Fear of commitment: Weighing costs and benefits of information technology

Hospitals and physicians agree that computerization can be a practice boon, but both groups also fear the technology's potential to devour a lot of money.

By Katherine Vogt — Posted June 27, 2005

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Hospital leaders know that information technology promises a better life of improved quality of care and streamlined operating efficiencies. But as they get ready to bring these systems into their lives, many are getting cold feet.

They have deep concerns about whether they are choosing the right kind of technology, because a dearth of industry standards leaves them without guarantees that their systems will be compatible with others. And they also worry that they will be forced to bear the costs of such systems alone, adding to mounting financial pressures in the industry.

These jitters were much of the focus of the American Hospital Assn. annual meeting May 1-4, which brought together hospital leaders, industry observers and politicians. While much of the discussion sought to allay fears, a lack of certainty about the future underscored the conundrum many hospitals are facing.

"There really are no easy, one-size-fits-all answers," said Teri Fontenot, president and chief executive of Woman's Hospital in Baton Rouge, La., and an AHA board member. "It's time to move on through the five stages of grief and accept that IT is here. We might as well make the best of it."

Fontenot's hospital, which specializes in obstetrics and women's health, spends about $2.5 million per year on IT. That amounts to about half of its capital expenditures. The hospital also invests in a lot of clinical equipment related to information technology.

The investments have helped Woman's Hospital work on its strategic goals to improve the quality of care and operate more efficiently. Fontenot said the technology had become a "powerful" recruiting tool in luring and retaining physicians.

But the process also has hit some bumps in the road, like when a new system for electronic charting of fetal monitoring strips failed. "We thought we did all the work we needed to up front ... but it didn't work. We had to turn it off. Not only did we shatter the credibility of EMR with the labor and delivery doctors, but that included nearly all of our admitting doctors as well," she said.

Such systems failures scare off some hospitals from investing in new technologies altogether, or at least cause them to postpone purchases until the products are more proven. Hand in hand with those concerns are doubts about whether the systems will be compatible with others.

Who should set standards?

To that end, government and industry leaders have been working together to explore developing industry standards. But the effort has raised questions about who should develop the standards and what their deadline should be.

Dept. of Health and Human Services Secretary Mike Leavitt told hospital leaders that the government shouldn't set the standards by itself because there are too many parties involved, each with varying interests. And letting competing vendors develop the guidelines likely would result in several different sets of standards, he said.

The best solution, Leavitt suggested, would be to develop standards from a collaborative effort including the government and private parties. "Collaboration is difficult, it's expensive, it's time-consuming and it's hard, but it's absolutely indispensable," he said. (The AMA is one entity that has been involved in efforts to try to create standards.)

The government can do its part by bringing together interested parties, and it can help ensure that the standards are being built on solid ground by trying to "unify and harmonize various components of the regulatory and statutory design," he said.

Also, Leavitt said the federal government can lead the way by being an "early and certain" adopter of such technologies.

Some observers believe the standards need to be set immediately. At the very least, said George C. Halvorson, chair and chief executive of Kaiser Permanente, hospitals need to be wired now. "If we wire the system over 10 years, that's too long," he said.

Halvorson said Kaiser, a $30 billion-a-year organization, spends about $4 billion annually on automated medical records and connected systems, including billing.

Some cash-strapped hospitals might aim to spread out the investment by starting to adopt systems now, but there is concern that the technology they buy will become obsolete when standards are developed.

But several industry leaders said the benefits of early adoption in terms of operating efficiencies, reductions in administrative costs and improved quality likely would outweigh potential threats posed by the technology's lifespan.

"The costs, risk benefit and time -- it's all worth it," said Timothy R. Zoph, chief information officer of Northwestern Memorial Hospital in Chicago.

Zoph said not all technology has to be 100% compatible for it to be useful. "My sense is that the interoperable standards may not be the biggest driver of change," he said. Improvements in functionality and reliability may have more impact on the future of technology, he added.

Besides, as more hospitals adopt new technology, it will stimulate technological innovation and therefore create more value for those who are buying it, said David J. Brailer, MD, PhD, Health and Human Services' national coordinator for health information technology. Dr. Brailer spoke at the meeting.

Who should pay?

Paying for the technology poses more problems, especially for hospitals that already are experiencing declining reimbursements and other financial pressures. In an outline of its advocacy agenda, the AHA said such investments should be jointly funded.

"Most of the initial cost is borne by hospitals, while the financial benefits often flow downstream to other providers, payers and employers who provide coverage to their employees. For this reason, the AHA believes that providers and payers must share these investments," it said. (The AMA's policy on a national health infrastructure calls for costs to be split in a way that "the financial burden on physicians is not disproportionate when they implement these technologies in their offices.")

The AHA went on to encourage the government to offer federal seed money and tax credits for health care IT, as well as grants and low-interest loans to help create a national network to develop standards and regional information organizations for sharing data.

Still, some hospital executives are saying they can't wait for such developments before implementing a new system.

"We are in the process now of making a decision on a clinical information system [which would cost between $10 million and $20 million]. The numbers are staggering, but we are basically committed to the fact that we don't have any choice. It's the right thing to do, and we're going there. We're going to figure out how to make it work financially," said Al Stubblefield, president and chief executive of the four-hospital system Baptist Health Care in Pensacola, Fla.

He said it would be easy to argue that the federal government should pay those costs, because information technology has the potential to reduce Medicare costs and the overall cost of health care. "But that's a pipe dream, and if we sit around and wait on that we will kill a lot of patients, because we don't have the technology to treat them as they ought to be treated," he said.

For some, there is hope that information technology will pay for itself by improving timeliness and accuracy in ways that reduce administrative and operational costs. At the very least, Kaiser's Halvorson said, it makes sense to try to reap those rewards.

"There's a lot of low-hanging fruit in health care that can be harvested," he said.

Stubblefield predicts that patients ultimately will bear the brunt of the costs. "It will be built into the charge structure of hospitals," he said.

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Easing the strain

The increasingly strained relationships between physicians and hospitals caught the attention of several hospital leaders at the American Hospital Assn. annual meeting in May, giving rise to questions about how the two groups can work together in an environment that sometimes forces them to compete.

Al Stubblefield, president and chief executive of the four-hospital system Baptist Health Care of Pensacola, Fla., helped lead a discussion about the challenge of managing physician-hospital relations. AMNews interviewed Stubblefield after the event.

Question: What is happening today with hospital-physician relationships?

Answer: Hospital-doctor relationships have changed as physician practice patterns have changed. Specifically, the hospitalist explosion over the last three to five years has dramatically changed relations between hospitals and office-based physicians because they're not coming to the hospital every day and walking the halls. It becomes a more distant relationship or nonrelationship.

So you've got that phenomenon going on. There is also a phenomenon of physicians looking for ways to supplement their incomes when they're stuck in a reimbursement system that is not giving them adequate resources. They are looking at ancillary revenue that has previously been the domain of the hospital. When you stick your hand in my pocket, or what I perceive as my pocket, it tends to strain our relationship.

(Note: The AHA and the AMA had differing policy on a federal moratorium on physicians referring to specialty hospitals they own. The AHA wanted to see it continue, saying such facilities are a threat to access to care because they take profitable services away from community hospitals. The AMA called for it to be lifted, saying that competition among facilities would be beneficial for the health care system, and access to care. The moratorium expired June 8.)

Q: How can this tension be fixed?

A: I don't think there is a fix. It think it's going to be the world we live in going forward. Those who don't recognize and do something about it are not going to be happy. ...We've got to figure out a way to work together.

Q: What can hospitals do to meet those challenges and facilitate a good rapport?

A: We can recognize where the physicians' motivations are coming from and recognize that this is the world we live in today. We can't bury our heads in the sand. We've got to get creative and innovative and look for ways of working with physicians.

Q: What can physicians do?

A: Both sides can try to understand where the other party is coming from and relate to their needs.

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