Healthcare Has Cost Problems, but IT and EHRs Do Not Have to be One of Them

Irv LichtenwaldI’m proud to lead a group of intelligent and energetic technology professionals committed to developing a robust healthcare IT system that is (1) easy for clinicians to use, (2) improves patient health and (3) doesn’t bankrupt hospital budgets. We think any sustainable system must have those three key requirements.
And how is healthcare doing thus far?

The EHRs available today are developing rapidly. Vendors are making frequent and impactful improvements to improve system usability. Clinicians are getting better at maximizing the contribution healthcare IT makes to patient health and safety. It’s not hard to see how healthcare IT can meet the first two requirements and broadly contribute to improved healthcare.

But then there are the costs. In this crucial third requirement, many EHRs are as much liability as asset. They contribute to a quality of American healthcare—paying more for just about everything—that makes it unique in the developed world.
"All the evidence is that we haven't paid enough attention to prices," says Dr. Ashish Jha, director of the Harvard Global Health Institute, regarding a study recently published in the Journal of the American Medical Association (JAMA). "And prices are where we are truly exceptional. We're just higher for everything — drug prices, physician prices, nursing prices, hospital prices, MRI prices."

And, yes, technology prices, but not just the healthcare IT kind.

While healthcare IT purchases have contributed to noteworthy financial challenges at many hospitals and health systems, it is actual medical technology that has more impact on overall healthcare costs.

“The real culprit of increased spending? Technology,” health economist Austin Frakt writes. “Every year you age, health care technology changes — usually for the better, but always at higher cost. Technology change is responsible for at least one-third and as much as two-thirds of per capita health care spending growth.”

For healthcare IT, the concern is that exorbitant prices for EHRs and similar technology crowds out spending on other initiatives. Yes, healthcare IT can help eliminate costly medical errors and moving to the cloud should significantly reduce hardware costs. But EHRs don’t lower clinician salaries, the cost of pharmaceuticals or other costs.

"After investing more than $30 billion in health IT, we haven't improved the administrative efficiency," said Dr. Kevin Schulman, an associate director of the Duke Clinical Research Institute and a contributor to a recent study on the impact of EHRs on billing processes. "That was one of the big promises of digitizing records."

According to the research data, the more complex a visit, the more expensive it is to bill. Payer complexity means a simple primary-care visit requires 20 minutes to bill for and costs just over $20. An inpatient surgery, by comparison, required 100 minutes of billing time at a cost north of $215.

"We think the costs are due to the complexity of the market itself," Schulman said. "Part of that complexity comes from the fact that every insurance company has their own way of doing things. This is a cost that's passed onto the provider organizations."

The budget-busting EHRs that can’t bring down these four costs—medical technology, salaries, drugs, payment complexity—are both failing to address the overall cost problem and adding to it.

So, if healthcare IT is neither a major contributor to rising costs nor a powerful cost mitigator, how should hospitals and health systems approach buying healthcare IT systems? By making wise, frugal purchases as part of a general cost reduction plan. Indeed, the argument for a positive healthcare IT return on investment hinges on EHR platforms being significantly less expensive than most are now.

What can hospitals and health systems do to ensure that healthcare IT costs don’t become part of the overall concern with rising costs? At a minimum, adhere to these criteria:

As things change and improve, healthcare IT will have to enable improved administrative efficiency in tandem with hoped-for improvements to the way healthcare is administered. Pharmacy and related modules will have to be responsive to lower drug prices if and when those changes occur. Perhaps healthcare IT can facilitate significant cost adjustments in other areas as well.

In the meantime, hospitals and health systems can ensure that the EHR doesn’t become a financial albatross. Sure, everyone wants the Cadillac. But why pay for it when what you just drove is a Pinto with bells and whistles?

Irv Lichtenwald is president and CEO of Medsphere Systems Corporation, the solution provider for the OpenVista electronic health record.