Datica Blog

March 24, 2020

ONC-CMS Final Rules, Part 3 – Innovation

Dave Levin, MD

Chief Medical Officer

The Office of the National Coordinator (ONC) and the Centers for Medicare and Medicaid (CMS) have released final rules on interoperability, information blocking, and other activities as part of implementing the 21st Century Cures Act. In previous posts, we explored the rules on interoperability and information blocking, why they are necessary, and the expected impact. In this post, we delve into the rules that are intended to promote competition and innovation. A future post will look at the rules related health insurance companies. A handy summary of the changes between the proposed and final rules can be found here.

Given that the final rules are complex and controversial topics open to interpretation, we invite readers to respond with their own ideas, corrections, and opinions.

Competition is a key theme of the ONC and CMS rules. They are designed to create a more level playing field and foster market-driven innovation. The coordinated effort between CMS and ONC makes the most of their respective regulatory powers. ONC is defining how health IT companies, providers and others should behave (certification and use of health IT), while CMS is tying compliance with those behaviors to payment for services.

Together, they are addressing selected business practices that inhibit competition and innovation while balancing the need for competition and protecting legitimate business concerns. Here we examine how competition unlocks innovation and the possible disruptions the final rules may bring for innovation, intellectual property (IP), and supporting business models.

Unlocking Innovation via Competition

In most markets, innovation is driven forward by competition. Businesses compete on equal footing, and their investment in R&D pushes innovation forward. Innovation in health care has been dramatically outpaced by other markets. The final rules identify a combination of tactics employed in health care that restrict the free flow of clinical data, such as:

  • NDAs
  • Confidentiality Clauses
  • Hold-harmless Agreements
  • Licensing Language

These tactics slow innovation by contributing to an environment where stakeholders resist pushing the boundaries — often because they are contractually obligated not to. The legislation and the rules are designed to address the ongoing failure of the market to resolve these conflicts.

Protecting IP & Profit

Health IT (HIT) companies must be able to protect their intellectual property (IP) including patents, trade secrets, copyrights and trademarks. The goal of the rules is to define what is reasonable IP protection and limit the tactics discussed above, saying:

...a developer is not permitted to prohibit or restrict communications under the guise of copyright protection (or under the guise of a confidentiality or non-disclosure obligation) when the communication in question makes a use of the copyright material in a way that would qualify that use as a "fair use."

The rules seek a balance between the need for free-flowing clinical data and IP protection. Further, the rules recognize that HIT companies should be able to generate profits.

There are two different pathways to profitability:

  1. The ability to be profitable through pricing.
  2. The exploration of new business models that maximize profits.

While they extend the definition of information blocking to include, "any fee that is likely to interfere with the access, exchange, or use of EHI," they also acknowledge the potential negative impact on innovation. The final rules go on to note that vendors can charge fees, but the fees must be tied to actual costs and reasonable profit margins. This is intended to promote competition and the free flow of clinical data while also minimizing opportunistic pricing ("rent seeking") and ensuring reasonable vendor profitability.

Promoting Transparency for Safety and Efficiency

The rules also address the need to exchange information about system performance. A basic principle of quality improvement and safety initiatives is the collection and analysis of performance data.

There has been substantial concern that vendor IP issues and contractual agreements have stifled the collection, analysis and sharing of performance information. The rules specifically address this and make it clear that health IT users cannot be prohibited from sharing this information, (i.e. screen shots, video, etc.) by the vendor’s contractual gag clauses or other business practices.

Interventions to Address Market Failures

Many of the final rules by CMS and ONC are aimed at critical problems that market forces have failed to address. One example of market failure is the long-standing inability for health care providers and insurance companies to find a way to regularly exchange patient data. Each has critical data the other needs and would benefit from sharing. And, as CMS noted, health plans are in a “unique position to provide enrollees a complete picture of their clams and encounter data.” Despite that, technical and financial issues, along with a general air of distrust from decades of haggling over reimbursement, have prevented robust data exchange.

Next Up

In part four of the series, we will dive deeper into final rules that affect health insurance companies.

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