Smart Health Community: The Hidden Value of Health Information Exchange

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Supplements and Featured Publications, Special Issue: Health Information Technology — Guest Editors: Sachin H. Jain, MD, MBA; and David B, Volume 16,

Smart Health Communities create new value by leveraging investments in health information exchange to provide an array of services for both consumer and community.

Investments in health information technology are accelerating the digitization of medicine. The value from these investments, however, can grow beyond efficiencies by filling the information gaps between the various stakeholders. New work processes, governance structures, and relationships are needed for the coevolution of healthcare markets and business models. But coevolution is slow, hindered by the scarcity of incentives for legacy delivery systems and constrained by the prevailing patient-healthcare paradigm. The greater opportunity lies in wellness for individuals, families, communities, and society at large: a consumer-community paradigm. Capturing new value from this opportunity can start with investment in health information exchange and the creation of Smart Health Communities. By shifting the focus of exchange from public servant to value-added service provider, these communities can serve as a platform for a wider array of wellness services from consumer care, traditional health care, and research.

(Am J Manag Care. 2010;16(12 Spec No.):SP31-SP36)

Public sector leadership has provided both an overarching purpose and large incentives for a new health information infrastructure. But the size of the opportunity remains uncertain, and constrained by the mounting pressure to meet regulation timelines. Keys to unlocking full value are as follows:

  • The consumer-community paradigm, arising from an end user perspective, provides the broadest lens for creating and capturing value.

  • Coevolution of healthcare markets and business models will be fostered through new work processes, governance structures, and relationships. n Health information exchange, with incentives, can grow into Smart Health Communities.

Our national health information highway is being repaved. Catalyzed by provisions of the Health Information Technology for Economic and Clinical Health (HITECH) Act, part of the American Recovery and Reinvestment Act, small and large providers of healthcare are preparing for new systems and processes to improve quality, safety, and efficiency.1 The end result is projected as a changed, more connected healthcare environment for patients, caregivers, providers, and insurers. Interest is growing, as are expectations for gains in efficiency and improved quality of care. But the opportunity seems constrained by the prevailing patient-healthcare paradigm in the US healthcare sector. The broader opportunity lies in wellness for individuals and welfare for families, communities, and society at large. The emerging consumer—community paradigm, we argue, is a better means by which to assess the opportunities created by a new health information infrastructure.

The Coevolution Conundrum

Patient care is traditionally offered through a hierarchical family of health services by nurse practitioners, physician assistants, primary care physicians, and specialists. Offerings are supplemented by services from pharmacists, lab clinicians, physical therapists, and insurers. Places for service delivery are growing more plentiful for the patient, including not only physician offices and local hospitals, but also miniclinics, employer clinics, and the new patient-centered medical home. Physicians are consolidating into larger group practices, and components of the system are more and more assembled toward integrated health systems. Great leaps are prevalent in all parts of the value chain. These leaps are intended to create value through cost efficiencies, growth opportunities, and the option to provide new services. But the results have been mixed, with marginal increases in quality of care and little impact on rising costs.

We believe that this lost value stems from information gaps, both within and across organizations, that have deepened over time. Value also is lost because of gaps across pools of patients.

Broad adoption of health information technology (HIT), done fittingly, promises to close these information gaps across organizations and populations. Information sharing, increased collaboration, and improved decision making are fundamental to remaking the healthcare ecosystem. Matching reality with promise, however, is filled with uncertainty. Where there is optimism, the rationale is based on technological innovation and surging information quality and velocity.

Technological innovation is made accessible through pervasive communications, sensory networks, and smarter software. Some parts of the United States still struggle with broadband speeds and mobile coverage, but communications are well on the path to ubiquity. The embedded base of smart devices is proliferating, and the price of biologic and environmental sensors continues to fall. Furthermore, cost-effective processing and storage are leading to a variety of cloud computing solutions that show promise as transformational tools and analytical engines. For example, software for natural language processing is making sense of physician notes. In addition, embedded technology providers are developing new features and functionality to meet the demands of customers, while new entrants are developing new services to challenge the status quo. Overall, technological innovation looks to be more enabler than inhibitor on the road to a new health information infrastructure.


Information quality and velocity are expected by-products of digitization and technological innovation, refining the fuel required for improving patient and population health.2 Today,

Figure 1

we see an abundance of paper shuffling and incomplete records across healthcare organizations. But the state of health information is well positioned to advance along 3 dimensions simultaneously (). The first is a (long-promised) longitudinal view of the patient, where observations (eg, blood glucose measurements) are repeated over long periods of time. The second is a contextual view of the patient, where information is integrated across various healthcare service providers, personal health records, and health-centric social networking. The third dimension is a scientific view of the patient, where genomics and the environment align for personalized medicine. All phases are in full swing, with progressive times to maturity. The patient is becoming increasingly visible, with the power to impact disease prevention, diagnosis accuracy, medication adherence, performance measurement, case management, and innovation efficacy.

However, closing information gaps requires more than just technology. Too often, established industries add new technology to old institutions and relationships, challenging the cost structure of legacy delivery systems. Convergence on an overarching purpose remains easier than a commitment to coevolution. With coevolution, modernizing institutions can change the boundaries for each player and the shape of the ecosystem. For example, navigation as a service for the mobile phone required public investments in the global positioning system, private investments in digitized maps, and a proprietary interface for the service provider. We contend that organizations must coevolve to create new capabilities around technology by adding new processes, governance structures, and relationships. These organizations can redefine traditional boundaries, allowing new markets and business models to emerge. Only then can information flow more freely.

To better understand the opportunity, it is useful to consider an alternative perspective on healthcare, that of the end user.

The End User as Catalyst for Coevolution

Healthcare is a pillar of individual and family life. Simply put, the consumer wants personal and family wellness at all times, in all locations, and at reliable prices. Collaborative care, from nutrition to surgery, often requires complementary therapies to achieve a desired outcome. Silos of specialized treatment are increasingly insufficient to deliver these outcomes. From a consumer perspective, there is the opportunity for a broad array of services beyond a scheduled visit with a primary care physician or an unexpected trip to the emergency department. As they do for other complex consumables such as education, consumers expect coordinated delivery across multiple caregivers, early diagnosis, prompt and reliable delivery, price stability, and flexible access to care. Further, consumers improve the innovation environment by engaging in the development of novel treatment through clinical trials. These expectations give rise to the notion of a multiattribute “quality of wellness” score, forcing difficult choices about willingness to pay and adoption of new services. However, traditional healthcare delivery organizations have difficulty in responding to this new consumer perspective.

Industry configuration of healthcare is intractable by nature. The legacy logistical structure, from the taxonomy of medical curricula to the enabling role of medicines and devices, evolved during times of different technological realities, patient needs, and community and social norms. Healthcare is an art that is practiced as a craft, much like the early days of automobile manufacturing.

Since Henry Ford, auto manufacturing has gained efficiency through mass production, making vast improvements within the frame of the production line. More recently, Toyota broke the mold, devising a Kanban system that determines what to produce, when to produce it, and how much to produce. Consequently, Toyota was able to achieve mass customization (offering a vast menu of choices within models), lean production (bringing about superior quality with drastically reduced waste), and design-for-manufacturing capability (halving the time needed to introduce new models). The company implemented new information and manufacturing technologies for added flexibility, built new organizational processes that aligned incentives within production groups, and most importantly, created a new ecosystem of part suppliers and distributors catalyzing the transformation. By shifting the frame of innovation from the production line to scheduling based on customer demand, Toyota changed the shape and structure of the auto industry forever. It did not take long for the rest of the industry to follow suit. Those who could not, perished.

For many years, the US healthcare system has used technology for testing, imaging, surgical techniques, and medicaldevices. Similar to the era of mass production, these technologies were embraced within a craft-like institutional structure, creating an inefficient (costly) system that was unable to deliver quality of care and widespread access to the benefits of technological innovations. Inevitably, questions of economic sustainability arose. The adoption of health information technology will create efficiencies (within the current frame), but it must also be leveraged to create new markets and business models if we are to capture full value from the opportunity. Without coevolution, the data and information collected by healthcare providers will remain narrow in scope and trapped in silos, supporting quality, safety, and efficiency from the perspective of the current institutional form.

Personal and family wellness—at all times, in all locations, at reliable prices—is not revolutionary. Each day new service providers emerge to offer education, personal health records, secure consultations, connections with others, personal genomics, blood glucose readings, health monitoring, and medication reminders. The breadth of these services may not cover the span of possibilities, but the lack of market penetration is revealing. Innovative services, from inside and outside the medical establishment, often lack consumer appeal, point-of-care coordination, and insurance coverage. The lack of service adoption by consumers is cause for concern among HIT enthusiasts. Public and private sector leaders recognize patient engagement as a critical enabler for quality of care. To date, access to lab results and prescription information are leading the penetration.

Health Information Exchange as a Capability Platform

Widespread adoption of new services often takes time and accelerates only after crossing a tipping point. The modern world is anxious for the next iPad and the rush to 1 billion users. But evidence suggests the key to exponential adoption is a platform composed of robust infrastructure and the realization of complementary network effects. For example, the automobile was dependent on a network of roads, filling stations, and drivers. The television was dependent on the presence of programming and the electric grid. And the iPad is largely dependent on a robust mobile Internet and a plethora of applications. The platform rallies consumer confidence by ensuring sustainability of the service, providing access to innovations and building connections between customers.

The path to building a platform can be elusive, requiring many participants and an orchestrated series of investments in the face of uncertainty. Evolving standards, mounting regulatory policies, and questions about customer acceptance are the norm. Investors are well served by partnering to share risk and shape new boundaries. Coordination across healthcare participants requires the same. We argue that the place to start is health information exchange (HIE), a platform investment that creates numerous growth options.3

Figure 2

As envisioned today, HIE enables the secure routing or access to patient information across healthcare organizations (). These services are commonly classified in 3 ways: enabling services for directories (eg, of physicians) and vocabularies of medical description; basic services for ensuring patient consent, authorizing physicians, and routing information; and secondary services for integration and aggregation of data to support public health registries and population health improvement.4 Health information exchange is a missing component of many health information infrastructures worldwide where investments have been in place for more than a decade. Fortunately, US federal and state governments are supporting HIE in some creative ways.

Benefits of HIE include the priceless value of holding a patient’s primary care record as he or she enters the emergency department and elimination of provider-centric basic forms. Other compelling applications of HIE are brought to light by the federal grants behind Beacon Communities (connected communities throughout the country pursuing aggressive goals in the collaboration of care). Given their central role in the community, we argue that community exchanges are well positioned to add consumer services (social networking, medical education, health monitoring) and network services (safety, decision support, surveillance, population planning, provider performance) to their portfolio. Strong HIE could force coevolution with traditional healthcare and fill the information gaps within and across healthcare organizations.

For the most part, HIEs perform in the background with support from government aid and philanthropy. More recently, commercial health plans are supporting exchanges as they foresee an opportunity to improve quality, affordability, and population health. Going forward, what are the obstacles to expanding the exchange platform and integrating services from beyond the legacy delivery system?

Incentives for Coevolution

The repackaging of HIE is not without challenges. To become active players, HIEs need to shift the focus from public servant to service provider, offering wellness services at all times, in all locations, at reliable prices. There are few barriers to being a secure pipe for routing health information, a commodity service for the legacy delivery system. But there are few incentives for the legacy delivery system to support a move to the higher value services that could be provided by HIE. For healthcare, the incentive is to grow the hospital, much like the electric utility’s incentive is to grow demand. This hinders change.

Let’s take a closer look at the state of affairs in the energy sector.5 There are many technological innovations in energy efficiency improvements, clean energy generation, storage, and smart appliances. But adoption of these innovations is slow. Carbon pricing, at the national level, lacks a clear mandate beyond targeted incentives by sector. Regulatory impediments, at the state and local level, reward utilities for selling more, not less, power. Decoupling utility profits from amount of power sold remains a massive challenge. In addition, consumers do not have access to pricing information and therefore do not understand the impact of their purchase and use behavior. Finally, the new technologies need to be “knitted together” with processes and organizations to create new services. The skills, expertise, and incentives are scarce and not standardized. No one knows the business model to create and capture value.

Before widespread adoption can occur, clean energy needs new markets and business models to emerge. Many participants are actively experimenting with new models, basing them on the platform of the smart grid, where prices and costs become more transparent to users and producers. But developing services based on the smart grid requires many other capabilities, such as the semantic integration of information from diverse power sources. Dominant solutions are unlikely to emerge until these issues are worked out at the community level, where incentives are being tested before scale is exploited.

Much like with energy, the community contract for healthcare is complex, requiring consumers and a diverse mix of service providers to align incentives and goals. Dynamic consent for new uses of health information is only the first hurdle in the chain. Availability of innovative services depends on broader consumer engagement, such as personal genomics and self-monitoring warranted by medical history. These complexities, however, need to be balanced with the value consumers expect to get from these new services, which may not meet the expectations of investors. A much richer source of value may arise from expanding the unit of analysis beyond the consumer, to the community.

The Consumer—Community Paradigm

In practice the community functions like a traffic cop who controls the flow of automobiles so that pedestrians can shop and navigate streets free from harm. For example, Singapore and London show how the invisible hand, through incentives and sensitivity, can use prices to smooth out traffic during peak and valley periods. In other words, a smart transportation grid can dynamically shape supply and demand. The same is true for telecommunications and electricity networks. Why can’t the same be true for healthcare? Intelligence about consumers and their interactions with service providers can provide early alerts on safety, orchestrate provider actions in response to outbreak of disease, observe (near) real-time measures of provider performance, and drive the size and shape of the provider community. A smart health community can provide decision support for the system at large.

By sharing information across players in the ecosystem, the community also helps capture full value from innovations such as medical homes for chronic care. These innovations have new capabilities, but require information bridges and coevolution with multiple players to succeed. Another good example, from the Centers for Medicare & Medicaid Services, is the envisioned accountable care organization, where care is coordinated across pools of patients to improve outcomes in return for financial bonuses. In essence, a Smart Health community can become a platform for the accountable care organization.

Working across geographic or virtual communities opens a large opportunity for comparative effectiveness, disease modeling, and informatics. These new (second-tier) services can be launched across communities without losing the direct connection with the consumer for dynamic consent and access to real-time health information. Opening new pathways for health information and scaling services also opens the door to the integration of research services, from the discovery of new treatments to the execution of clinical trials. Secondary use of health information, in this context, becomes another family of services on the front line of wellness at all times, in all locations, at reliable prices. Smart investors may pursue multiple tiers of service at the same time, revealing uncertainty around the sizes and sources of future value.

Figure 3

The consumer, the service provider, the community, and society at large can all provide new sources of value. But the consumer—community paradigm requires new capabilities to mine these opportunities (). Wellness requires innovative contracting with consumers and service providers, an understanding of monitoring and managing temporal data, semantic integration of structured and unstructured information, and expertise in services that cross therapeutic areas. The community needs capabilities to identify safety signals, conduct surveillance, orchestrate system capacity, and shape the flow of demand. Working across communities requires expertise in multiple layers of informatics and close ties with the research community. These capabilities exist today on the margins of providing care; the value is in consolidating, integrating, and optimizing these capabilities for the consumer and community.

Lessons Learned

Many questions remain regarding the shape of modernized organizations, the new basis of competition, ownership of the platform, and access to information. There is no hard and fast prescription for closing information gaps through coevolution— only lessons learned. One lesson is scope before scale: aligning incentives at the consumer—community level allows the business model to evolve in light of the broadest lens, that of the end user. A second lesson is use of experimentation to reveal uncertainty: there is no substitute for building new business capabilities across multiple participants and offering services to customers in the marketplace. Lastly, coevolution requires making new markets and business models to capture the opportunity. The Smart Health community, we believe, is a good place to start.


We thank Gary D'Alessandro, MS, Stacey Gelman, MS, Clark Golestani, BS, John Henderson, PhD, Hemali Kulatilaka, MPH, Al Lowenstein, BS, Richard Murray, MD, Truls Ostbye, MD, Sanjoy Ray, PhD, Michael Rosenblatt, MD, J. Chris Scalet, BS, and Venkat Venkatraman, PhD, for valuable comments and suggestions. The point of view and all remaining errors, however, are our own.

Author Affiliations: From Merck & Company (JNC), Whitehouse Station, NJ; and Department of Management and Finance (NK), Boston University, Boston, MA.

Funding Source: The authors report no external funding for this work.

Author Disclosures: The authors (JNC, NK) report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (JNC, NK); drafting of the manuscript (JNC, NK); critical revision of the manuscript for important intellectual content (JNC, NK); and administrative, technical, or logistic support (JNC).

Address correspondence to: James N. Ciriello, MS, Merck & Company, One Merck Dr, Whitehouse Station, NJ 08889. E-mail: james_ciriello@merck. com.

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