The Big Deal About Healthcare IT

The U.S. healthcare industry is arguably the world’s largest, most inefficient information enterprise, but interoperable EHRs may help trim up to $371 billion annually.

Among all industries, healthcare stands to benefit the most from better use of IT. For one thing, I’m aware of no other market in the world plagued with such staggering amounts of wasteful spending. According to a chart published in The Economist, in 2009 unnecessary healthcare expenditures in the U.S. alone ran between $600-800 billion dollars. Given that in 2009 U.S. healthcare spending reached$2.5 trillion, roughly one in four healthcare dollars in the United States went down the drain that year.

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It’s a perfect opportunity for IT.

Looking at just one area, electronic health records (EHR), the benefits in the U.S. alone are impressive. EHRs promise to cut waste through such basic IT concepts as digitizing paper documents, eliminating the need to hunt down records in storerooms filled with overflowing file cabinets.

According to a Rand study, by implementing interoperable EHRs, savings to the nation will be between $141 to $371 billion annually. The key word there is interoperable. International standards bodies, such as HL7, are working on a layered approach to EHRs along the lines of the exceptionally successful International Standards Organization seven-layer Open Systems Interconnection networking model. In its annual report, HL7 outlines its progress, such as certification of health professionals around the globe.

On a smaller scale, Michigan State University studied real-world EHR environments, where even a small practice of four doctors saved more than $60,000 a year per practitioner. The detailed MSU research showed that the four-physician practice was able to reduce its support staff by 1.4 in labor hours and also reduce costs for transcription services by $53,900 each year.

Once health records are digitized, additional gains will come from applying basic IT best practices to them. That is, identifying business processes, using automated tools where possible, then collecting and analyzing the data to identify more processes where efficiency can be improved.

But the greatest promise of IT benefit to healthcare transcends the undoubted efficiency EHRs and streamlined processes. It will be found in more precise diagnoses and better treatments with the aid of big data and predictive analytics. I will evaluate some of those possibilities in my next post.