IT isn't driving up health costs, but it could help lower them


The proliferation of health IT applications for providers and consumers will help drive national health spending to nearly 20 percent of GDP by 2019, a recent PriceWaterhouseCoopers (PwC) report predicts. Most of that cost increase, however--also forecast by Medicare actuaries in an October 2010 report published in Health Affairs--will not come from health IT, and it's even possible that growth in health IT adoption will start to bend the cost curve by the end of this decade.

According to the PwC report, entitled "The New Gold Rush," healthcare providers in 2010 spent $88.6 billion worldwide on health IT, including electronic health records and health information exchanges. It's unclear what percentage of that was in the U.S., but consulting firm Gartner previously had predicted that U.S. health IT spending would be $28.4 billion in 2009. Even if that figure rose significantly in 2010, it have would been a tiny fraction of the total U.S. health spending of $2.6 trillion. The HIT increase, similarly, would have been a small portion of the health cost growth of $127 billion from 2009 to 2010.

The pace of health IT investment is expected to grow because of the government's HITECH incentives and other factors. But it has been estimated that it would cost $98 billion to raise the hospital EHR adoption rate to 90 percent; to get physicians to that point would cost roughly $17.2 billion. These are trifling sums in the context of overall health spending.

PwC's research indicates that the mobile health market will grow from $1.4 billion in 2008 to $12.7 billion by 2014. The company surveyed U.S. consumers and found that they'd be willing to pay $13.6 billion out of pocket a year for new health-related online services. That includes $8.9 billion for resources that rate physicians and hospitals, $4 billion for health-related video games, and $700 million for mobile health applications.

All of this is wonderful news for the entrepreneurs at whom this report is aimed. But it doesn't amount to a hill of beans in terms of overall health cost growth.

On the other hand, projections of potential savings from health IT--trumpeted by the Obama Administration and its predecessor--also are debatable. A 2005 RAND study, for example, estimated that health IT could produce half a trillion dollars in net savings over 15 years from increased efficiency and safety in hospitals and physician practices. That number might double, the researchers said, if health IT enabled physicians to provide recommended preventive and chronic care to more of the population.

Experts, though, have questioned some of the assumptions behind the RAND numbers. One observer contended that any savings from health IT would be reallocated to meet the ever-increasing demand for healthcare. Others have cited the insufficiency of the data underpinning the estimates and noted that it hasn't been proved that improved clinical decision support will actually change medical practice.

James Walker of the Geisinger Healthcare System, in his own commentary on the RAND study, made an observation that remains highly relevant today, saying: "The implementation of an effective EMR system requires an organization to be passionately committed to transforming the ways it cares for patients--and capable of effecting that transformation."

Of course, that's the whole point of showing meaningful use. But, judging by the pushback to meaningful use requirements and to the proposed rules for accountable care organizations, not many healthcare systems and physician groups are as committed to change as Geisinger is.

That said, I agree with healthcare thought leaders, including former ONC head David Blumenthal and Medicare Administrator Don Berwick, when they say that health IT is essential to transforming the healthcare system. Information technology isn't sufficient to fix what's wrong with our system any more than pills alone can cure what ails so many overweight Americans who don't exercise or eat right. But without IT, healthcare organizations can't measure or manage the data they need to improve quality, cut waste, and lower costs. - Ken

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