applied to something as formidable as the development of IT standards and inter- operable data exchange systems--confronts all industries that are unable to achieve technical standardization. This impediment is steeped in problems of competitive strategy for all industries and can be summed up in what Michael Porter first identi- fied as "first-mover disadvantage 26 This concept explains why Joe's insurer would not want to build an information system connecting its numerous data systems with the nations hospitals. Why would one insurer go to all of the financial and strategic cost of creating a ubiquitous information system that would benefit its competitors? For exactly the same reason that IBM created the Internet. Indeed, IBM did not cI ate the Internet-the federal government did-but IBM and all of its competitors have made a fortune creating things that run on, over, off, and because of the Internet. But suppose for a moment that Joe s insurer were foolish enough to violate is strategic principle and initiate at its own expense an HIT system that allowed it to exchange data with all of its contracting hospitals, physicians, labs, and pharma cies. First, would it be able to get those providers to go to the expense of connecting with the system?(Or would it have to subsidize them, the way WellPoint had to subsidize physicians to get them to use its e-prescribing system? )Second, would it be able to get those same providers to retool their workflows around the new sys- tem? Finally, would it build that system based on open standards that would allow its competitors to exchange the same kind of data with those same providers? The health insurer might be able to answer"yes"to the first two questions, but only if it were willing to answer"yes"to the third, thus burning its own capital and internal resources on behalf of its competitors. And so no one, save the occasional e-pioneer ing physician like Charles Kilo, writing in this volume of Health Affairs, is the first to install. 27 I The size factor If size mattered and an organization could fix this problem through brute force, no one organization in health care has size enough. WellPoint comes close, especially after it finishes combining with Anthem, but it still does not command a dominant share of any major health insurance market, hence the limita tion of its e-prescribing experiment to only 25,000 physicians nationwide. Even if Joe's health insurer were the largest in Pittsburgh-large enough to force providers to adopt HIT in ways that offset the costs of first-mover disadvantage--it would not be large enough to dictate It standards to the rest of the market(And if it were,it would be too busy dealing with folks from the Justice Department to do anything else. ) This problem has haunted all new technology industries in their infancy, as multiple players emerge and seek to coalesce around a technical standard. and the it is licensed and regulated at the state lev consists of hundreds of different players. Even the largest commercial plans like An them/Wellpoint and Aetna do not control a sufficient share of the business of a large enough base of physicians across the country to demand that they adopt and use one IT system or another. Once again, only Kaiser has this advantage, one symbolized by and embodied in its development of an EMR system unmatched in the industry.28 HEALTH AFFAIRS Volume 24, Number 5D o T - G o V apphed to something as formidable as the development of IT standards and inter￾operable data exchange systems—confronts aU industries that are unable to achieve technical standardization. This impediment is steeped in problems of competitive strategy for all industries and can be summed up in what Michael Porter first identi￾fied as "first-mover disadvantage."^* This concept explains why Joe's insurer would not want to build an information system connecting its numerous data systems with the nation's hospitals. Why would one insurer go to aU of the financial and strategic cost of creating a ubiquitous information system that would benefit its competitors? For exactly the same reason that IBM created the Internet. Indeed, IBM did not cre￾ate the Internet—the federal government did—^but IBM and all of its competitors have made a fortune creating things that run on, over, off, and because of the Internet. But suppose for a moment that Joe's insurer were foohsh enough to violate this strategic principle and initiate at its own expense an HIT system that allowed it to exchange data with all of its contracting hospitals, physicians, labs, and pharma￾cies. First, would it be able to get those providers to go to the expense of cormecting with the system? (Or would it have to subsidize them, the way WellPoint had to subsidize physicians to get them to use its e-prescribing system?) Second, would it be able to get those same providers to retool their workflows around the new sys￾tem? Finally, would it build that system based on open standards that would allow its competitors to exchange the same kind of data with those same providers? The health insurer might be able to answer "yes" to the first two questions, but only if it were willing to answer "yes" to the third, thus burning its own capital and internal resources on behalf of its competitors. And so no one, save the occasional e-pioneer￾ing physician hke Charles Kilo, writing in this volume of Health Affairs, is the first to install.^'' • The size factor. If size mattered and an organization could fix this problem through brute force, no one organization in health care has size enough. WellPoint comes close, especially after it finishes combining with Anthem, but it still does not command a dominant share of any major health insurance market, hence the limita￾tion of its e-prescribing experiment to only 25,000 physicians nationwide. Fven if Joe's health insurer were the largest in Pittsburgh—large enough to force providers to adopt HIT in ways that offset the costs of first-mover disadvantage—it would not be large enough to dictate IT standards to the rest of the market. (And if it were, it would be too busy dealing with folks from the Justice Department to do anything else.) This problem has haunted all new technology industries in their infancy, as multiple players emerge and seek to coalesce around a technical standard. And the health insurance industry—^because it is hcensed and regulated at the state level— consists of hundreds of different players. Fven the largest commercial plans like An￾them/WellPoint and Aetna do not control a sufficient share of the business of a large enough base of physicians across the country to demand that they adopt and use one IT system or another. Once again, only Kaiser has this advantage, one symbolized by and embodied in its development of an FMR system unmatched in the industry.^^ HEALTH AFFAIRS - Volume 24, Number 5 1255