Universal Health Care: Promise of HIT Reform

All of the candidates proposals so far have included an estimate of savings related to improving Health Information Technology. All of them are quoting the RAND report which was published in 2005 as a monograph.

The monograph is very detailed, 105 pages long and includes the calculations used to arrive at their conclusions. Interestingly though, they provided their estimate of savings BEFORE the estimated cost of implementation. Kinda like the cart before the horse. They also state that their estimates do not include any cost or savings related to the different systems being able to communicate patient information with one another across any distance. In other words, your doctor’s office system can’t talk to your pharmacy’s system that can’t talk to the hospital’s system.

Many hospitals and physicians offices have already started implementing EMR’s (Electronic Medical Records), at their own cost. Many have done so in response to HIPAA (Health Insurance Portability and Accountability Act) requirements. HIPAA dictates how health information transactions are to be carried out between applicable agencies/businesses (the standard) mostly for billing purposes.

The estimates for the cost of implementing an EMR quoted in the RAND report did not take into account any economies of scale, since most practices comprise 4 or fewer physicians. The estimate for implementation was $22,000 per physician as initial start up costs and $4,400 per physician for annual maintenance costs. Not an inexpensive project.

How do these figures compare to a real world practice? A moderate size specialty group in our communty is currently implementing an EMR for their practice. They have been planning the implementation for some time and took the effort to look at a large number of available products before making their final selection. Ultimately, the product they chose is costing each of the physicians in the group 30K-40K each, not including the loss of prductivity mentioned in the RAND report.

This group has 30+ physicians and physician extenders. If they are not able to achieve some measure of economies of scale, imagine the cost to a smaller practice. The often quoted RAND report likely needs to adjust it’s figures, especially since the data in it is from 2004.

If we assume 30 physicians and an average cost of 35K per physician, then the total one time set up cost is $1,050,000 PLUS lost productivity during a training period (RAND estimates this loss at 15% of revenue). The annual cost of maintenance is 20% of the initial cost or $210,000 per year for this practice of thirty physicians. They have to make up that additional practice expense somehow, somewhere. How about charging more or seeing more people?

Can’t charge more because insurance will only pay $XX for a certain visit/procedure, no matter what you charge and the providers’ contracts prohibit them from charging the difference to you (except for deductibles and copays). Seeing more patients? The more patients you see, the less time you spend with each one, the fewer things you can address at a visit. Kind of goes against the whole idea of improving quality and quantity of care, doesn’t it?

I don’t know who the candidates think is going to be SAVING money by implementing the HIT improvements they are all promoting, but I doubt it is going to be the providers. At least Obama is willing to spend money for the HIT improvements, and his estimate of the cost to do so over a five year period seems reasonable.

As I’ve mentioned before, there is not going to be a no-cost, painless solution to the problem of healthcare and coverage for the under and uninsured. But, so far I’m not impressed that anyone has come up with a comprehensive, budget neutral, fair, quality driven program that meets the NEEDS, not wants, of the patient citizenship.

Doc B

My opinion is free.
Advice is worth exactly what you pay for it.


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