A Toll on the Road to Merger:
Highmark, Independence and the Creation of the Pennsylvania Healthcare IT Adoption Fund

I support the proposed merger of Highmark Inc. and Independence Blue Cross of Pennsylvania (IBC) – with contingencies. Pursuant to receiving not-for-profit status (and with it significant financial benefits), the Blues were required to show their work conveys certain public benefits. Regulators evaluating this proposed merger will be tasked with determining if the union itself would be in the public interest in order for the consolidation to be approved.

The Blues have touted significant cost savings as reason to support this merger. These savings will be realized through increased operational efficiencies, which in turn will enhance “the consolidated company’s ability to fulfill the community missions of Highmark and IBC.” (“Advantages of Consolidation,” Highmark/IBC Form A Filings, PA Insurance Department, 04/27/07) The Blues have also pledged additional support to cover the healthcare costs of the uninsured – certainly a public benefit. This latter financial commitment may prove illusory, though, as a growing chorus of government and industry leaders have called for a single payer/universal health insurance model for the country, which ultimately could let the Blues off the hook for their pledge.

So how can we make sure that the public does indeed benefit from this merger? I would propose a “toll” be assessed the new entity as a condition for approval. The funds generated would be used to create a program that would benefit not only healthcare consumers and the hospitals and healthcare providers that serve them, but the insurance companies, themselves. This new program, the Pennsylvania Healthcare Information Technology (IT) Adoption Fund, would support both the adoption of electronic medical record (EMRs)* technology by providers statewide, and the linkage of these providers for the purposes of securely sharing data. Studies have shown that the use of EMRs both bring down the cost of healthcare while raising its quality through greater operational efficiency and a decrease in medical errors**. The program could be managed through the Pennsylvania eHealth Initiative, and provide grants directly to hospitals and Health Information Exchanges, with matching support from state and federal government.

In 2004, the Massachusetts eHealth Collaborative was formed, bringing together healthcare stakeholders from hospitals, insurers, consumer groups, vendors and state government for the purpose of achieving 100% electronic medical record adoption and linkage throughout that state. Costs for statewide adoption and linkage at the time was estimated to be $500 million. To fund its “demonstration phase,” the program received a $50 million grant from Blue Cross Blue Shield of Massachusetts. Work on the demonstration phase is well under way, and yielding promising results.

Why not require of the new Blues entity a similar investment in IT for Pennsylvania? Adjusted to account for inflation – and for a State five times the size – an investment of $250 million or more could fund an EMR demonstration phase. But why stop there? Considering the Blues’ current combined reserves of $4.2 billion, coupled with the projected cost savings realized through both the merger and the implementation of EMRs themselves, why not double that amount? And with significant complementary investment by state and federal governments, healthcare providers and doctors, why not start with the goal to complete the project? Given the current healthcare financial crisis, can we afford not to?

The proposed Highmark/IBC merger presents a once-in-a-lifetime opportunity to fully-fund healthcare IT in Pennsylvania. Let’s realize the plan’s true value, and make Pennsylvania a national leader in healthcare reform through the adoption of information technology. [An important side benefit: IT can help PA recruit and retain top Docs – a real concern. Evidence has shown that doctors coming out of medical school today prefer employment within healthcare settings which employ the latest in information technology.]

Mark Stevens
Exton, PA

The author works in healthcare executive search, and is an active member of the Healthcare Information Management Systems Society (HIMSS)Delaware Valley chapter.

• In a 2004 Executive Order, President Bush announced the goal of providing most Americans with access to an interoperable electronic medical record by 2014. In his Rx for Pennsylvania unveiled earlier this year, Gov. Rendell requested the same for PA residents by 2012.
  • A study released in May, 2007 by the Rand Corporation estimated that the U.S. could save up to $169 Billion each year if EMRs were implemented nationwide, an amount equal to 10% of annual U.S. healthcare spending.