McKinsey: Well-planned and executed health IT can save $40B annually

If you caught FierceHealthPayer or FierceEMR last week, you would know that four major health insurance companies will offer their own financial incentives to providers to adopt and use EMRs and align their programs with the recently published CMS definition of "meaningful use." That likely will be a big help for the many hospitals and physician practices that wonder if their investments in health IT will pay off.

Some equally good news on this front comes from consulting firm McKinsey & Co., which estimates that if most U.S. healthcare providers adopted "a best-practice IT platform to house and share medical records, to manage hospital resources more transparently, and to define precise guidelines for medically authorized tests and procedures," nationwide savings could add up to $40 billion a year. That's much more than the estimated $27 billion the federal government will spend on Medicare and Medicaid incentives for EMRs, and McKinsey says return on investment will take just two to four years, assuming that overall health IT investment will total $120 billion for project planning, software, hardware, implementation and user training.

But there's a caveat. A big one. "Achieving such a positive return on investment [ROI], however, requires distinctive change-management skills among hospital leaders, better governance and sustained engagement from key clinicians," reads an article in the August edition of the company's McKinsey Quarterly newsletter. This means integration of systems, optimization of the labor force, adoption of--and adherence to--clinical and administrative best practices and revenue-cycle management.

"The realization of the benefits from healthcare IT investments will require a radically new approach to IT on the part of the CIOs of healthcare providers, as well as the business leaders and clinicians those CIOs serve," McKinsey's Francois M. Laflamme, Wayne E. Pietraszek and Nilesh V. Rajadhyax write. "Healthcare providers will need to use new approaches to achieve an inclusive governance process with streamlined decision-making authority, a radically simplified IT architecture, and a megaproject-management capability."

This sounds like a daunting task, but McKinsey has identified three factors that often lead to success: governance with real authority, a "radical" simplification of IT architecture and a well-planned and executed implementation strategy. "Hospitals that take a systemwide approach to overhauling IT-a governance model with real authority, a radically simplified IT architecture, and a robust megaproject-management methodology-will be well positioned not only to meet their compliance responsibilities but also to lower their operating costs significantly while improving the quality of patient care," the consultants say.

For more tips:
- read this McKinsey Quarterly article (reg. req.)

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