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By Nancy Ferris
Peter Orszag, an economist and director of the Congressional Budget Office, has a high-deductible health insurance plan and a health savings account. But making those purchasing decisions wasn’t easy, he said.
“It is often difficult as a nonmedical professional to determine what is or is not valuable,” Orszag recently told the House Budget Committee.
Experts are struggling to make the same determinations about health information technology. As part of its mission to attach a dollar value to every bill Congress acts on, CBO issued a report in May questioning the value of health IT.
“No aspect of health IT entails as much uncertainty as the magnitude of its potential benefits,” the report states.
Although health IT could enable changes to U.S. health care, it has little value on its own, Orszag said. Without other reforms, “it doesn’t generate the kind of results many people would hope for,” he added.
CBO’s report questioned an often-quoted 2005 Rand study that estimated the value of health IT to be $80 billion in annual savings once 90 percent of hospitals and doctors adopt it. CBO took issue with Rand’s methodology and conclusions.
Lead researcher Richard Hillestad has appeared before Congress several times to defend the Rand study. He said the $80 billion savings level might be delayed for 10 to 15 years based on the slow rate of health IT adoption, but he stuck with the estimate.
However, he added, “the potential savings we calculate are spread among stakeholders — insurers or payers, providers, and individuals — so such savings are not necessarily savings the government might realize from programs to enhance the adoption” of health IT.
Orszag and Hillestad agreed on one thing: In Hillestad’s words, “The broad adoption of [health IT] systems and connectivity should be considered necessary but not sufficient steps toward real health care transformation that delivers efficient and effective care at the right time.”
In other words, health IT could be the basis for desired changes in health care.
A public good?
That’s something many state and federal policy-makers have begun to recognize. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, said last month, “Health IT adoption is likely to be a key component of health care reform.”
But he and others continue to wrestle with questions of who will benefit from health IT and who should pay for it. Some experts are urging them to view health IT as a public good, comparable to the interstate highway system or state universities.
“The financial benefits…may be very large, but many of the benefits may accrue to society,” said Dr. David Westfall Bates, medical director of clinical and quality analysis at Partners HealthCare System in Boston.
CBO endorsed the concept in its report, stating: “The technology has some characteristics of a public good — that is, a good that would be provided in a less-than-optimal amount by private markets if the government did not intervene.”
Although Bates and others say the government should fund such programs, CBO disagrees. “The fact that health IT has some characteristics of a public good does not necessarily mean that the federal government must intervene, nor does it prescribe an appropriate form of intervention,” its report states.
Experts say Congress and the Bush administration are not likely to accept responsibility for funding health IT because of rising deficits. Furthermore, components of the health care industry continually lobby lawmakers about their piece of the health care pie, which can make it hard for them to see the big picture.
The administration has also consistently opposed proposals to reward doctors for acquiring electro nic medical record systems, though a new administration might be more flexible in its approach.
One sign of a possible shift in thinking about health IT is that policy-makers are finally talking about value. “Getting Better Value in Health Care” was the title of the House Budget Committee hearing at which Orszag testified in July. And the notion of value seems to be displacing some persistent concerns about business cases and return on investment (ROI).
ROI remains elusive
For years, advocates have predicted that investments in health IT would reduce costs or at least slow their growth. The predicted outcomes include fewer duplicate lab tests and radiology orders, fewer medication-induced ailments, and more preventive care.
But measuring outcomes and determining who has the most to gain from the technology have been difficult. For one thing, patients often change doctors and health plans, so the promised continuity of care doesn’t materialize. Patients are the only definite beneficiaries of health IT, but most providers are reluctant to ask them to pay higher health care bills to cover the costs of the technology. And although the need for fewer tests would reduce costs, they would also reduce the incomes of those who provide such services.
Finally, the people who spend money on health IT seldom reap its rewards. In the language of business, that means there is no ROI.
“I think the problem we have right now is always using…return on investment” as the sole way to measure the worth of a health IT project, said Kathleen Nolan, director of the Center for Best Practices’ Health Division at the National Governors Association, speaking at the Government Health IT Conference in June.
“I think there’s a difference between value and ROI,” Nolan said. Value represents an improvement in the health system’s efficiency or effectiveness or a better result from everyone’s health expenditures, she added.
If the discussion focuses on value, “we won’t create false expectations of actual savings” in health care costs, Nolan said. “It is still a business discussion, but you have to be looking at other outcomes” beyond cutting costs.
Laura Kolkman, president of Florida consulting firm Mosaica Partners, said she believes many people have unrealistic expectations about ROI. “I know very few start-up businesses that are as capital- and resource-intensive as developing [health information exchanges] that have a positive ROI within a matter of two or three years,” she said. That view led her to recommend that business experts be included in a local effort to create an HIE.
Pinning down a business case
Successful business cases have been just as elusive as ROI. For example, Kolkman said, when the Health and Human Services Department asked four technology companies to help local HIEs create business models, none came up with a viable scheme for how an HIE could collect enough revenues to cover its expenses.
Even successful HIEs, such as Indiana’s, rely on government and foundation grants to expand or enhance their services.
Experts are beginning to question whether HIEs can be self-sustaining and whether electronic health records can reduce costs in a fragmented health care environment. Even after the Nationwide Health Information Network becomes available, it’s not certain that doctors will use it.
And yet, Kolkman said, “we all recognize [health IT] is an unmet need” in a national health care system that is inefficient and costly. She called the current situation memory-based medicine because doctors, patients and others involved in health care cannot readily get the information they need.
When you understand what your customers value, you know what they will pay for, what serv i es you should provide first and what they care about deeply enough to change their behavior, Kolkman said.
That understanding will help HIEs win patients’ support and loyalty instead of assuming that if you build it, they will come, she said. “It’s been built, and they’re not coming,” she added.
In many communities, the HIE business model could be similar to the one that sustains the local symphony orchestra: The orchestra sells tickets to its performances, just as an HIE could charge transaction fees, she said. Some orchestra supporters also buy annual subscriptions, pay membership dues, or make donations during fundraising drives or on other occasions.
Failed experiment?
The MaineGeneral Medical Center in Augusta covers much of the cost for the health IT systems for 30 medical practices based on the notion that the connections are valuable to everyone in the system.
“If I have a choice of two laboratories, I’m going to choose the laboratory that puts the data into my EMR without my having to handle the paper or input the number into a field,” said Dr. Dan Mingle, who until recently served as MaineGeneral’s director of ambulatory clinical informatics.
“If I’m a patient, I’m going to choose an emergency room where my doctor’s data is accessible,” he added. “It won’t take me many visits to realize that if I go here, they’re going to ask me a lot of questions and rely on my memory, and if I go to another place, they’re going to find my records [in the system] and will have my allergy list, my medication list” and so on.
“Both the doctor and the patient are likely to choose a specialist who can get into the primary care doctor’s notes to see what’s going on with the patient and whose notes will go automatically to the [primary care] doctor,” Mingle said.
However, when MaineGeneral connected hospital services and affiliated physicians, it did not increase revenues sufficiently, he said, adding that “what we saved on medical records, we’re spending on IT support and so on.” Although the quality of care, patient safety and the speed of data transfers have improved, there has been no accompanying reduction in overall operating costs.
“That failure to get the ROI relates very clearly to my losing my job,” Mingle said. Officials reorganized the IT staff and eliminated his position, and though they offered him another job, he chose not to accept it.
“There’s a belief that you install a system like this and the ROI accrues to you passively,” Mingle said. “It doesn’t. It’s not a passive thing.”
“To really make it work, you have to start handling your patients differently, start handing off your work to one another differently, and even redistributing the work among the people there and building new skills in the people there,” he said. “And if you don’t do that, those key returns on investment become elusive.”
Orszag made a similar point, although he was speaking as an economist assessing the big picture. “If you just plop a health IT system down in the middle of a fragmented [health care] system, with financial incentives that encourage more care rather than better care and without a system for using the information that is coming out of the health IT structure to improve quality, you are not going to get very much,” he said.
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