Health Information Technology

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1 Analyzing the Impact of President Obama s Stimulus Plan March, 2009

2 Executive Summary Health Information Technology (HIT) is not just about convenience and savings it is also about saving lives and reducing the healthcare burden to maintain US competitiveness What is the Obama administration s plan for implementing HIT? HIT is a key focus of the recently passed USD 787 Bn economic stimulus package, which allocates USD 19 Bn for HIT Of the total HIT spend allocated, USD 17 Bn will be paid as incentives to physicians and hospitals to spur HIT adoption What are the potential benefits? When fully implemented, the administration has quoted potential savings to the US healthcare system of USD 77 Bn per year from HIT Successful HIT implementation would ensure availability of reliable data to all stakeholders, leading to less waste (less physician/patient time, better drug utilization, etc.), improved clinical care, and more cost-effective R&D Will the plan work? Critics debate the extent of actual savings to be achieved and highlight that Obama s plan doesn t adequately address issues such as the development of interoperability standards and the enforcement of data privacy, elements considered critical to HIT adoption rates The USD 17 Bn allocated for incentives to physicians and hospitals, would be sufficient to make payments to approximately 70% of hospitals and physicians in the US. Whether the payments are sufficient to cover the cost of adoption is uncertain. The USD 19 Bn allocation translates to USD 63 per capita spread over approximately 5 years. This is considerably less than the USD 193 per capita spent by the UK in 2005 UK, although other countries with high HIT adoption rates have spent less. What does history tell us? In the US, the Department of Veterans Affairs (VA) has implemented what is generally considered a highly successful HIT system. The UK faced significant delays and cost over-runs in an ambitious effort to implement HIT nationally 2

3 Definition and Relevance Health Information Technology Overview Health Information Technology (HIT) refers to computer applications for the practice of medicine 1 Only 17% of US physicians have access to electronic medical records and only 4% have what is considered a fully functional electronic medical record system 2 It is estimated that a fully deployed HIT system could save the US healthcare system $77 Bn in expenses, prevent 200,000 medication mistakes and save tens of thousands of lives each year 3,4 The focus of most HIT discussion is the electronic medical records (EMR) to replace paper records and charts. HIT also includes other tools and systems: Electronic Medical Records (EMR) E-Billing Computerized Physician Order Entry (CPOE) A process which allows physicians to use a computer to directly enter medical orders,... feed information back to the physician about drug interaction, cost of the item ordered, etc Peace Health Inc. Picture Archiving & Communication Systems (PACS) Enables images such as x-rays and scans to be stored electronically and viewed on screens, creating a near filmless process and improved diagnosis methods NHS E-Prescribing Tele-Health Longitudinal electronic record of patient health information generated by one or more encounters in any care delivery setting HIMSS Online payment of bills ZD Net A prescriber's ability to electronically send an accurate, errorfree and understandable prescription directly to a pharmacy from the point-of-care HHS Use of information and communication technology (ICT) to deliver health services, expertise and information over distance Health Telematics Unit Source: 1 Evidence on the Costs and Benefits of Health Information Technology, CBO May 2008; 2 Electronic Health Records in Ambulatory Care- A National Survey of Physicians, The New England Journal of Medicine, July 3, 2008; 3 Can electronic medical record systems transform health care? potential health benefits, savings, and costs, Health Affairs, October 2005; 4 Extrapolating evidence of HIT savings & costs?, Rand corporation,

4 Where is the US today? The US, despite initiating efforts to adopt HIT at the national level more than 5 years ago, lags far behind comparable countries in HIT adoption Key Events in US Adoption to Date Department of Veteran Affairs (VA) begins computerizing records David Brailer is named as the first national coordinator for HIT with a goal of making EMR available to most Americans by USD 139 mm budgeted to support adoption of EMR Medicare Modernization Act is passed by Congress providing incentives for e-prescribing and making it easier for public companies to support physician adoption of HIT 1 Obama Stimulus Plan allocates USD 19B for HIT adoption % HIT Adoption, HIT Adoption Rate Norway New Zealand Australia UK Germany US Canada Note: 1 HIT adoption rate represents the average of adoption rate for EMR and e-prescription and is based on primary care physician survey, conducted by Commonwealth Fund, except for Norway Electronic Prescribing, 2 University of Victoria October 26, 2007,and Electronic Health Records: A Global Perspective, HIMSS, August

5 Obama s Stimulus Plan Improving healthcare is a significant focus of President Obama s 2009 stimulus package, with USD 19 Bn allocated for EMR and other HIT initiatives Total Stimulus Package (USD 787 Bn) Healthcare Stimulus Package (USD Bn) Expenditure on HIT (USD 19 Bn) HIT Spending Breakdown (USD 19 Bn) Physicians Hospitals Discretionary Fund Payments of up to USD 44,000 per physician (over 5 years) for using EMR Maximum incentives will be provided for adopting EMR by 2013 while incentives will be less if adopted between 2013 and 2014 No incentive for adoption after 2014 No incentives to hospital-based professionals (pathologists, emergency physicians and anesthesiologists) Upfront payment of USD 2 MM and an additional volume-related (number of discharges) annual incentive for adopting EMR post 2011 Volume payments depend on total hospital volumes roughly USD 200 per discharge Penalty to hospitals for not adopting HIT: Medicare payment reduction of 33.3%, 66.6% and 100% if hospitals fail to adopt HIT by 2015, 2016 and 2017 respectively 2 Bn allocated to the Office of the National Coordinator for Health Information Technology 5

6 Potential Benefits and Limitations Potential Benefits Limitations Cost Savings Estimates of the cost savings derived from HIT implementation vary widely Two recent reports (CITL (2008) and RAND (2005)) estimate annual savings in the US of USD 21 Bn and USD 77 Bn respectively Savings are expected from many sources including: Lower paperwork and transcription costs Elimination of duplicate or unnecessary tests Reduction of hospital stays Safety Alerts and reminders could potentially prevent 200,000 adverse drug events each year Better Care Screening and management could prevent tens of thousands of deaths each year from diseases such as pneumonia, influenza, breast cancer, and colorectal cancer Better monitoring and data could improve the management of diseases such as asthma, CHF, COPD, and diabetes High Adoption Rates Assumed Most estimates of the benefits of HIT assume high levels (80-100%) of adoption Interoperability Still an Issue Interoperability refers to the ability of different systems to share data Most estimates of the benefits of HIT assume highly interoperable systems Interoperability is still an unresolved issue and continues to be a challenge Evidence on Potential Cost Savings are Debatable A recent Congressional Budget Office, notes that By itself, the adoption of more health IT is generally not sufficient to produce significant cost savings 1. Many of the savings attributed to health IT result from changes in behavior that take advantage of HIT systems Source: 1 Evidence on the Costs and Benefits of Health Information Technology CBO May 2008; The value of Personal Health Records, Center for Information Technology (CITL), 2008; Extrapolating evidence of HIT savings & costs?, Rand corporation,

7 Historical Examples Success is not guaranteed, but neither is failure England Harder Than Expected In Oct 2002, the UK Department of Health initiated a National Programme for IT (NPfIT) for the development and implementation of an integrated IT system for all National Health Services (NHS) organizations in England Implementation is behind schedule and over-budget Several issues are blamed for the overrun Projection Targeted Completion Estimated Cost (GBP) Initial Current Mismanagement of Contractors: Conflicts between regional contractors and the NHS led to delays and inconsistent deployment of systems Lower Utilization: Adoption rates of various components of NPfIT program was lower than expected e.g. as of January 2008 online appointment booking for hospitals was only 6.7 MM vs. the expected 39 MM Scope Expansion: During implementation, several necessary and unplanned tasks were identified, adding time and costs to the program VA System State of the Art & Successful The United States Veterans Health Administration (VHA) began digitizing health records in 1985 and has established an integrated health information system that enables VA clinicians to instantly access patient records and patients to create an online copy of their health records. The information system connects 163 hospitals, 800 ambulatory care and community-based outpatient clinics, 206 counseling centers, 135 nursing homes and 43 domiciliary facilities Full Adoption of EMR in VA VA introduced an EMR system (VistA) in 1996 and currently has 100% adoption Prescription accuracy rate in VA system is 99.99% compared to 92-97% in non-va hospitals VA system provides 66.7% of care recommended by the Agency for Healthcare Research & Quality (AHRQ) at a cost of USD 5,000 per patient compared to non-va hospitals that provide 50% of the recommended care at a cost of USD 6,300 per patient The VA has been able to maintain a steady cost per patient for the past ten years despite rising healthcare costs in the US 7

8 For More Information Contact: Grail Research Copyright 2009 by Grail Research, a division of Integreon No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the permission of Grail Research, a division of Integreon 8

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