Season's Greetings!

I'm on vacation through the end of the year.  May all you readers have great holidays and a satisfying 2011!

Clarification: Black Clouds Can Have Silver Linings

Two health care executives contacted me personally over the past week to ask if they should throw in the towel. They were impressed and, therefore, depressed by my analysis in the two previous posts to this blog. I am pleased to report that they may have overreacted to the generally gloomy outlook I presented. A clarification is due—especially with respect to the likelihood of receiving HITECH incentive payments as a meaningful user.


Their misinterpretation related to my view that the expected value of HITECH subsidies is considerably less than 50% of the amount (approximately 30 billion dollars) that Congress appropriated for the program under ARRA. This outlook, shared by at least a few other experts, does not mean that a qualifying provider will receive less than 50% of the amount to which his or her organization is eligible. Qualifying as a meaningful user of certified technology is an all-or-nothing proposition. A provider meeting all of the criteria will almost certainly receive all of the incentive payments.

The slight hedge in the previous sentence allows for the very remote possibility that a future Congress will not appropriate funds as authorized by the law. However, assuming no changes in the law, providers who fall short of meeting all the criteria will get nothing. “Close, but no cigar,” as the saying goes. Congressional staff analysis of the program prior to its passage actually allowed for the possibility that total HITECH expenditures could be less than half the authorized amount. My forecast isn’t as contrarian as it might seem.

The silver lining in the big black cloud is something more than the good news that some organizations will likely get millions of dollars in incentive payments. Rather, it’s my belief in the economic concept of creative destruction. In response to expectations of problems ahead, progressive enterprises discard their old business models and build a better mousetrap—an unending process because evolution will subsequently produce a better mouse.

The silver linings in the black clouds are the new business models developed by providers, payers, purchasers, and their business partners to prepare them for emerging from turbulent times with different, better approaches to producing health care. Many of today’s enterprises will be swept away by the perfect storm that is brewing, but future-focused survivors will transform the medical marketplace in exciting ways. Qualifying for HITECH is not a strategic precondition for their success.