Sunday, October 3, 2010

Reckless REC Wrecking

The Health Information Technology Extension Program, created and funded by ONC, has completed funding for all 62 Regional Extension Centers (REC), with a grand total of well over half a billion dollars and, predictably, criticism of the program was immediately forthcoming. The RECs are supposedly an impediment to free EHR markets and doomed to failure from the start, which may seem a bit contradictory if you think about it. Anyway, before making further statements and assertions regarding the “recklessness” of the RECs, or the impeding “train wreck” they represent, it may be beneficiary to take a closer look at the program.


The HIT Extension Program consists of 62 RECs, at least one for each State and territory, and one national Research Center (RC). The stated goal of the program is “to provide outreach and support services to at least 100,000 priority primary care providers within two years”. The individual RECs are supposed to conduct outreach and education campaigns in their respective States and inform physicians on the latest HIT developments and available programs and incentives. The RECs are also chartered to offer support and guidance to physicians selecting and implementing EHRs, particularly Primary Care docs in small practices and in underserved areas. These are the doctors that were left out by the regular market process because they were hard to reach, too expensive to implement and too poor to bother with. While the individual RECs are locally oriented, with feet on the ground in each State and each County, the RC is basically a National forum for RECs to share information and exchange lessons learned.


Other than a small amount of seed money, RECs are not handed out all those hundreds of millions of dollars of grant funds. RECs are paid for performance. For each physician they touch and manage to recruit, the RECs are paid about $1500. If and when the provider implements an EHR, the RECs receive another equal payment. The last third of the money is handed to the REC if, and only if, the provider achieves Meaningful Use. This arrangement is only in effect for two years. All those who believe that RECs are bound to fail should be reassured by the fact that in that dire case most of the allocated funds will remain with ONC. The RECs are expected to use the ONC seed money and find a way to become sustainable businesses after ONC ceases to support them financially.

Effectively, ONC is funding the start-up of 62 Social Businesses. A Social Business is a business whose purpose is not to amass profits for its founders and shareholders, but instead to better society and solve one social problem; a profitable and sustainable business, not a charity. As any venture capitalist knows, funding a startup is risky business and most startups never make it to the finish line. But some do, and there are strategies that investors employ to both minimize their own risk and maximize the likelihood of success for the entire portfolio. By providing the RECs with centralized operational oversight and by instituting milestone funding, ONC is doing exactly what a careful investor, managing other people’s money, would do.


The argument goes something like this: The RECs are running out of time and there is no way they can create thousands of Meaningful Users in a short two years, or what is left of those two years. The common wisdom is that it takes many months, sometimes over a year, to transition a practice from paper to EHR, let alone Meaningful Use. That may be true for your average 30 docs practice. The RECs are not dealing with large multi-specialty practices in suburbia. They are dealing with the solo doc in Booneville, Arkansas. It shouldn’t take longer than 3 to 4 months to get a solo primary care practice from paper charts to Meaningful Use, if the doctor is willing. Granted, the time left for collecting maximum Medicare incentives is rather short, but the RECs constituents are those administering health care to the poor and underserved, many of whom will be receiving incentives from Medicaid. There is plenty of time for Medicaid incentives. And if some RECs fail, as some inevitably will, and are unable to deliver Meaningful Users, they will forfeit most of their allocated grant money. Tax payers in this case will not foot the bill for failure.


We all know that the Meaningful Use gold rush is creating a shortage of qualified EHR implementation resources, so how are all those RECs going to staff their operations? They certainly cannot compete with private market salaries, since the ONC seed capital comes up very short. Strangely enough, most RECs managed to build their infrastructure already, but will there be enough funds to hire HIT experts and will anybody want to take a job which may prove to be very temporary indeed? It is very unlikely that RECs will attract experienced EHR implementers who are used to flying out to client sites, staying at nice hotels, renting cars and having all their expenses paid while on the road. RECs cannot afford these resources, and RECs do not need these types of resources either. RECs are not selling and implementing EHRs. They are there to see that the vendor does a good job and serve as the physician advocate during the process. Many RECs are University based and others were created by traditional Quality Improvement non-profits. None of them are starting from scratch and, like every startup, they will have to come up with innovative solutions. Some already have, others will learn from those examples and, as John Moore aptly predicts, the remainder will not be around after 2012.

Free Market

Here is my favorite gripe against the REC concept. The RECs are selecting a handful of preferred EHR vendors to recommend to their clients and therefore are interfering with the free market. Particularly since most RECs seem to select the same usual EHR suspects. Along the same lines it can be argued that every hospital Group Purchasing Organization (GPO) is interfering with the free market and so are Sam’s Club and Costco and any other discount for volume program. Why are the RECs consistently selecting EHRs from a small group of about a dozen products when we all “know” that there are 400 EHRs out there? Perhaps it is because there are not 400 viable EHRs out there. There never were. There very well may be 400, or more, companies selling, or trying to sell, EHR software, but very few of those companies ever made it into the main stream and even fewer have enough stability, or appeal, to be a viable choice for an informed consumer. It is worth noting that the EHRs the RECs are selecting are the same ones that physicians independently selected prior to the RECs creation, and thus the ones with the largest existing market share. Perhaps one size does not fit all, but certain sizes do fit most, and anyway, RECs are by definition committed to work with any EHR a physician chooses, whether recommended by the REC or not. When you compare this with the non-profit North Shore Long Island Jewish Health System spending $400 million to roll out one particular EHR to 7000 physicians, I don’t think the RECs are skewing the “free market” too much.

For anybody wondering about the existence of a dark side in the RECs EHR selection process, I would suggest reading the latest EHR selection press release from the Ohio REC. The selection criteria for Ohio seem pretty straight forward: adequate functionality, capacity to do the work, willingness to hire and train Ohio citizens, support provided exclusively in the U.S. and commitment to ongoing certification. Looks rather reasonable to me. By the way, the Ohio REC reported about 40 vendor applications, which makes one wonder where exactly are the other 350 EHR vendors hiding.


How about “stifling innovation”? Are the RECs holding back the future of HIT by selecting old “legacy” EHRs? There is no question that the RECs are selecting what they, and most reasonable folks, consider safe products, products that have been around for a while, products with a sizeable install base and products backed by financially stable companies. Would you buy a car from Stimulus Motors, Inc., who’s been in business for 12 months, has 5 employees in the U.S. and 3 customers, just because they advertise usage of “latest technologies”? What are “latest technologies”? If you look at the “legacy” EHRs selected by the RECs, most boast .NET or the latest Java software, industry standard databases, browsers, rich thin clients and even Natural Language Processing engines. The assumption that all innovation must come from 2 guys in a garage is largely a fallacy. Besides, a truly valuable innovation should be able to make its way through any market, whether it is a completely new paradigm or the much exulted iPhone proprietary model. Personally, I hope we don’t devolve back to days when a particular software product was inextricably tied to a particular piece of hardware, and for lack of a better term, call it innovation, but this is better left for another day and another post.

Full Disclosure: I have a financial interest in EHRpathway, LLC which is currently providing consulting services to the Missouri State REC.


  1. The taxpayer will actually be footing the bill for the RECs. And since some of the RECs will undoubtedly fail, the taxpayers will have invested initial startup funding for an unsuccessful business, but the real cost to society will be in practices not achieving meaningful use.

    As far as the free market goes, I do have a bit of trouble with the idea that my tax money is being used to promote specific products at the expense of others. GPOs are not interfering with the free market because they are part of the free market. If Sam's Club or Costco were receiving federal funds, we would have different requirements for their operations. This is one area that is going to create problems in some places. There is a huge difference between a private company or non-profit corporation's discount for volume program and a taxpayer funded organization promoting particular vendors. How these vendors are selected and the criteria being used, along with any disclosures of potential conflicts of interest, need to be as transparent as possible.

    I am trying to remain optimistic on the RECs, but this is definitely the most problematic area of the HITECH Act programs for me...

  2. Brian,

    The tax payer will, or rather is, paying the startup costs (about 20%), but that is a far cry from giving the RECs all the money upfront and hoping they will fulfill their goals. We are making an investment and the possible returns, I think, justify the risk.

    As to the free market, I agree that since these are tax payer funded entities, their recommendations need to be based on very transparent processes. However, a free market is based on perfect information being available to both buyer and seller. Until now, the buyer (doctor) had only as much information as the seller (vendor) saw fit to provide, and as we all know this information was nothing more than a vaporware based sales pitch.
    Therefore, I think that to some degree, and assuming that they don't engage in illegal activities, the RECs are actually enabling the functions of a free market by leveling the field a little.

    And BTW, I consider non-profit organizations as being supported by tax payer money as well.

  3. Certainly it is much wiser that the money is allocated in phases, so hopefully this will help to mitigate costs for those that do not succeed. It will be very interesting to see how many physicians are actually signed up, and then what proportion of those actually achieve stage one meaningful use. I'm still hoping for the best.

  4. I agree with Brian in that taxpayer funding for RECs could be problematic. But, I would rather government start to get into the short-term catalyst business (w/ 20% startup taxpayer funds) than business as usual with long-term subsidies of 100% with taxpayers dollars.
    Ever wonder why corn byproducts are ingredients in just about everything we eat these days?

  5. I used to wonder. Not anymore... :-) Remember the old food pyramid?

    I can see the need for careful handling of tax payer money, but I do like this milestone model. I think HHS did a very nice job with this one.

  6. So the tax payer will be paying REC to promote horrible legacy products and kill innovation.
    If we took that approach we would all be sticking AOL now