Health Information Technology: Past Predictions, Current Reality, and Future Potential - Part 1 of 3

Health information technology (HIT) was predicted to control healthcare costs and improve care quality, but results show much room for improvement. Adoption rates are very low and those using HIT have seen poor to mediocre return on investments. Much can be improved by realigning economic benefits, having a better way to handle standardization, and using a cohesive HIT implementation strategy that encourages innovation.

In my next series of posts, I will discuss HIT's potential and evidence of its benefits; explain why adoption has been slow; and examine the need for a big picture blueprint. I will then present a new, comprehensive roadmap for achieving the initial predictions.

Initial Predictions

According to a Rand study published in 2005, "Widespread adoption and effective use of electronic medical record systems (EMRs) and other health information technology … improvements could save the U.S. health system as much as $162 billion annually by greatly improving the way medical care is managed, greatly reducing preventable medical errors, lowering death rates from chronic disease, and reducing employee sick days." [Ref: http://www.healthaffairs.org/press/septoct0501.htm]

HIT's Potential

According to a recent report by the Congressional Budget Office (CBO) titled, Evidence on the Costs and Benefits of Health Information Technology, electronic health records (EHRs)* can enable healthcare providers (practitioners, clinics, and hospitals) to deliver healthcare more effectively and efficiently by, for example, helping them to:

• Focus on appropriate preventive care
  
• Identify harmful drug interactions or possible allergic reactions to prescribed medicines
  
• Manage patients with complex chronic conditions
  
• Enter notes about a patient's condition and care directly into a computerized record, thereby eliminating medical transcription
  
• Eliminate or reduce the need to physically pull medical charts from office files
  
• Prescribe lower cost generic medicines
  
• Reduce duplication of diagnostic tests.

HIT's Benefits: Return on Investment over the Past 5 Years

Despite HIT's potential to save money by increasing efficiency, and by improving quality at the same time, its return on investment (ROI) is not uniformly positive. Understanding why can be difficult since there are different types of benefits of HIT, as well as different groups who receive those benefits. In fact, one essential group is actually hurt in important ways.

The two basic types of benefits HIT can produce are:

• Economic, reflecting decreased cost and increased profit
  
• Care quality, reflecting positive outcomes resulting from delivery of appropriate and effective care.

And there are at least three groups to be considered:

• Providers of healthcare services
  
• Consumers (patients and other people using health services and products)
  
• Health plans (insurers).

Following is a brief description of how this all plays out.

Economic Benefits (and Losses) of HIT to Providers

Based on the same CBO report, the economic benefits (cost savings/margin improvements) to providers may be:

• Internal, which means the savings go to providers through their use of HIT
  
• External, which means the savings go to someone other than the provider using HIT.

In integrated healthcare delivery system (such as staff-model HMOs in which clinicians are paid a salary, including Kaiser Permanente and the VA), the providers are paid on a contractual basis, not fee-for-service (FFS). The savings are thus internal, primarily driven by increased efficiency.

For nonintegrated providers, who are paid on a FFS basis, however, savings are external. This creares little incentive for them to adopt HIT. There are at least two additional reasons for this unintended consequence:

• Many nonintegrated clinicians might not be able to reduce their office expenses or increase their revenue sufficiently to pay for their HIT, whereas integrated systems have the revenue to cover the costs.
  
• Our healthcare system is set up in a dangerous manner: FFS providers who keep patients well and deliver care most cost-effectively will receive less reimbursement than those whose patients become ill, receive more tests, and get most costly treatments. Use of HIT, therefore, can reduce their profits by improving the cost-effectiveness of care rendered. According to a 2005 RAND research study cited in the CBO paper, "Most providers are paid on a fee-for-service basis; if they were to reduce health care costs by providing fewer or less expensive services, they would have to submit lower charges to insurers, and as a result, their payments would decline." Some even argue that this can result in worse care if it leads to over-treating (delivery of unnecessary care). [Ref: http://www.aarpmagazine.org/health/health_care_costs.html]
  

Economic Benefits of Provider HIT to Consumers and Health Plans (Insurers)

It is logical to conclude that both consumers and health plans gain when providers use HIT to lower utilization rates. Consumers benefit because they need less care and face lower charges. Health plans benefit because there is lower payout to the providers.

Economic Benefits of Consumers-Facing HIT

Consumer-facing HIT consist of personal health records (PHRs), which give consumers information and guidance for managing their own health, and the option to share certain information with the providers. The economic benefits of these tools reflect the same benefits derived when providers use HIT. That is, by helping consumers to remain healthier longer and receive more cost-effective care, consumers and health plans save money, while nonintegrated providers receive less revenue.

Care Quality Benefits of HIT

Key to improving care quality (safety and effectiveness) is to use HIT decision-support tools that promote use of evidence-based guidelines.

For consumers, higher quality care means better results (outcomes), including fewer diagnostic and treatment errors, more effective procedures, and better preventive care. It could even mean lower costs since poor quality can cost more, which means quality improvement would also benefit health plans.

Unfortunately, improving care quality can have the unintended consequence of diminishing providers' incomes. According to the CBO report:

The quality of health care could be improved through the use of clinical decision support systems to remind physicians to schedule tests, help diagnose complicated conditions, and more effectively implement appropriate protocols for treatment. In addition, the extensive data about patients that the use of EHRs generates might allow researchers to inform evidence-based guidelines and compare the effectiveness of different treatments for different patients as well as the effectiveness of different designs for the delivery of care.

Like the benefits from delivering care more efficiently, however, benefits that stem from improving the quality of care—and the potential cost savings that accompany them—are primarily realized by patients and insurers rather than the providers who generally make the investment in health IT that leads to those benefits. Seldom are providers directly compensated for improvements in the quality of their care. Indeed, if those improvements, for example, cut down the number of hospitalizations and office visits, they might actually reduce a provider's compensation, especially in the case of providers paid on a fee-for-service basis (as is commonly the case). Improvements of that kind might enhance a provider's reputation and thereby attract more patients over the long run. But those outcomes would not necessarily increase a provider's income or lower his or her costs. (Also, some providers might discount the value of those benefits because they already had what they considered to be a sufficient number if patients and felt no need to add new ones.)

A possible benefit of improving care through the use of health IT, however, might be to lower malpractice insurance costs for providers. A number of firms that sell liability insurance for physicians are beginning to offer discounted premiums to practices that use EHRs.

So, the economic and quality improvement benefits of HIT are yielding modest and mixed ROI at best, which is one reason HIT is not realizing its potential. A second reason is low rate of HIT adoption, which I discuss in my next post.

* Note that EHRs and EMRs are closely related and sometimes used interchangeably. The somewhat ambiguous distinction is that EHRs aggregate patient data for use among multiple providers, whereas EMRs are used by a single provider.