It is now a well worn story in business school circles.The first fax machine, by itself, was not worth very much.Once there was another fax machine, then the first one could send a document to someone and it thus became more valuable.With every additional fax machine in operation, the first fax machine could now reach more people.

Viola.

The power of the network.The value of connectivity.

We now almost take network economics for granted.Email, Facebook, the Internet itself. This is part of the very fabric of our society.We instinctively see, and believe in, the worth of having all the little parts be connected to one another.

We can even back up further and look at something far more pedestrian, but maybe just as important.Coming out of World War II, we turned the American industrial complex from building war machines to laying down, literally, that great concept known as the interstate highway system.Physically, instead of digitally, we were connected.And that connective capability was a key enabler to one of the greatest economic expansions in the history of the world.

But this is not just a random walk through business history.

I got to thinking about these things when talking to one of our clients about the cost of EMR interfaces.

See, this client, a small primary care practice, was jumping in to the EMR world.

We gave them the proposal and they looked at the cost of the implementation and training, the cost of the ongoing monthly hosting and support, and even the cost of what they would likely spend over the years for additional training and customization.It was a meaningful number, one that required some serious thinking.

But they thought as business owners, knowing they had to invest in their business just as every other small business owner has to do.They saw the productivity value to their practice internally and they saw where the market was headed.They were not afraid of technology, but saw it as a tool to help their business.They were ready to invest.

Then we got to the discussion about interfaces.

This client understood the big idea about healthcare technology (HCIT).They knew that they would benefit if they could get data about their patients from other sources such as their lab and their hospital.And they knew that their patients would benefit if they could share their 'soon to be electronic' data about that patient with others such as the specialists to which they referred or that same lab and hospital.In fact, they realized, it would be great if their EMR was connected to a couple of diagnostic machines in their office.

And we began to talk about the current state of the world of interfaces and data exchange.And then we began to talk about what that all would add to the cost of their project.

Though healthcare is improving rapidly every day and massive investments being made everywhere you turn (RHIOs, health information exchanges, interface engines, clearinghouses, carrier pigeons), we as an industry are still pretty backward in regard to the exchange of information from one system to another and even more so between organizations.Too much of this is still hand-crafted work, where an expensive IT guy on one side of the technical hand shake works with another expensive IT guy on the other side of the hand shake, doing what amounts to custom programming.Sure, things like HL7 protocols help, but we're a long way from the seamlessness of the ATM system.In one form or another, these guys have to get paid and that cost is added to the price of a practice getting fully into their EMR.

As is the case generally with this particular type of technology issue, large organizations have a cost advantage.The cost of making the interface work is spread over a much larger revenue base, making it less significant.

However, for physician practices, most of which are small, that interface cost has to be covered by a lot less revenue.The cost to a practice of developing and configuring an interface with a lab, for example, is about the same for a practice with 500 transactions a month as for one that sends 10,000 transactions a month.

Which brings me back to fax machines.

When I bought my first fax machine, I paid for the machine and added a phone line.But I did not have to pay anyone $10,000 to allow my fax machine to talk to the other machines.And I sure did not have to pay for every possible connection my fax machine would ever have.The shared connective infrastructure was already there.The phone company had already made that capital investment and was spreading a big cost across a whole lot of people in their monthly service fee.

I believe in the value of EMR specifically and technology generally for physician practices.Obviously, since we sell these solutions to our clients.I believe that when properly implemented there is a direct financial benefit to the practice, realized in improved productivity, which means the ability to see more patients, which means more income to the practice.And that is good for our clients.

And I believe that fully automating our industry will be a good thing in the long run, but I am not quite as effusive, at least in the short term, as some policy makers on the ability of HCIT to 'bend the cost curve.'The interface issue is one of the reasons why.

At the individual practice level, and that is my perspective more so than as an industry analyst, the interface question is pretty clear.Is there is a cost benefit that accrues to the practice that offsets the cost of developing the interface?If so, the practice should include the interface.If not, they should pass.That is a straightforward question.

But if we are to gain the promised societal benefits of lower costs and better quality from HCIT, then like fax machines, these individual practice EMRs have to be hooked into the bigger network because a lot of the really important data resides in the physician office.

And until we figure out the right investment economics and pricing model for the connective infrastructure, the cost to physician practices of developing a lot of interfaces will be a barrier to the envisioned grand nirvana.

If you have any good ideas, you can fax them to me.