Well, last Wednesday, the WSJ announced that Wal-Mart, Intel, British Petroleum and others large firms are planning to provide their employees with “portable health records” (PHRs). Innocuous enough, though Intel CEO Craig Barrett correctly referred to PHRs as “the building blocks to modify the US health industry.” They (and about 10 other large firms) also promised to establish a health care data warehouse that would presumably be used to identify problems and opportunities in the system.

 

It is not over the top to suggest that this action is only the most recent (and possibly most important) of several that mark the beginning of the end of HC’s current paradigm. HC transparency efforts are hardly new. Many large employers already use standard analytical tools to evaluate their claims data, and then some try to adjust their benefits programs to get better, lower cost care. But its difficult for individual firms, working alone, to have much impact. Even huge organizations like Wal-Mart don’t have enough employees and dependents to generate credible evaluations of all the doctors and hospitals in a given market. But when coalitions of employers/purchasers come together, those numbers can be achieved. And the leverage these efforts can apply to their findings can be formidable.

 

Just as important, when the results of their analyses are made public, new dynamics come into play. Yes, consumers can figure out which doctors and hospitals deliver the best care at the lowest cost. But so far, it appears that relatively few patients avail themselves of that kind of information, at least until they have a condition that provokes their attention.

 

Several other consequences are more likely, though. First, other, smaller group purchasers WILL look at the data, and then tell their plan administrators that they want doctors A, C and D on their network, but they DON’T want doctors B and E. Second, the cosmic law will kick in that says that nobody wants to look like a jerk in public. Combined with the industry’s rapidly emerging transition to performance-based reimbursement, poor performing physicians and hospitals will have a lot more incentive to improve. You can bet on that.

 

An effort put together by extremely capable Fortune companies - it’s important to remember, after all, that organizations like Wal-Mart have succeeded because they’ve become so good at managing information - is likely to quickly get to the heart of the drivers of the HC cost crisis, and transform the way the entire industry works. Consider, for example, the traditional resistance of the health plan sector to providing pricing and performance information for the doctors and hospitals in their networks. Mr. Barrett has a telling quote in the article: “I frankly don’t think that the industry is capable of modifying itself.” Now the large employers - and they’re all self-funded under ERISA for their health benefits and so they own their claims data - will simply go around the industry’s obstacles as they work to co-opt it.

 

Let’s also not forget that Wal-Mart and Intel are both also now entering the HC business as vendors. It isn’t unreasonable to understand these actions as part of a larger plan to establish a position in and exploit opportunities in the industry.

 

There’s lots of HC wilderness to tame in the more accessible (through clinical encounter and claims data) downstream care delivery and financing sectors. But it would be foolish to assume that purchasers will overlook the inefficiencies in the procurement of drugs, devices and supplies. This sector makes up 35-40 percent of the $2.2 trillion current HC spend. Supply chain senior execs should expect increasing pricing pressure from hospitals, but ultimately the real pressure will be from large group purchasers.

 

Of course a lot of critics will sound alarms about how the information will be used. But technologically, this is mostly straightforward. The analytical tools are well-developed, credible, and already widely used by health plans and other large purchasers. The privacy and security issues are also well understood and responsibly handled nearly universally. (Some problems will arise, as they do in any complex system.)

 

But the real power of this new trend - of large HC purchasers finally focusing on the industry’s processes - is that it will gradually lift the veil of invisibility that has cultivated such an opportunistic culture throughout HC. We know that as much as half or more of HC cost is unnecessary, inappropriate and preventable, and the industry’s conflicted motivations have driven cost to the brink of market crisis and instability. HC professionals may see the Wal-Mart/Intel initiative and others like it as threat to longstanding income or corporate margins. But this is, really, classical economics, the market at work. What we’re witnessing is a step that holds out the promise for re-establishing the stability and sustainability that HC has nearly lost.

 

The WSJ article signals a new era in HC where purchasers use data to shepherd solutions, and where the forces that have driven HC costs through the roof are relentlessly pursued. As they would be in any other business. And that will likely change everything.