The Trillion Dollar Conundrum

The Trillion Dollar Conundrum

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In Tuesday’s Wall Street Journal Op-Ed pages, physicians from Harvard and University Pennsylvania Medical Schools criticize subsidies for expanding the use of health information technology (HIT). The physicians cite a recent review article that failed to find consistent evidence of cost savings associated with HIT adoption. If true, this is bad news for the health economy, as supporters claim that HIT could cut health spending by as much as $1 trillion over the next decade.

How can something that is so avidly supported by most health policy analysts have such a poor track record in practice? In a new NBER working paper by myself, Avi Goldfarb, Chris Forman, and Shane Greenstein, we label this the “Trillion Dollar Conundrum.” One explanation may be that most HIT studies examine basic technologies such as clinical data repositories, while most of the buzz about HIT focuses on advanced technologies such as Computerized Physician Order Entry. In our paper, we offer a rather different explanation for the conundrum, one that would have eluded physicians and other health services researchers who failed to consider the management side of HIT.

My coauthors on this paper are experts on business information technology. They are not health services researchers. When I approached them to work on this topic, they insisted on viewing HIT much as one would view any business process innovation. As I have learned, this is by far the best way to study most any issue in healthcare management. Those who advocate that “healthcare is unique” – usually by ignoring broadly applicable theories and methodologies—often strain to explain data that are easily understood using more general frameworks. Such is the case with HIT.

Health services researchers have analyzed HIT much as they would analyze a new medical intervention. Some patients receive the treatment, others receive a placebo, and the treatment is deemed “successful” if the treatment group fares better than the control group and the difference passes statistical muster. While this methodology inspires a certain level of confidence in medicine, it has a critical shortcoming that has only recently been addressed through “personalized medicine.” The intervention might be effective for only some of the treatment group, and might be harmful to others. The typical research design masks these heterogeneous effects.

Our study articulates why we would expect heterogeneous effects of HIT and finds strong supporting evidence in the data. The key is to view HIT as a business process innovation. Like other such innovations, successful implementation requires complementary human capital. In other words, HIT does not operate itself. Skilled individuals must install it and train hospital personnel on how to use it. Hospital personnel must learn how to use the software and how to adapt it to their idiosyncratic needs. Not surprisingly, some individuals are better at this than others.

We argue that complementary human capital is most abundant in areas where there is a strong general IT presence – think the Bay Area or Seattle. Thus, El Camino Hospital near Palo Alto was an early and successful adopter of HIT. At the same time, hospitals located near the headquarters of major HIT firms, are more likely to get better vendor support. Thus, hospitals in Milwaukee have been very successful with the Epic system. (Epic is located near Madison.) Finally, hospitals with experience with primitive HIT are likely better prepared to take advantage of advanced HIT.

We find strong evidence that human capital is vitally important to the success of HIT. We find that hospitals adopting advanced HIT experience, on average a 1-2 percent increase in costs (including amortized HIT costs.) But this masks heterogeneous effects. Hospitals lacking complementary human capital see their costs increase by 2-4 percent, while those with complementary human capital enjoy cost savings of 2-4 percent. All of these findings are statistically significant.

The most exciting thing about these findings is that complementary human capital is not static. All of us are improving our general IT capabilities just by using our smart phones and the like. Hospital staff will, over time, improve their HIT-specific human capital. The benefits of HIT enjoyed by hospitals fortunate enough to have complementary human capital will almost surely spread to most hospitals. We would be foolhardy to promise $1 trillion in savings, but we do expect substantial savings. It is far more foolhardy to claim that the tepid average performance to date is the end of the story.

Postscript: Next week I will attend the Annual Health Economics Conference at Stanford. I have the privilege of discussing a new paper by Jeff McCullough, Steve Parente, and Bob Town that studies the impact of HIT on outcomes. Most studies have failed to find any benefits for the average patient. After interviewing many providers, these authors conclude that the benefits are likely concentrated on patients whose care requires substantial coordination and information transfer. And they find this — HIT improves outcomes (measured as mortality in this paper) for the minority of patients likely to enjoy the benefits of HIT but are otherwise unchanged. As with my own paper, this study shows that HIT is complex and the benefits are likely to be heterogeneous. I do not believe it is a coincidence that both of these studies were conducted by management professors.

David Dranove, PhD, is the Walter McNerney Distinguished Professor of Health Industry Management at Northwestern University’s Kellogg Graduate School of Management, where he is also Professor of Management and Strategy and Director of the Health Enterprise Management Program. He has published over 80 research articles and book chapters and written five books, including “The Economic Evolution of American Healthcare and Code Red.” This post first appeared at Code Red.

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61 Comments on "The Trillion Dollar Conundrum"


Guest
Sep 21, 2012

Prof. Dranove is a good scholar, but this missive misses the point.

No attempts at showing a reduction in cost or enhanced health status of the population through any kind of academic study will reveal any current value for the adoption of computer technology into the recording and electronic manipulation of clinical data.

As an aside, just ask the sage Margalit Gur-Arie, who may still be an active participant to this weblog. She is not a native English speaker, but her prose is often better than mine and her knowledge of healthcare issues, including healthcare-related information technology is excellent.

I am convinced without need for an attempt at a “controlled” study to show that the key impediment to (1) adoption and (2) effective use of computer technology by medical services providers, primarily physicians whether primary care or specialist, is purely generational.

Current physicians by and large are neither that comfortable with the use of such technology or more likely simply do not want to devote any time to effective use at this stage in their careers.

The attitude is not particularly positive nor admirable, but it is understandable.

The point is, let’s wait 10 to 15 years until the current generation of physicians (and ancillary personnel) is retired, then see the effect on health status and cost of the adoption and use of computer technology in clinical care for patients.

In brief, the subsidy given to providers as part of the ACA was a gift not so much to the providers themselves as to the commercial suppliers of software. Much more could be written on this topic, but desist at the moment.

Guest
southern doc
Sep 21, 2012

“Current physicians by and large are neither that comfortable with the use of such technology or more likely simply do not want to devote any time to effective use at this stage in their careers.”

Baloney.

I wrote my first computer program at age 12 at the University of Virginia, and I despise the currently available EMRs. Not because I can’t use them, but because I’m forced to use them to do things that are of absolutely no value to me, my staff, and my patients. I consider that a very positive and admirable attitude.

Future generations of physicians will use EMRs because they’ll all be hourly employees and what they think is best for themselves and their patients will be completely irrelevant.

Guest
John Irvine
Sep 21, 2012

agreed. total baloney.

if any other industry blamed its customers the way these guys do, they’d be run out of town on a rail ..

Guest
Sep 21, 2012

If Mr. southern doc is a physician, he is an anomaly in regard to being savvy about computer use, not to mention computer programming.

What computer language did Mr. southern doc use at 12 and what did the program do? Has he done any other programming since then?

What EMR systems does he use? Does he have experience with other EMR systems?

“do things that are of absolutely no value to me”

If this is in fact the case: (1) who made the decision to implement that system (2) why not find an EMR system that is of value (3) how is the value to “me” defined, (4) might there be value to others, specifically the customer = patient?

What are the key 2-3 functions that would make an EMR system of value to Mr. southern doc, if the one Mr. southern doc uses now valueless to him?

Might the value be system-wide, rather than specific to Mr. southern doc? I.e. yes, a drag to enter clinical data at point of sale, so to speak, by the “salesman”, but once digitized the data are then available in digitized form for use and transmission by everyone.

Guest
Sep 23, 2012

Southern doc is likely a lot more savvy than most IT personnel regarding medicine – which is – null.

I observed that lack result in IT personnel putting patients in danger. See here for example: http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=clinical%20computing%20problems%20in%20ICU

IT personnel need to be kept on a very short leash by medical personnel, especially if (like most) the IT personnal have no biomedical informatics education and expertise.

I need to point out that HHS/ONC now consider those attrirbutes essential for health IT leadership (see http://hcrenewal.blogspot.com/2009/12/onc-defines-taxonomy-of-health-it.html).

Further, most physicians don’t give a darn about programming. They just want information systems that support clinical care.

(I learned PDP-8 assembler at 13, PL/I and IBM370 assembler at 18, Sybase/4D RDMS at 33, and authored EHRs supporting research collaborations in birth defects with a Middle Eastern oil-producing country some time after that.

I’m also an extra-class amateur radio operator.

Does that count for anything?

Member
Sep 21, 2012

sorry wendell

typos don’t count – watch yourself or you’re gone

john

Guest
Sep 21, 2012

Well, thank you Wendell for the kind words, but I’m afraid I’m no sage. Not even close. Anyway, let me take a shot at this.

Are there older physicians that don’t want anything to do with computers? Yes, there are, here and there you’ll find a few that have that mind set, but it’s a very small minority.

Should physicians be expected to be technically inclined to use an EHR? I don’t think so. Good software should not require that the user has programming skills or anything of the kind. It will however require training and learning just like any new instrument does. Doctors are pretty good at that, judging by the ever increasing amounts of medical devices and equipment.

EHRs were never intended to save doctors time or money, regardless of what the ads say. Initially EHRs were intended to increase billing revenue, and according to the latest reports, they were exceedingly successful at that. We need to remember that EHRs did not create the billing rules. EHRs did not make doctors click those E&M boxes. They just made the boxes available to be clicked. And when you make useless boxes available for clicking, it by definition, detracts from elegance and clinical imperatives.
Now we have MU, which has created yet another set of boxes that EHRs must make available for clicking, which detracts even more from so called usability.

Doctors hate the billing rules and their boxes and find MU boxes equally distracting from patient care, but very few would consider buying an EHR that is not certified for MU and cannot capture E&M justifying data. So what is it exactly that we want software vendors to build? A million dollars masterpiece that nobody buys?

EHRs have been the tool by which external stakeholders enforce rules and regulations on physicians, and they are even more so now than before MU. They were/are intended to save money to payers (public and private). Is it really so surprising that docs dislike these tools?
BTW, I think someone should do a little study on payer MLR and EHRs, but that data is probably very hard to come by, and it is probably too soon to tell anyway.

Southern doc is right. When physicians become hourly workers, the grumbling will cease…. and so will many other things….

Guest
MD as HELL
Sep 22, 2012

Margalit,

This is the best thing you have ever posted here. It is perfect and perfectly correct.

Guest
Sep 23, 2012

Bravo to Margalit for putting some inconvenient truths in her message.

Guest
Murray_Wendell
Sep 21, 2012

Glad to see a message the “goddess” herself, Margalit. I have an Aetna PPO. The only data I look at on Aetna’s website are payment related. Very good for that. There may be clinical data available as well, but I have not checked for that. Interestingly, I received a notice about an index for one of the test done on a blood sample from Aetna that is related to therapies to keep in mind due to the level of the index. That is the only clinically-related information that has been issued by Aetna without prompted by me.

Guest
Murray_Wendell
Sep 21, 2012

FYI, what’s the story with banishment? Are we in Germany circa 1938?

Guest
MD as HELL
Sep 22, 2012

It matters not shich info system I use to save money when the MediCare crowd can come in any time they wish ad extract healthcare from the system. I am at my urgent care clinic today, Saturday. I am seeing a spectacular array of walkers and canes and wheelchairs. These people need healthcare today like the Tinanic needed deeper water. They are completely out of control with their demands and spending. It is not their money, but it is their entitlement. It must stop. It must be their money; then they will change their consuming ways.

Guest
Sep 22, 2012

There is one simple explanation for rising costs with EHR use – fast and easy documentation of complete evaluation. Using EHRs and software programs – such as instant medical history which allows patients to enter complete medical histories – doctors can generate a detailed evaluation including a complete medical history in an instant, commanding a higher paying evaluation code with a single click, I write about this today in my blog, medinnovation, under the title “Revenge of the EHR Nerds”.

Guest
Sep 23, 2012

There’s also fast-and-easy documentation of things never done, a “moral hazard.” This is especially true when docs are being graded as “taxpayers” (revenue generators). The NYT quoted a patient who found many of the claims made as to what the docs did was fictitious.

Guest
coriolanus
Sep 22, 2012

“There is one simple explanation for rising costs with EHR use – fast and easy documentation of complete evaluation.”

Some of us call that lying.

Guest
Legacy Flyer
Sep 22, 2012

Dranove is an apologist for the “Health Care IT/Industrial Complex” and he blames the users for the fact that EMRs are mostly bad, time wasting pieces of version 1.0 software. How else could he respond as a “Distinguised Professor of Health Industry Management”?

The reason is that most EMRs are poorly written pieces of software and were never intended to assist Doctors and Nurses take care of patients, but were instead designed to improve billing and record keeping for the Hospital Admin.

And the belief that EMRs would save money was part naivete, part political spin and in large part due to political contributions from IT companies that saw a coming windfall.

Nobody with any brains would ever have allowed incompatible systems to be put into place. Handwritten data – which is what most hospitals still rely on – is very hard to integrate with EMRs. Physicians reasonably resist attempts to make their life harder by forcing them to take 2 minutes extra (hundreds of times a day) to do something electronically that they used to do on paper quickly.

The sad truth is that it will take decades for the “loser” EMRs to be weeded out, the “winner” EMRs to be refined to where they don’t actually waste time and compatibility issues to be addressed. And during the “evolutionary” process, billions of EXTRA dollars will be spent.

My internist, who is my age (late 50’s), has a well thought out and coherent approach to EMR adoption in his office based on his experience with his hospital’s EMR. “I would rather pay the fine that get an EMR. I can’t afford it and I don’t want to waste all the extra time an EMR requires.” Until the consumers of the product have a better opinion of its useability, EMRs are an Edsel that could only exist due to Governmental coercion.

Guest
Wendell Murray
Sep 22, 2012

“The reason is that most EMRs are poorly written pieces of software”

What is your expertise in software development to make this statement?

Guest
Sep 22, 2012

LOL.Yeah, I got lambasted in another post for calling out a “doctor” who claimed unhelpfully that “the EMRs I have evaluated” basically sucked, and that, by extension, they all suck.

How scientific.

I see the gamut; systems that do in fact suck, systems that work fine. Docs who hate ’em, docs who love ’em.

But, my critic asserted that since I am not a physician, I just “play” with EMRs, I have never actually used one in the course of doctoring. Consequently, my experience with the approximately 40 systems my REC supports is of no value.

The fact that EMRs are of necessity suffocatingly code-heavy with billing logic is neither the fault of either the HIT vendors nor their end-user clinicians. People do precisely what they’re incentivized to do.

BTW, Google THIS:

“Medicare Bills Rise as Records Turn Electronic”
NY Times.

More fuel on the fire.

Guest
Midwest doc
Sep 24, 2012

No extension. Just a lot of the crap. You still angry.

Guest
Sep 24, 2012

You’re confused. Which is why you comment anonymously. They do not all suck. The payment paradigm is what sucks.

“Doctor.”

Guest
Dr. Mike
Sep 25, 2012

It was not that your experience has no value, it was that your experience with EHRs does not automatically trump the opinion of an actual end user of the tool (EHR). You discounted their opinion without cause, and I simply and sarcastically called you on it, as you deserved.
Your insight and opinion are very valuable on this blog, but you are not immune to the very errors you seem so willing to point out in others.
That EHRs have faults, even if not of their own making, is by your own admission plain fact. So too is the over-promising and under-delivering that pervades the marketing of these medical devices.

Guest
Wendell Murray
Sep 26, 2012

My perspective continues to be the sturm und drang from some physicians regarding EMR systems is far too much ado about very little.

From Dr. Mike’s comment, it appears that BobbyG is a regular commenter. His comments in this weblog posting appear to me to be accurate and pertinent.

Regarding the inevitable hype from commercial vendors of medical devices, it is up to physicians, as buyers, to determine whether a particular device is useful or not. Given that physicians practices or hospitals or other medical service providers do not operate on the basis of a competitively-determined market, the selection of equipment or of devices by those providers is itself ultimately not competitively determined.

The point is that many “bad” choices are made that simply add to the cost base of medical service delivery without any other positive outcome.

EMR systems have marginal and more or less irrelevant characteristics in common with devices used clinically. In essence they are a significantly better substitute for hand-written, physical, paper-based records. FDA evaluation and approval of medical devices, an issue about which I know next to nothing, are not relevant to EMR systems any more than to paper-based clinical data repositories.

The issue of the large positive externality of digitized records is the most important. Unfortunately, medical personnel have to bear some of the cost of data input. On the other hand, patients, by and large, bear historically and still currently a much higher cost of the use of paper-based records.

In other words, physicians should do their best to select EMR systems that work best for them – that is an investment in time of course, but also a necessary step – then get on with using them. This, rather than constantly complaining about aspects of such systems that will gradually become less burdensome.

In addition, it looks as though Margalit Gar-Urie continues to write intelligent and accurate essays on EMR and related computer-based systems, so skeptical physicians should read those.

Guest
Wendell Murray
Sep 26, 2012

Sorry, Margalit: should be Gur-Arie. But, hey, Hebrew does not insert vowels in writing, they are understood by the context, so “u” rather than “a” and vice versa could theoretically be right. Correct?

Guest
Sep 26, 2012

I appreciate your observations. And I am no unreflective choirboy for HIT.

I bite the hand that feeds me with regularity. Openly.

Guest
rbaer
Sep 22, 2012

@WM: you do not need to have expertise in software development to criticize the quality of software (even though there still may be reasonable and unreasonable crticism) – similar to the fact that you do not need to be a chef to judge the quality of a meal, or a sarcastic person to judge the quality of sarcasm.

Guest
Sep 23, 2012

Your question exposes a fundamentla conceit.

One does not have to be a sofware developer or engineer to recognize poor software.

Guest
coriolanus
Sep 22, 2012

“The reason is that most EMRs are poorly written pieces of software and were never intended to assist Doctors and Nurses take care of patients, but were instead designed to improve billing and record keeping for the Hospital Admin.”

Just change “poorly written” to “well written,” and leave everything else the same.

‘My internist, who is my age (late 50′s), has a well thought out and coherent approach to EMR adoption in his office based on his experience with his hospital’s EMR. “I would rather pay the fine that get an EMR. I can’t afford it and I don’t want to waste all the extra time an EMR requires.” ‘

That’s what all the smart docs are doing. One of our patients was the head of design and installation for the EMR at a top 20 med school/hospital, and he’s thrilled with our decision to stay with paper.

Guest
Wendell Murray
Sep 22, 2012

“That’s what all the smart docs are doing.”

“smart” is not the operative word here. Arrogant and self-interested are the appropriate adjectives.

I do not question the fact that data entry at “point-of-sale” is a hassle, but it is minimizable. Worth it because of the huge positive externality of having data digitized and stored in manipulatable as service is rendered in any form.

The nay-sayers on the use of information technology among physicians are of course the loudest complainers, because they are the least flexible and the least willing to look on their occupation as one that should be patient- rather than -self-oriented.

Physician: heal thyself psychically.

What is the bit with coriolanus by the way? Roman aristocrat by that name, perchance? Modern-day Umbrian? Sole remaining native of Corioli that is otherwise of location unknown?

Guest
coriolanus
Sep 22, 2012

“Worth it because of the huge positive externality of having data digitized and stored in manipulatable as service is rendered in any form”

Just keep telling yourself that when you’re sitting in front of your doctor telling her you’re so depressed you want to die, or you have crushing chest pain radiating into your arm, and she has her head buried in her laptop.