December 18, 2009
by Jason D. Fodeman , Tevi Troy
President Obama's health care agenda recently suffered a blow from an unsuspecting source - the leadership of the liberal Physicians for a National Health Program.
New research published in the American Journal of Medicine by Harvard Medical Faculty - and PNHP co-founders - Dr. David Himmelstein and Dr. Steffie Woolhandler demonstrates that electronic health records (EHRs) will not generate anywhere near the savings Mr. Obama expects.
Since the earliest days of the presidential campaign, Mr. Obama has championed health information technology (HIT) as a tool to save both lives and money. He has frequently cited a Rand Corp. study claiming widespread HIT adoption would save $80 billion annually. Mr. Obama is banking on these savings to help fund his costly health care overhaul, which the Senate is debating.
HIT does offer real promise, although how much is not exactly clear. Advocates of HIT believe a national interoperable network could alert doctors about possible allergic drug reactions; could scan charts recommending vaccines and screening tests depending on individual risk factors; and could recommend appropriate tests tailored to a patient's chronic disease.
These proposed benefits provided the impetus for the inclusion of more than $20 billion of government money into health information technology via the $787 billion stimulus bill. The stimulus package codified the Office of the National Coordinator for Health Information Technology (ONCHIT) and directs the newly formed office to establish standards to attain interoperability and develop criteria for certification of HIT products. The stimulus package also contains bonus payments to doctors and hospitals for "meaningful use" of a "certified EHR." The payments designed to spur adoption of EHRs start in 2011 and are gradually phased out and replaced by penalties beginning in 2015.
While ONCHIT is going to start writing checks in 2011 regardless of the new study, it is very important the public take a look to gain realistic expectations about the financial fruits of this taxpayer investment. The authors studied 2003 to 2007 data from the Healthcare Information and Management Systems Society, a yearly survey of more than 4,000 hospitals. From this, they were able to assess hospital technology and compare these results to administrative costs as per Medicare Cost Reports from the Center for Medicare and Medicaid Services and cost and quality data from the Dartmouth Atlas.
The authors failed to find any evidence that computerization has lowered costs. According to bivariate (two variables) analysis of the data, computerized hospitals actually had higher total Medicare expenditures.
Multivariate analysis found no such association. Neither bivariate nor multivariate analysis demonstrated a relationship between administrative costs and computerization. Hospitals that more quickly expanded computerization actually experienced larger administrative cost increases.
This research is not the first to question the financial benefits of HIT. The Congressional Budget Office (CBO) while run by Peter R. Orszag, Mr. Obama's director of the Office of Management and Budget, found that, "By itself, the adoption of more health IT is generally not sufficient to produce significant cost savings." The CBO was also dismissive of the Rand study, arguing that it focused only on studies that found positive effects of HIT and concluded that Rand overstated the potential savings from widespread HIT adoption.
Even Dr. David Blumenthal, Mr. Obama's HIT czar has previously written, "Actual evidence of the efficacy and cost-saving potential of HIT is scarce."
More technology in medicine is a positive. Yet HIT is no miracle pill. The very notion that HIT will produce substantial savings is simply not supported by the literature. In fact, it may produce no net savings.
It would be naive to think this latest research will impact HIT's status in the already passed stimulus bill. Still, as our country ponders a trillion dollar restructuring of the health care sector, the importance of this research cannot be underestimated. The costs associated with the proposed overhaul are clear, while the proposed savings are not.
Ultimately, the public must wonder where the money to finance this expensive reform will come from. As per this new research, it likely will not be the result of a more wired medical environment. A correctly implemented interoperable network will certainly have some benefit. However, this new study shows it is premature to rest the fate and solvency of one-sixth of the U.S. economy on unproven savings such as those expected from HIT.
During the campaign, Mr. Obama spoke repeatedly about the importance of basing public policy on sound scientific evidence as opposed to politics. Perhaps the president should consider following his own advice.
Dr. Jason D. Fodeman is an internal medicine resident at the University of Connecticut and a former health policy fellow at the Heritage Foundation.
Tevi Troy is a Senior Fellow at Hudson Institute and served as the Deputy Secretary of the U.S. Department of Health and Human Services from 2007 until 2009.
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