Why America's medical records are stuck in the 18th century

American electronic records are, routinely, a pretty terrible way to organize and share health-care data. Lots of hospitals and doctor offices still rely on pen and paper. One federal report found that as of 2013, 59 percent of hospitals are using a basic electronic record system — which means 4 in 10 hospitals aren't.

Perhaps the most frustrating issue with electronic medical records right now is that they don't talk to each other; hospital A and hospital B typically have different records, made by different vendors, that can't share information. This means that even if hospital A and hospital B are across the street from each other, you still need to phone in or fax or print out any type of medical information you wish to share.

The most recent data shows that 4 in 10 hospitals share health-care information with other hospitals. More, however, will share information with non-hospital providers, like sending off an MRI to a specialist in private practice or a prescription to the drugstore.

(Office of the National Coordinator)

For doctors, the numbers are even worse: just 14 percent say they can transmit medical records outside of their own organization.

(Office of the National Coordinator)

Why is the exchange of medical records so difficult? Health-care providers will typically cite obstacles like the loss of productivity when they set up these records (their workers have to learn a new system, and that takes time) or the cost of buying the software in the first place.

Those are all almost certainly true; buying software costs money, and training doctors in that software takes time. But there's arguably another, bigger obstacle that they don't bring up: it's bad business for hospitals to share medical records.

For patients, it would be great news if any doctor or hospital could access their medical history. They could turn up at any office in their city, maybe even in the country, and with the click of a button a doctor could bring up their various scans and tests and personal history. It would become way, way easier to get a second opinion or switch to a new provider.

That's exactly why interoperability is bad business for hospitals: it makes it easier for patients to switch providers and take their business elsewhere. Hospitals with interoperable records would be taking away all the friction that's associated with switching providers in the current health-care system.

There are other incentives pushing hospitals to make electronic medical records that do talk to each other. One is patient satisfaction: if other hospitals offer a better experience, with portable records, patients might vote with their feet and head elsewhere. So far, though, the figures above suggest that hasn't been enough of a driver to force widespread adoption.

This likely explains why the federal government has stepped in. The Obama administration's HiTECH Act includes billions of dollars in bonus payments for doctors who increase their use of electronic records. The first stage of those payments was all about adoption: just getting doctors onto electronic records. The second stage is about interoperability: doctors get rewarded for making their records talk to each other. Those incentive payments are still going out the door, and over the next few years we'll get a better sense of whether they're strong enough to actually get hospitals to work together — or if the business structure of the health-care system keeps everyone far apart.

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