9 September 2021

The most important 15c in the history of digital health?

ADHA DoH Government Money

The decision not to reduce the 15c eScript transaction fee is a small but significant win for vendors and may signal a better way to fund digital health innovation.

Late last year I was called by the CEO of the Medical Software Industry Association (MSIA), Emma Hossack, who was in quite a fluster about 15c.

At the time I could not make head nor tail of what she was talking about – some hitherto unknown transaction fee that the government had paid over the years to the eScript exchange vendors, when an eScript was sent, which was then divided in some ratio between the doctor patient management system (PMS)  vendor, the pharmacy dispensing system vendor, and the eScript exchanges (either eRx or Medisecure).

The e-script exchanges (Rx exchanges) are essentially cloud based centralised data sets of all the scripts written in the country which can be accessed by any pharmacist at any time to check a script.

I understood at the time that the government was proposing to decrease the overall amount of 15c down to 12c, but I didn’t quite get why they were doing it or why Hossack really cared.

In the scheme of things it all seemed pretty menial. The fee seemed small and divided up so much it felt like although annoying, it wasn’t a big deal in the scheme of things.

But it was.

I should have been listening more carefully.

If the government pursued the 15c rebate reduction, it would have been a strong indication that digital health was being run more by Treasury than it was by the policy and strategy people in the Department of Health (DoH) – not good.

Further, it would have indicated a fundamental misunderstanding of how vendors are operating within the digital health ecosystem in Australia, and possibly put a stake through the heart of what could well be the best model for the government to properly partner with industry, and fund  digital health innovation and infrastructure into the future.

The 15c in question has been paid to the Rx exchange vendors as a rebate for each script processed through their exhange since the core eScripts service got up and running nearly  10 years ago.

Back then, doctors weren’t generating tokens for their patients’ mobile phones via their PMS, they were generating paper scripts with a bar code.

But the PMS system was still sending that transaction to the centralised Rx exchange, so when that patient turned up at a pharmacist anywhere in the country, the script could be checked off as genuine.

Each time this happened, the government paid the Rx exchange vendor 15c. This 15c was how the Rx Exchange vendors got paid for developing the Rx Exchange in the first place.

It’s significant because the Rx exchanges, although private cloud based networks, each with their own idiosyncrasies, have turned out to be the single most effective and useful pieces of modern IT architecture for interoperability in the Australian healthcare system that exists to date.

Forget the My Health Record – no one uses it.

There isn’t really a reason for most stakeholders to use it. It isn’t facilitating useful information exchange at the right place at the right time with the right people.

The Rx exchanges are.

They facilitate the better part of 300 million script transactions each year – connecting the doctor on one side of the transaction to the pharmacist on the other side, to make sure nothing dodgy has gone on in between. Now they also allow a patient to carry their scripts on their mobile phone, and retrieve them anywhere they like.

The system is being used now for real-time monitoring of dangerous scripts such as those for opioids, to help reduce issues in the system such as doctor shopping.

Three hundred million times 15c equals $45m.

But that’s not actually the amount the government has been paying these Rx vendors.

For the 15c to be paid the transaction had to be a full end to end e-transaction between the PMS and the bar code being entered into the dispensing software at the pharmacist.

Even over 10 years, more than half of these transactions end up getting interrupted before the bar code gets used at the pharmacy end by manual intervention. This usually occurred when the pharmacist manually enters the script into their system, rather than wanding the bar code, because his or her system didn’t work properly or wasn’t set up for the final leg of the process. When this happened the government did not pay the 15c. This is despite the information still being passed over the Rx exchanges, and effectively doing the check.

It has been estimated that until the new e-token advancements and true end-to-end script interoperability was introduced earlier this year, largely as a result of the government getting its skates on due to the covid pandemic, only 42% of scripts attracted the 15c rebate.

So that means that the government until early this year was only funding the Rx exchanges, the doctor based PMS vendors and the pharmacy based software vendors to the tune of about $20m a year to do this job, not $45m.

The Rx exchange vendors would distribute this rebate in selected ratios to the PMS vendors and the pharmacy vendors who helped facilitate the transaction at either end. That means the Rx exchanges were actually doing this magnificent job for a lot less than $20m per year.

Do you see now why Hossack was so up in arms about the idea that the government was going to reduce this rebate moving forward?

Essentially, between two private sector companies, eRx (which was developed by FRED IT, the major pharmacy software vendor) and Medisecure, and some government support and cheerleading by the ADHA (God forbid someone praises the ADHA ever, but we are doing it on this occasion), we somehow came up with the most efficient cloud based system of interoperability – sharing data between doctors, patients and pharmacists seamlessly, electronically – in the country.

And guess what?

It didn’t cost us more than $2 billion like the attention- and money-sucking My Health Record has cost us over the last 10 years. It has cost us something like $18 million a year only.

Vitally important in the understanding on this project and what it should shout out at the government is that the $18m has always been performance based. The Rx exchanges get paid only when a transaction takes place – 15c a go. If it doesn’t work, the government isn’t spending the money.

Imagine if we had decided to fund the My Health Record project that way.

The ADHA gets say, 20c each time the MHR is used in a meaningful exchange of data between health professionals and maybe a patient?

If we’d put that system in place at the start we be lucky to spending $1m per year so far on the My Health Record project. No matter how many statistics get thrown at us as a result of of the opt-in decision on this project, the secret has been out for some time that meaningul data exchanges using this system just aren’t that common. If they were, the government and the ADHA would have probably started measuring them properly, and reporting it, rather than spewing out meaningless stats each month on how many pharmacies or GP surgeries have been  artificially incentivised to sign up, and how many useless automated PDF hospital and pathology lab documents or GP healthcare summaries got uploaded, most of which will never be accessed or used.

Back to the 15c and what the Treasury wanted to do with it.

Apparently some time about a year ago Treasury worked out that with the new e-token project and the advancement of both the PMS vendors and the pharmacy dispensing systems, the $20m would eventually start to go up as more and more script transactions became end to end properly, electronically.

Some wunderkind in Treasury did the sums and realised that if this project went really well, the government could end up paying $40m for this service and project.

OMG, double the cost!

Hence, early last year the Rx exchanges and the vendor community got the word that the government in their wisdom had decided to reduce the rebate from 15c to 12c.

You might imagine that someone in Treasury thought they were being quite generous. After all, even at 12c, if things kept going well with this electronics script thing, they’d be paying a lot more than $20m for it. Maybe even over $30m.

Of course, what Treasury wasn’t figuring into any of their analysis was the massive efficiency and safety gains at the pharmacy and the doctor and with a patient that more end-to-end electronic script transactions would bring.

Rather than thinking of reducing the rebate, they should have been leaping for joy at what cost savings their meagre extra $10-$20m in funding was going to end up bringing to the entire health system. Among other things literally thousands of errors that used to occur between the doctor, pharmacist and patient will be eliminated along with the risk and harm that these errors created in the past.

Thankfully, someone, we are going to assume, in the Department of Health (DoH), listened carefully enough to Hossack and her colleagues and recently put a stop to the madness of disincentivising the only truly successful interoperability project the government has been involved with.

A few weeks back, with some short and simple press announcements, which most people would not have comprehended the importance of, it was to be that the 15c would remain untouched.

The significance of the DoH coming to this decision probably can’t be overstated.

For one thing, it says that they are listening to the health-tech community and starting to do the math better.

Fifteen cents to 12c in the face of the costs of the pandemic could easily have been seen as nothing to fight over internally in Canberra.

Why upset Treasury or your bosses for 3c? Yeah, it doesn’t make a lot of sense (/cents) to cut it under the circumstances, but the whole thing is pretty invisible. Who is really going to care?

That the DoH saw how important 3c was in the scheme of things is big. It says they are starting to get it.

But it’s not as big as another potential implication of this reversal of the cut: that in the 15c rebate funding regime, and how the Rx exchanges were built with the private health-tech community, and government, the government may have stumbled into the most effective way to  partner with industry and fund innovation in major digital health infrastructure projects for interoperability into the future.

The My Health Record, and a number of other government big bang projects have failed spectacularly in bringing a sensible a return to the taxpayer. Giant IT infrastructure projects tend to fail a lot when run exclusively by government.

If you put the return for the My Health Record project, and the funding mechanism of it up against the Rx project, the difference on ROI is so startling its hard to see why the DoH and even Treasury did not see it a bit sooner.

One reason they haven’t might be that it has been the position of the DoH and the government for some time that private enterprise is private enterprise. If they can make a buck in digital health, then good luck to them. But why should we be adding to their profitability?

The issue has been a big source of tension between the government and the vendor community in Australia for a long time.

It is in part a historical problem. A lot of our tech vendors have been very agile and smart in building up their businesses and making them decent businesses without any government incentive or assistance.

Often the DoH will make changes to the system and rules that impact the health tech vendors massively financially, but which they are reluctant to help with based on the premise that they are making good money, and if they don’t want to do it, surely commercial forces will intervene and someone else will step up.

An example would be that all the major software vendors are going to need to invest heavily to create interfaces to talk the new cloud based Medicare and PBS systems. It’s maybe not a great example, because all the vendors should be more forward-leaning on cloud, but it serves to illustrate that the vendor community maintains vital digital health infrastructure that the government often takes for granted, when maybe there is a better way the two groups could be working together to make the whole system more efficient.

Hossack tells Wild Health that the real story in “15c-gate” is not so much the money that hard working vendors would have unfairly lost if the government had decided to cut the rebate, but how brilliantly the system of transaction payments worked to stimulate innovation and development in the private health tech sector.

“Why doesn’t the government adopt this same funding paradigm again to get some of our  bigger and more complex interoperability and innovation challenges solved?” she asks.

Why not indeed.

Our health tech vendor community are clearly a very capable and innovative bunch, as the Rx exchanges and electronic script writing project now has clearly illustrated.

They know the ground rules, have proven themselves very resourceful and efficient in developing some pretty amazing software solutions on the smell of a few oily rags.

The main issue most of them have in taking part in major transformational projects is capital. They are small and run on tight margins and don’t have the cash lying around that big globals do, or that sometimes makes an appearance when private VC money becomes available.

What Hossack sees is the potential for the government to partner effectively with the local health tech community in a manner that benefits both parties and from a government perspective is seriously risk-mitigated by the model of paying based on successful and meaningful data transactions.

The other thing about a model like this is a government can budget its investments in a much more controlled manner.

When the My Health Record wasn’t working five years ago, and the solution the government came up with was to double down on its $1.2bn investment to that point of time, there was no means ever of controlling the cost against measurable outcomes.

Yes, there will be more money flowing to the local vendor community from government, but in a model that looks like it makes sense.

How much ROI has Australia achieved from spending over $400m (and more to come) with the global consultancy firm Accenture in their development and maintenance of the My Health Record infrastructure. If this were a local vendor, a lot would have been different about what needed to be delivered to make the project more useful because local vendors are part of networked community. And most actually take pride in delivering solutions that help the system and Australians.

Of course, these things are always far more complex in execution.

The government might need to outlay some initial funding in any projects to local vendors which they normally wouldn’t. That’s always fraught with some political difficulty.

But they did that on the Rx exchanges project and look what happened.

Hossack says she is optimistic that the transactional partnering model that seems to have worked so well in the Rx exchange project will now get a bit more attention when government is considering the design and build of parts of our digital health infrastructure moving forward.