Market Dynamics and Health Information Exchange

Electronic health information exchange (HIE) is designed to facilitate sharing of clinical records among independent providers and has the potential to improve efficiency and quality of patient care. However, uptake in the US has been relatively low and non-uniform, suggesting that barriers to adoption exist. Paradoxically, low uptake reduces the gains from HIE as these stem directly from network effects. Commonly discussed barriers such as lack of capital or IT experience and technical problems of interoperability are important, and have been addressed to a considerable extent by government policies and subsidies.

However, this paper examines a different, largely unexplored strategic barrier to physician practice participation in HIE networks. We consider whether potential market share loss from relinquishing control of patient health records discourages provider participation in HIE. While there is anecdotal evidence that such competitive threat deters participation, this barrier has not been studied in the literature, particularly with respect to physicians. This study is a first step in understanding how competition and providers’ attempts to control their patients’ medical records affect the development and functioning of the national HIE infrastructure. 

We develop a novel theoretical model of providers’ decisions to participate in HIE taking into account barriers, including potential loss of market share. The model yields two predictions that are empirically tested. First, it predicts that providers are less likely to participate in HIE if they are in a more competitive market. Second, it predicts that providers are less likely to participate in HIE with a centralized system compared to a decentralized system.  Providers relinquish greater control of their data in a centralized system, where data is held in a central repository, compared to a decentralized system, in which data remains with the originating provider.  Reluctance should be greatest when the technology involves complete surrender of “property rights,” relative to alternative schemes in which the originating physician retains some control of patient data.

The study utilizes a unique dataset that comprehensively accounts for physician practice participation in all eleven regional health information organizations (RHIOs) across the state of New York through mid-2013. RHIOs are regional HIEs created with government grants. NY is an ideal setting due to its numerous and varied markets, as well as its relative progress with respect to HIE. Data is supplemented with relevant RHIO-, market-, and physician-level information.

Consistent with model predictions, preliminary results which use a probit framework suggest that practices in more competitive markets are less likely to participate in HIE compared to those in less competitive markets. Moreover, the second prediction– that practices are less likely to participate in RHIOs with centralized structures compared to decentralized structures– is also supported.

The study finds preliminary evidence that practices demonstrate protectiveness of patient records to retain market share. This behavior could significantly undermine efforts to develop HIE, particularly in the most competitive markets where information sharing could provide greatest value. This barrier may suggest the need to consider alternative government policies and models of information sharing to overcome economic disincentives that deter HIE participation.