It's not widely penetrated across the entire market, but I think in certain markets it's starting to change the way providers think about those purchase decisions. And that leads to demand for health information exchange. We're starting to see more and more organizations saying, 'I can't possibly meet this risk contract. I'm bearing the risk of costs being greater than a certain amount, if I don't have the ability to first off have information, which requires interoperability, and second the the ability to act on it.'

From my perspective there are some cultural dynamics that are pretty powerful going on as well. The next generation of physicians are all on iPhones and streaming Spotify and on Snapchat. Increasingly when I talk to them they have an expectation that this is about to happen. And they're increasingly unwilling to go into settings that aren't having something that at least has a glimmer of Facebook-like personality and interoperability. They appreciate that there are privacy and security concerns that prevent a complete Facebook openness, but there's an expectation on the provider side. It just takes time for the older generation to leave and the newer generation to come in. I think they're starting to make their voices heard from the bottom up.

It's happening on the patient side, too. It takes a while, but increasingly we're seeing – and maybe this is a bit ahead of the pack, but I don't know how much – your expectation that you can get on websites and make reservations and do other stuff but not be able to do that in healthcare, there seems to be increasing demand for that.

Q: Maybe we should take some satisfaction of where we are today, then. When you were doing those initial pilots in Newburyport and Brockton in 2004, did you envision we'd be where we are today?

A: I think the HIE story is a really good story now. Not because we've accomplished more. If I look back on my 2004 self, I would have thought that in 10 years we'd be further along than we are now. On the other hand, I guess I feel really good about it because I think a lot of what happened, especially with the HITECH dollars – and our pilot project showed this too, but that was just a microcosm or a harbinger or what the national experience was later – is that this isn't a money problem or a technology problem.

If you give people money – we had $50 million for our pilot projects, CMS giving $25 to $30 billion – we can throw money at it, buy technology for people, put it in their offices, and then find that they still don't do it because there are so many barriers to it: cultural, legal, policy barriers – and workflow barriers.

If you look at how innovation happens in any industry, it often starts with product innovation, where people have fancy, cool new toys that get put out in the market. But there's been a lag: a bump up in product innovation – and then there's this real lull because process innovation has to take over to really incorporate those new products.

We're seeing that in healthcare. We have the capability for Direct messaging now, but it still doesn't work to the satisfaction of most people. It's not because the technology isn't in front of them, it's because the market ecosystem, which is about process innovation, hasn't fully developed to create that ability for networks to talk to each other.

Telephone networks and power grids, same sort of challenges. Now we're just at the beginning of the market trying to figure out how to put these pieces together. The pieces are all distributed – and that's a good thing – but it takes a while now to figure out how to put all this together.

Even in these places where Direct is working, like the Massachusetts state HIE has hundreds of thousands of transactions a month, one of the things we're finding is that people are comfortable being senders – I have my secure email and I'm happy to send. Part of that is because MU is incenting you to send, with the 10 percent transition of care summary, but they also feel comfortable sending.

What organizations are not comfortable with doing is receiving the information. They don't know what to do with it when it comes through that channel because they're so used to getting it via fax.

Mass General has literally thousands of providers with all these processes designed to protect patients from safety events and deliver good care. It's not easy to say to all those people, 'We're going to flip over to email, starting tomorrow.' They have a lot of finely crafted – and arcane – but yes, finely crafted processes that track information in certain ways.

Q: Direct was billed as a relatively simple solution, but is so much harder in practice than many people might have thought. Are you surprised?

A: Yeah, I am. And maybe I'm just admitting my own naïveté here. But yeah, whenever we start to make this kind of change I think it's generally true that we probably under-appreciate the complexity of what seem to be small changes. Because the industry is so fragmented, it's hard to get that kind of coordination. If there was just a Walmart and a Target that accounted for 60 percent of all of healthcare, things would be a lot easier. You could get Walmart and Target to talk to each other via Direct, and then the other 40 percent would come along. But it's so fragmented that the networks are emerging organically and there are literally hundreds of them. Trying to figure out how they fit together is part of the challenge.

I was studying the telephone industry. At the turn of the last century there were something like 2,000 telephone networks in the U.S. alone. It took decades for them to come together so you could have seamless hubs across the networks. There were lots of local exchanges, but long-distance – one exchange to another – took a while to figure out. It's the same thing here. ONC is going to hopefully play a much bigger role here trying to facilitate that. But if it's not coming from at least strong parts of the market, it's not like the government can do anything that will be long lasting. In our economy it's gotta be market-based, at the end of the day.

The other example I would give is look at the one area of healthcare where there is concentration: namely, pharmacies. And interoperability works great there. E-prescribing is the runaway success of interoperability. How did that happen? Well, basically, the retail pharmacies formed an oligopoly. You have Walgreen's, CVS, Rite-Aid and Duane Read and a few others. It's fewer than 10 retail pharmacies and fewer than 10 PBMs and that accounted for the vast majority of the prescribing market. They get together and say, We're going to create a network among ourselves. It will be a proprietary network, and it's a runaway success. It's now the national standard for how prescribing happens. I'm not advocating monopoly (laughs), but sometimes there's a benefit to that. It's the one place in healthcare where it did happen, on its own, without the government having to get involved.