to UPMC) and therefore Highmark.

One avenue forward for Highmark is to sharply improve the value proposition of working with the Highmark HIE. As a payer, it has far more incentive levers than does UPMC. ACO models (which – in the commercial and Medicare Advantage context – Highmark can shape into an attractive proposition) could reward providers for using the Highmark HIE and also sensitize them to the relative cost effectiveness of West Penn vs. UPMC. Highmark has been relatively quiet about ACOs to date (and limited activity with patient centered medical homes): look for that to change.