HIT POLICY minutes is an example of IT market success; the inability of the health care indus- try to catch a simple medical error during his half-day in the er is an example of IT market failure. All parties involved in consumer financial transactions have an economic interest in seeing that those transactions work as smoothly as possible Not so all parties involved in health care s myriad transactions a The business case for no HIT. The first step in understanding the real intrac ability of the problem is ignoring the rhetoric. There is a veritable cottage industry involving the articulation of moral outrage over the health care quality"crisis, "much of it public relations spadework for someone s political or commercial ambition and most of it culminating in a the naive insistence that the system is on the verge of col lapse and cannot go on like this. Actually, it can and will go on like this forever, ab sent any major intervention by the nation's largest health care purchaser-the US government. Why? Because in the crude fee-for-service( FFS)reimbursement sys- tem inherited by that purchaser in the 1960s and fundamentally unchanged since then, the Las Vegas hospital has little real interest in knowing Joe s medical history In most cases, access to such information would represent a reduction in billable services. In an industry rife with dirty little secrets, this is health care's dirtiest: Bad quality is good for business and the surest road to bad quality is bad or no informa tion. The various IT systems out there are expensive to buy, implement, and train taff to use, but this expense pales in comparison to all of the pricey and billable complications those systems would prevent I Health insurers'interest. By contrast, Joe' s health insurer back in Pittsburgh has a strong interest in conveying Joe's treatment information to whatever hospital he may end up in, to reduce its bill for Joe's admission But is this rational business objective powerful enough to invest in an open, accessible information system that would, at the same time, allow Joe, his coworkers, their dependents, and every doctor, hospital, pharmacy, outpatient clinic, and lab in Pittsburgh to track every penny the insurer owes them? Of course not. The only information the insurer wants to transmit readily is what it does not owe and what Joe himself has to pony up as a copayme The principal goal of the consumer finance industry is to increase the number of transactions. By contrast, the principal goal of the health insurance industry is to slow down transactions or lose them altogether. Anyone who believes otherwise is ignorant of the central metric by which a health insurer is judged by Wall Street its"medical loss ratio. This accounting term describes the percentage of the in- surer's premiums paid out in medical claims. The lower the medical loss ratio, the higher the insurers profits and, in turn, its stock price. The conflict between this metric and the other business objectives of an insurer is the active fault line run ning beneath the entire health insurance industry. Insurers must simultaneously please their members and providers with better service(which implies more and faster claims payments)and their employer-customers with lower medical costs (which implies fewer and slower claims payments). Given which constituency September/OctoberH I T POLIC Y minutes is an example of IT market success; the inability of the health care indus￾try to catch a simple medical error during his half-day in the ER is an example of IT market failure. All parties involved in consumer financial transactions have an economic interest in seeing that those transactions work as smoothly as possible. Not so all parties involved in health care's myriad transactions. • Tiie business case for no HiT. The first step in understanding the real intrac￾tabihty of the problem is ignoring the rhetoric. There is a veritable cottage industry involving the articulation of moral outrage over the health care quahty "crisis," much of it pubhc relations spadework for someone's pohtical or commercial ambition and most of it culminating in a the naive insistence that the system is on the verge of col￾lapse and cannot go on like this. Actually, it can and wiU go on like this forever, ab￾sent any major intervention by the nation's largest health care purchaser—the U.S. government. Why? Because in the crude fee-for-service (EFS) reimbursement sys￾tem inherited by that purchaser in the 1960s and fundamentally unchanged since then, the Las Vegas hospital has little real interest in knowing Joe's medical history. In most cases, access to such information would represent a reduction in billable services. In an industry rife with dirty little secrets, this is health care's dirtiest: Bad quahty is good for business. And the surest road to bad quahty is bad or no informa￾tion. The various IT systems out there are expensive to buy, implement, and train staff to use, but this expense pales in comparison to all of the pricey and billable comphcations those systems would prevent." Health insurers' interest. By contrast, Joe's health insurer back in Pittsburgh has a strong interest in conveying Joe's treatment information to whatever hospital he may end up in, to reduce its bill for Joe's admission. But is this rational business objective powerful enough to invest in an open, accessible information system that would, at the same time, allow Joe, his coworkers, their dependents, and every doctor, hospital, pharmacy, outpatient clinic, and lab in Pittsburgh to track every penny the insurer owes them? Of course not. The only information the insurer wants to transmit readily is what it does not owe and what Joe himself has to pony up as a copayment. The principal goal of the consumer finance industry is to increase the number of transactions. By contrast, the principal goal of the health insurance industry is to slow down transactions or lose them altogether.'^ Anyone who beheves otherwise is ignorant of the central metric by which a health insurer is judged by Wall Street: its "medical loss ratio." This accounting term describes the percentage of the in￾surer's premiums paid out in medical claims. The lower the medical loss ratio, the higher the insurer's profits and, in turn, its stock price. The conflict between this metric and the other business objectives of an insurer is the active fault line run￾ning beneath the entire health insurance industry. Insurers must simultaneously please their members and providers with better service (which implies more and faster claims payments) and their employer-customers with lower medical costs (which implies fewer and slower claims payments). Given which constituency 1250 September/October 2005