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For other articles and previous issues click here. May 16, 2005 Building
(and Paying for) the Healthcare IT Infrastructure Beyond Radiology Last spring, then Secretary of Health and Human Services (HHS) Tommy G. Thompson decried the medical errors that kill between 45,000 and 98,000 Americans each year. The errors occur, he said, largely due to a lack of complete patient information. Americans, he insisted, deserve and will demand better. He said physicians and patients are entitled to systems that will prevent errors, and patients deserve care from healthcare professionals who have access to complete patient medical data. “I’m not a patient man,” said Thompson, “so I want to change this fast.” Only one week prior to Thompson’s declaration, President Bush said health information technology (IT) would be a national priority. His goal: electronic health records (EHRs) for most Americans within 10 years. Discussion and action to further this national agenda have been facilitated by the appointment of David J. Brailer, MD, PhD, to the post of national health IT coordinator. In July 2004 at the Secretarial Summit on Health Information Technology, Brailer discussed the blueprint for the National Health Information Infrastructure (NHII), which would serve as the foundation for the creation of an electronic health network within a decade. The report, which defined the NHII as a “national health information network that can provide low-cost and secure data movement,” identified the steps needed to achieve the government’s goals and described the need for public-private cooperation and leadership. The report noted that the HHS would explore various policy options for incentivizing EHR adoption, including regional grants and contracts; improving the availability of low-rate loans for EHR adoption; updating regulatory restrictions designed to protect against fraud and abuse; Medicare reimbursement for EHR use; and Medicare pay-for-performance demonstration programs. At the Healthcare Information and Management Systems Society conference in February, Brailer reiterated the government’s dedication to health IT, noting that President Bush spoke on the subject 50 times last year and had already discussed it publicly three times this year. He pointed to the HHS’s new secretary, Mike Leavitt, who’s making IT a major priority, and to the leadership of 24 federal agencies and innumerable private sector organizations that are joining forces to boost healthcare IT initiatives. Late last year, Brailer’s office published a Request for Information (RFI) that raised questions about the logistics of a national health information network. It spawned more than 500 responses from state and federal agencies, providers, payors, research organizations, systems integrators, vendors, associations, foundations, regional health information organizations, and individual entities and organizations. An RFI Review Task Force made up of more than 100 individuals from 17 governmental agencies is analyzing the information gleaned from those responses and will soon release a public summary and meta-analysis. Among the subjects raised in the responses and to be discussed in the forthcoming summary is how the government’s healthcare initiatives will be paid for. Although few in the healthcare industry question the government’s goals, many wonder what the price tag will be, who’s going to foot the bill, and when the goal will be fulfilled. As we wait for further information from Brailer’s office, we asked several industry insiders for their best guess at the NHII’s total cost and the likely source of those funds. Each insisted that the price of interoperability is anybody’s guess, yet each offered their best estimate and a prediction about when connectivity might be a reality. C. Peter Waegemann On that assumption, he speculates that such connectivity over the next 20 years would probably cost a total of $900 billion. That number, he says, looks big, but not when you consider that the establishment of the network could easily be accomplished if the industry would spend somewhere between 5% and 10% of its healthcare costs on technology. That shouldn’t be difficult, he says, considering that the banking industry spends an average of 15% to 18% of its revenues on IT. The returns on this investment, he adds, are substantial, but the benefits cannot be derived until we reach the point when there are paperless systems and a full network is installed. Although he acknowledges that the issue of medical error prevention and the delivery of quality care are driving the push toward the NHII, the realization of this goal isn’t necessarily going to ensure those goals. “It’s the wrong assumption that when we go to computerization, suddenly we won’t make any mistakes,” he says. A physician might write an unclear prescription that may be easily misread, perhaps leading to a medical error. “But if you give a doctor a handheld PDA, a smart phone, or a computer, it’s as easy or even easier to push the wrong key. Common wisdom has it that technology will prevent quite a bit of medical errors, and patient safety is a key issue, but it remains to be seen if that really can be achieved.” The critical reason to go forward, he says, is to gain the benefit of alerts that can be built into the electronic medical record (EMR) systems that help the practitioner provide quality healthcare. Funds to support the NHII, says Waegemann, are most likely to come from the private sector—which is, he says, the way it should be. “We are lucky in that respect because other countries’ governments are buying systems now that may or may not work in 10 years’ time.” Waegemann is quick to point out that even in this country there are healthcare organizations that spend $500 million on different systems that are ultimately thrown out. “Since we do not have one country or one area where we can say this has been working for a couple of years, let the market work it out. Let each hospital find out what works and what doesn’t and be very careful with it.” Waegemann appreciates some guidance and coordination from the government, but frowns on heavy-handed interference. “We’re still at the point where we need to get the buy-in from practitioners, and we need to get to a point where people do this because they want to and not because someone else is paying for it.” On the other hand, he feels that current legislation, such as requiring e-prescribing and standards such as the continuity of care record, will be a major force behind bringing about the NHII. Jody Porrazzo, PhD “Annually, they spend $50 billion and have 12 million insured. So if you multiply that by another 10, you’d have 120 million insured at a cost of $500 billion. Then I think you’re nearing the cost.” For the initiative to be realized, the private and state sectors need to cooperate and share their technologies without expecting any federal assistance. The President, she notes, is not looking to allocate federal money but instead feels that the model has already been developed through the VA and the DoD. Porrazzo, who has worked in a state peer review organization, believes the state has the ability already in place to achieve interoperability. “There’s been a convergence of healthcare compliance with healthcare quality performance indicators, so what’s in place there already could form the basis of what the President is trying to do on a national level.” The issue then, she says, becomes adopting a standard unit of terminology and standard measures so states can talk to each other. But on a statutory level, she believes this approach will be effective. “All the state organizations, the peer review organizations, keep their data in some kind of electronic format, from cancer and clinical trial data to prescription information. If the government intercedes to start a dialog with the necessary terminology so that state can talk to state, then you can start building and it won’t cost that much money.” It must be based on an agreement between the states and the private sectors, she says, because private hospitals and insurance carriers must also buy into the goal. The federal government must provide some kind of a guideline, but the technology already exists, says Porrazzo. Now, “there has to be some kind of umbrella to bring people together and capture the lessons learned from past resources and past technologies.” The President wants to see this network in place by 2015. “I don’t think that’s an unreasonable goal since technology is advancing at the speed of light.” Jonathan S. Bush The best case, he insists, is that the cost of selling the NHII will be approximately $280 billion per year—a figure based on a cost of roughly $4,000 per doctor. “The cost of the actual infrastructure itself—the wheels of the servers—is in the neighborhood of $100 per provider per month—or approximately $70 million a month just for the hardware.” The price for the distribution and utility factors vary wildly, but he envisions a cost of approximately $300 to $400 per doctor per month. While it seems like an enormous sum, he observes that the average physician today spends approximately $35,000 just to get his or her claims settled and another $45,000 on back office expenses associated with sending out lab requisitions and prescriptions. So the amount spent today, he says, is somewhere in the neighborhood of five times the price of those activities under the NHII. Another $3,000 to $4,000 per month, he says, would be needed to actually make the connections possible, depending on the level of automation. Finally, there’s the tab for setting up an infrastructure, which he estimates at current costs to be approximately $10,000 per doctor. His figures are based on athenahealth’s operating model, and he notes that the costs would be much higher when such a model is not adopted. In his view, the NHII will be funded by the private sector. “The issue will be getting the doctor to be able to afford the up-front costs.” Bush has no doubt that the NHII will be achieved, and he sees the year 2010 as a watershed. “The best stuff will be out of the closet by the end of 2006 and 2007,” he predicts, “but the year 2010 will be a tipping point. “My reason for optimism is that these enormous annual costs are replacing even more enormous sums. With the business models that are enabled by the industrial-strength Internet, work and knowledge can be bundled with technology to create a service that brings benefits to providers immediately and without significant up-front investment. This major paradigm shift—away from the traditional models of ‘buy this technology and good luck making it work for you’—allows the capital markets to get involved in sourcing the investments needed for this overhaul right out of the private sector. I’m sure we’re all grateful for the $125 million in President Bush’s budget, but the thing government needs to do is focus its energy on getting regulatory barriers to innovation out of the way.” Dan Rode, MBA, FHFMA Many of the responses, he observes, have offered numerous models, some community-based and other unique utility models put forth by some of the large computer firms. “A lot is going to depend on what the final model looks like, but just knowing what we’ve done with HIPAA, it’s easy to say that it’s going to be several billion dollars.” Where will the money come from? Everything, he says, ends up on the taxpayor or the patient, so the real question is: How does it trickle up from there? “The best guess at this stage of the game is that it will be a combination of private and public funds, and how those funds will get into the infrastructure is still a mix and could vary by region. “The need for exchange of data in a particular place might cause different entities to want to put money forward, and that money could come from federal or state government or from healthcare payors or healthcare organizations themselves. Certainly, long-term there’s a cost savings and efficiencies to be gained out of the system, but now most of the discussion is looking at what the private industry—meaning payors and providers—put forward and what money should be put forward by the federal government and in what manner.” It might, he suggests, be some version of a change in reimbursement or an investment in a grant or loan that would come from the government above and beyond the Medicare and Medicaid programs. In light of the war in Iraq, however, a lot of that money is not available, so the discussion returns to private investment or proposals attached to the Medicare and Medicaid system. Rode envisions a fairly rapid pace in the NHII development. “I think we’ll see some of the pieces of the answer start to formulate this year. There will be some legislation, and whether it will pass this year remains to be seen. It’s a new Congress and the legislation may not get passed until 2006.” With so many variables, any sort of breakthrough might lead to an acceleration. “If, for example, a pilot program can identify the means of a cost savings or return on investment in some part of this networking, then you might see communities going for the low-hanging fruit where there’s the best chance of receiving some economies out of the process or having a return that can be reinvested in a much larger networking process.” He says Congress wants to support the initiative, “but they want to know how this is all going to be put together, and they don’t feel that they know enough about this right now to really support some of the money that’s been asked for in the budget.” He’s confident, however, that there’s time in the budget and appropriations process to work that out. Ultimately, suggests Rode, questions about cost specifics are somewhat premature. “While a lot of what’s being sought here is good and everyone agrees to it, when it comes down to having the money, when the money will be available, and how it will be distributed, we have quite a long way to go.” The benefits, he’s convinced, will be worth the cost. “We know that we desperately need a networking system to provide public health. We’re all interested in making sure that we don’t have another SARS outbreak or anything else of that sort, so having that information available is crucial. We know that if we can build a network and an EMR that can exchange uniform data, our ability to use that data for research and quality assurance is beneficial. What we don’t know is what that is worth.” Rode sees progress toward the goal occurring in fits and starts that could be accelerated by consumer interest. “We’re going to see a lot of knowledge come forth this year in spurts as projects and pilots come to fruition.” There will also be active interest on the part of Congress, he suggests, perhaps not to pass a bill, but at least to figure out how they might be able to ensure participation. “Are we going to see major funding come forward this year? I don’t think so. Are we going to see Medicare payment for performance? Maybe on a pilot basis, but certainly not the entire Medicare program. All those pieces are going to be there. It’s going to be a very interesting year.” — Kate Jackson is a staff writer for Radiology Today. |
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