Exploring Human Potential

Fact or Fiction: Electronic health records save money

Posted on | November 26, 2008 | No Comments

The jury’s still out on whether EHRs reduce cost, but it appears they enhance value.

Note by Brian Klepper: Today the actuarial consulting firm Milliman is convening a town hall meeting in Seattle focused generally on health care reform, but specifically on Electronic Health Records (EHRs). The larger Seattle metropolitan area is a hotbed of health care innovation, with Virginia Mason, Costco, Starbucks, Boeing, Premera and other forward-thinking firms. The conference will have representatives from CMS, Microsoft, the VA, Group Health Cooperative, and Milliman, and is open to the public. Should be an interesting session.

To kick it off, here’s a little piece on EHRs by Jeremy Engdahl-Johnson, Managing Editor at Milliman.


Earnestbwsmall Of all the initiatives endorsed by outgoing Secretary of Health Mike Leavitt, few are likely to be met with as much agreement by his likely successor, Tom Daschle, as the need for wider adoption of electronic health records (EHR). While there is general agreement on the need for this technology investment—both presidential campaigns included EHR in their health platforms—the cost ramifications are still up for debate. Will electronic health records reduce costs? There are compelling reasons to answer both “yes” and “no.”

“Yes, electronic records decrease costs”

Our system of care is fractured, and EHR is one way to tie it together. Doing this is more than just a convenience. It could save money. Why? For one, the cost of some conditions are compounded by the presence of other conditions, creating expensive co-morbidities that are not treated well in a fractured system. On a monthly basis, asthma costs $390 per member per month, but in the company of depression it costs $940. This co-morbidity is not always diagnosed (only 16% of the time even though it is expected 45% of the time among asthma patients), and while the cost of treating the diagnosed comorbidity is high, the cost of the undiagnosed comorbidity is higher. When physicians use electronic records, they are more likely to provide effective treatment because they can coordinate care with other physicians and also with nurses, therapists, technicians, and other organizations, cutting across care silos for the good of the patient.

Furthermore, patients with chronic conditions have more to gain from a personal health record. Their treatment plan is often self-administered and reliant on the correct information. If they can facilitate the kinds of questions and discussions needed to properly care for their condition without office visits, they can reduce the cost of their care. That’s why the medical home model, of which EHR is a cornerstone, is receiving more and more attention.

But it’s not just about chronic conditions. Despite the common assumption, the cost trends for nonchronic care are actually rising faster than those for chronic care. All patients have something to gain by tapping into the growing body of medical science. Evidence-based guidelines—the best of which have some 15,000 scientific references and can chart better paths of care—can bring that science to the bedside and to the home health environment.

Why is this science important? Much has been said about healthcare consumerism, and the suggestion that being more responsible for your health will create an economic incentive for staying healthier, a seemingly important carrot in a country with a 35% (and rising) obesity rate. Does the consumer-driven theory work? Maybe. Like them or hate them, consumer-driven health plans are shown to save 4.8%. This is in spite of the relative scarcity of good consumer health information … which is where dispensing medical science comes in. Most people don’t even know what health consumer information looks like. We’re only beginning to see healthcare equivalents of Consumer Reports. Many people know more about the different brands of canned goods available to them than they do about their different healthcare choices. Sources like WebMD have begun to change this, and health surveillance tools like Google Flu Trends are promising if unproven. Regardless of whether the consumer-driven model wins out, it seems likely that an information-driven approach can help improve care and perhaps reduce costs.

Throw in the most frequently cited virtue of EHR—a reduction in unnecessary administration—and you have a compelling case for the cost benefits of this technology.

“No, electronic records increase costs”

But there is cause for skepticism. From the small family business to the biggest multinational organization, technology deployments routinely cost more than anticipated. Going overscope and overbudget is almost a rite of passage. And now is seemingly a bad time for that kind of investment, when the country can scarcely pay off debts already incurred. Who picks up the tab for EHR during a recession?

Then comes the question of effecting change. Efforts to legislate IT have encountered mixed results. HIPAA implementations cost more and took longer than expected. They had the benefit of happening during a robust economy that was already investing heavily in technology. Today is different, and we’ve seen more resistance to legislated IT investments. Just look at ICD-10: The mainstream press poses questions about cost and doctor groups suggest this is one investment that can wait. The mandated 2011 conversion deadline is an interesting trial balloon for nationwide EHR requirements.

The final verdict?

We can’t know for sure whether electronic records will increase or decrease costs. As a purely cost-based argument, the debate can go on indefinitely. Ultimately, the quality argument may win out for a reason independent of cost—because it is deemed the right thing to do. The idea that healthcare has grown too complicated, becoming “too much airplane for one man to fly,” is often invoked as justification for surgeons’ checklists and better use of tools built on evidence-based medicine. It’s not that our doctors aren’t good; it’s that there are too many details and too many scientific improvements to keep track of.

The quality imperative—now emboldened by an administration that claims to be intent on change—may clear the way for other changes, generating the will to make a pervasive electronic health environment a reality.

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