Big electronic network could save big money

A national electronic health network enabling doctors, hospitals and other health care entities to seamlessly exchange standardized information would net $78 billion annually in savings after it is fully implemented, according to a report published on the Health Affairs Web site.

Such a network would cost $276 billion over 10 years, and it's likely that the net savings would be greater than projected because the savings exclude clinical benefits, says the report, written by researchers at the Center for Information Technology Leadership, a nonprofit research organization created by Partners HealthCare, a health care system in Boston that includes about 10 hospitals.

The researchers did not attempt to measure clinical benefits -- particularly the economic impact that information that goes missing in a paper environment has on medication errors -- because there weren't enough data in that area, said internist Eric Pan, MD, a co-author of the report and associate fellowship director and senior analyst at the center.

Thus, the researchers focused on measuring and analyzing potential savings from administrative efficiencies and fewer laboratory and radiology tests, Dr. Pan said. Of the projected $78 billion savings, $34 billion would go to physicians and hospitals, $21.6 billion to insurers, and the rest to independent laboratories, radiology centers, pharmacies and public health departments, Dr. Pan said.

The researchers based their projections on previously published research, literature, information and estimates from a panel of experts. They also used analytical software to crunch and model their data.

Todd Rowland, MD, director of medical informatics at Bloomington (Ind.) Hospital and Healthcare System, found the findings credible based on his familiarity with the authors' previous research and professional credentials. His employer and Unity Physician Group, a management services organization and 120-doctor emergency medicine group are spearheading a nascent effort to build a local health information network serving a 10-county area in Indiana.

Assumptions

While he doesn't have a problem with the $78 billion annual savings figure, Dr. Rowland nonetheless thinks that it will be challenging for the industry to hit that target, because the projection assumes that a national network will be truly interoperable, meaning that everyone will be able to connect to the network and exchange data in standardized formats, Dr. Rowland said.

If a national network is implemented, chances are that it will operate at a lesser level of interoperability, connectivity and standardization, Dr. Rowland said. That kind of network would cost $320 billion to build over 10 years and would result in annual net savings of $23.9 billion, according to the report in Health Affairs.

"That would be a more realistic projection," Dr. Rowland said. Those savings, which exclude savings from clinical improvements, still make a national network worth pursuing, he added.

The AMA has offered its support for development of a national network, with the caveat that physicians not pay a "disproportionate" share of costs.

Others think that the projected savings are over the top no matter what the assumptions.

The assumptions on which researchers based their analysis "seem very optimistic and could produce estimates that are not achievable," wrote Laurence C. Baker, PhD, associate professor at the Dept. of Health Research and Policy at the Stanford University School of Medicine in California. He wrote a commentary that accompanied the researchers' report in Health Affairs.

"I don't necessarily know that [their] numbers are wrong. They just looked to me that way, and there was not a lot of justification [given] as to why they were picked," Dr. Baker told AMNews.

For example, the researchers estimated $19.40 in administrative savings per laboratory test from a national interoperable network, Dr. Baker said. Presumably, the savings would come from labor savings.

But assuming physician office and diagnostic laboratory staff earn $15 hourly -- slightly above the $12-plus median hourly wages they earned in 2003, according to the U.S. Bureau of Labor Statistics -- the projected savings imply that both groups of workers spend 2½ hours of administrative time on sending and receiving results, Dr. Baker wrote in his commentary. "This seems very high."

Dr Pan responded that Dr. Baker had failed to take into account physician salaries in his calculation.

"We've very comfortable with those numbers, partly because we took a very conservative approach in coming up with them," Dr. Pan said.

For example, the researchers assumed that every hospital and clinic would have to buy brand new information systems and equipment at undiscounted prices, even though it's likely that vendors would offer discounts on software or hardware.

Still, Dr. Pan acknowledged that achieving the high rate of savings the report envisions will not be easy, because the projection depends on various assumptions, including one that a national network could be rolled out in five years. That "would require a very concerted effort on a national basis, which I'd definitely agree that, unless there is firm resolution on the part of the health care community, is unlikely to happen."

But the main point of the report is that "it really pays off to work in a standardized fashion whenever you're trying to connect to a health care institution."