CBO assesses return on investment of HIT

The return on investment of health care information technology isn’t uniformly positive, according to a recent analysis from the Congressional Budget Office titled, Evidence on the Costs and Benefits of Health Information Technology.

The underlying rationale for the report, which was requested by the Senate Budget Committee, is to sort out the federal government’s role in health IT. The report asks, "Whether — and if the answer is yes, how — the federal government should stimulate and guide the adoption of health IT."

The federal government is already in the health care IT fray. President Bush set the goal in 2004 that every American have an electronic health record by 2014. This was a vision, however, without a funding source. There are also several proposals in Congress that would expand the federal government’s role in health IT by mandating the use of electronic prescribing, provide financial incentives to providers who use health IT, and offer grants to purchase systems for providers.

The CBO report points out a major benefit of health IT that has been largely overlooked: IT’s role in research on the comparative effectiveness of medical treatments and practices. When individuals’ health data is in electronic format, it can be depersonalized, aggregated, and analyzed for a range of uses, such as medical effectiveness, quality, and system efficiency, among other research questions.

One sentence in the 48-page report encapsulates the Mother of All Barriers to Health IT Adoption: "How well health IT lives up to its potential depends in part on how effectively financial incentives can be realigned to encourage the optimal use of the technology’s capabilities."

Jane’s Hot Points: The ROI-rationale for the widespread
adoption of health IT in the U.S. is a macro, national one. It’s a
public health calculation that’s been mired in commercial/private
health arithmetic. The denominator of these wrong-headed ROI
calculations has been wrong-chosen: it’s been the individual physician
practice, or the hospital, or the single health plan. The denominator
is the public’s health.

One provider’s cost is another stakeholder’s benefit, in most
instances. Yet en masse, the public-at-large reaps the benefits of
health IT diffusion and effective use, in the forms of improved
clinical practices and efficiencies that ultimately benefit the overall
public’s health.

That’s the argument for the federal government to consider in perhaps
what could become a new era of U.S. public health after November’s
elections. As the report says health IT, "has some characteristics of a
public good—that is, a good that would be provided in a less than
optimal amount by private markets if the government did not intervene."
The authors point out the free-rider problem that happens when benefits
do not accrue to the purchasers of the good (in this case, health IT

The CBO recognizes that mass adoption of health IT achieves network
effects: the more users on the system, the greater the benefits
achieved. That’s the opportunity that the private sector cannot achieve
on its own. Unless perhaps the federal government is relying on Google
as implicit subcontractor for the job.

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2 replies »

  1. Jane– one additional point from a long time EMR/PACS user (who would never go back)…
    The real key in the report from the political side is not your MOAB, but rather what I will deferentially call the “Mother of All Inconvenient Truths” about EHR/EMR– they are not going to result in the cost savings that everyone from Obama to Clinton to Gingrich claim… especially the $150-$200 billion that Obama reports.
    Even better proof of this is to follow EMR advertising to docs over the last 5 years– first “paperless”— not really true, to say the least; then “cost savings” and “ROI”— not really true, just has very high up front costs, and support costs that go to a different place— now safety and convenience reasons, which, if they had really been all worked out, would bring into question the big venture capital investment we are seeing in health IT and 2.0.

  2. Jane- can’t help but notice that since the value of the ‘public health’ is likely ‘infinite’… using your calculus, the cost– however high or personally damaging or destructive, will appear insignificant.
    Brings me back to my satirical post that, in the eyes of most here at THCB, ‘profit’ in health care delivery is bad– except, of course, in health IT— where the free market is celebrated and glorified every day…
    So let me ask you, in a different way, the question I have posed here for years— why is the free market ok in health IT, why is it wonderful in health IT, but vilified in every other aspect of health care? This, when it is clear that the current system is entirely one of regulation, special interest lobbying, and an effort of nearly everyone involved (including local and state governments) to ‘game’ the massive bureaucracy?
    Put another way, would you support a law outlawing for-profit health IT as part of a broader goal to wring the unhealthy profit out of health care?