Thus, goes the argument, wire up doctors' offices, transfer those bulging manila folders of patient records onto networked hard drives, e-mail prescriptions to the pharmacy, and voilà! -- better care at lower cost. RAND, a Santa Monica (Calif.) consulting firm, estimates that IT could generate as much as $77 billion a year in efficiency savings for the health-care industry.
GLACIAL PACE. But the transition may not go quite as smoothly as the techies hope. RAND says getting to that level of savings will require 90% of doctors, hospitals, and labs to adopt the technology. And that could take 15 years.
In truth, the medical profession continues to be painfully slow in accepting IT. In 2003, only about 18% of physician practices used electronic medical records -- a rate that, amazingly, had not changed for three years. That may seem odd in an industry where other forms of technology -- imaging and microsurgery, for example -- have turned into part of everyday life. But a new look at the actual experiences of early-adopter small-physician practices may explain why.
Rather than using an economic model to forecast costs and benefits, University of California at San Francisco health economist Robert Miller and colleagues took a close look at 14 small practices -- with an average of about three docs -- that have actually installed IT. The study, published in the journal Health Affairs, found that wiring a small medical office costs an average of $44,000 per physician, and running the system costs about $8,500 per doc annually.
LUCRATIVE TRICK. Docs reported working longer hours as they transferred records and learned the new system. And not surprisingly, shifting to an electronic billing and record system can sometimes go very badly -- causing huge disruptions. One practice had no billings for three months. Another received no revenue for 10 months.
Overall, financial benefits proved solid -- averaging $33,000 annually. Ten of the practices figured they'd break even within four years. But some docs reported benefits of just $6,600 a year -- a rate at which they'll never recoup their investment. "A number of practices did very well financially," says Miller. "But a couple ran into some real problems. And that's the kind of experience that discourages others."
More troubling is how the docs saved money. A little less than half of the savings resulted from reducing clerical staff. The other half came from a practice known as up-coding, which allows docs to charge insurance companies and Medicare higher fees for their services. For instance, it would allow a doctor to document a more thorough examination for which an insurance company would pay $95 instead of $65. That works out nicely for the physicians, but it doesn't save the health system a dime.
RISKY SHIFT. Curiously, other studies have shown that the insurance companies, not the docs, reap the bulk of the benefits from a shift to IT. Here's why: Let's say greater use of IT helps a doctor track a congestive-heart-failure patient who's unexpectedly gaining weight. In such patients, extra pounds often result from the buildup of fluid in the body, a sure sign of serious trouble.
With her new ability to identify the problem, the doc can adjust her patient's medication and save a trip to the emergency room. That's wonderful news for the patient, bad news for the hospital (which loses revenue from an ER admission), and great news for the insurance company (which doesn't have to pay for that costly extra care).
But what financial gain is there for the doc, who has just paid $44,000 to rig up her new system? Tracking and contacting the patient takes time, for which the doc does not necessarily receive compensation. And catching a severe heart problem early might even mean fewer office visits -- more money out of the doctor's pocket.
Health-care IT is coming. It makes little sense for docs to maintain paper records in 2005. But as the Miller study shows, making the shift entails risks. Today, neither insurance companies nor Medicare can offer doctors great rewards for using the new IT to improve care. And until they adjust the way docs get paid, don't be surprised if physicians remain slow to change. By Howard Gleckman in Washington