Will health information technology (IT) be the silver bullet to create value in the health care sector? Michael O. Leavitt, Secretary of the U.S. Department of Health and Human Services (HHS) discusses health IT and other health system management issues in an interview with Leonard Schaeffer, founding chairman and CEO of WellPoint, Inc., and currently chairman of Surgical Care Affiliates and senior advisor of TPG Capital. The full interview was published this week online at Health Affairs [two-week free access]. Secretary Leavitt, who runs the nation’s Medicare and Medicaid programs, says that it is time to begin linking reimbursement with health IT adoption.

Subsequent to the interview, in a December 3 statement, Leavitt said that any legislation protecting physicians from impending Medicare reimbursement cuts “should require physicians to implement health information technology that meets department standards in order to be eligible for higher payments from Medicare.” And on October 30, HHS announced its first Medicare demonstration project using bonuses that are tied to adoption of electronic health records (EHRs). Under the demonstration, the small and medium-size physician practices that participate in the demonstration will be awarded bonuses that will correlate with the degree to which the practices use specific EHR functions to improve quality in their delivery of care.

Here is an excerpt from the interview:

Michael Leavitt: Health IT desperately needs the leadership of the government to help organize it, not to own it. I’ll give you a framework philosophy that I hope will make some sense to you in understanding my view. When Medicare was organized in 1965, it was consistent with the way the world viewed systems. We had these big, new machines called computers. They were large, mainframe computers that were by their nature bureaucratic and singular in operation. We set Medicare up to operate that way. And it has essentially guided the way health care has worked.

In the last fifteen years, a new social phenomenon has occurred–and I use the term “social phenomenon” deliberately, although it is political and economic as well as social. The world is beginning to intuitively organize itself into networks. Countries are organizing themselves into networks. The EU [European Union] is a network of countries. Businesses are clearly building themselves into networks. We’re fighting wars against a networked enemy. We had to change from a mainframe kind of army to a networked army, to make ourselves effective.

So as you start approaching the way health care needs to work, it should work more like a network of PCs rather than a mainframe computer. Now, Medicare and Medicaid, and big socialized insurance programs, are still mainframes. Health IT cannot be solved by the government simply owning and developing a system, because you’ve got this massive number of different entities that are performing parts of the system….What is missing is the capacity to hook this network together into a networked system. I routinely say that we don’t have a system of health care–what we have is a sector of health care….

Leonard Schaeffer: That is a very elegant formulation. Personally, I like the mainframe-versus-network analogy. But to play devil’s advocate, if you want to get the standards established fast in order to achieve interoperability, why not just say, “Here’s what Medicare requires. We’re not going to pay you unless you adopt all of these standards literally overnight.”

Leavitt: There are three ways to come up with standards. First, you can have government do it by fiat. And you’ll undoubtedly just choose the wrong one a lot of times. Second, you can do the “last vendor standing.” And if you do that, it won’t work because there’s lots of ways to deal with this. Finally, you can do it through a hard, collaborative process, which is what we have chosen to set the standards. Now, the second job is to get adoption. And I am persuaded that as you suggest, at some point in time, the federal government needs to say, “If you’re going to do business with us, you will adopt a system of your choice that will allow these standards to be met.”

Schaeffer: I would agree with you. But do you think it is too early to use strong incentives to create one set of standards?

Leavitt: No. I’m saying that it’s time. I’m saying that we have in place the levels of standards and a process for its continued maturation. But you will now begin to see efforts made to connect payment policies to adoption.

The full interview is available online at Health Affairs.