The Value of Healthcare Information Exchange and Interoperability

Transcription

1 The Value of Healthcare Information Exchange and Interoperability

2 Authors Eric Pan, M.D., M.Sc. Douglas Johnston, M.A. Janice Walker, R.N., M.B.A. Julia Adler-Milstein, B.A. David W. Bates, M.D., M.Sc. Blackford Middleton, M.D., M.P.H., M.Sc. Expert Panel David J. Brailer, M.D., Ph.D. William R. Braithwaite, M.D., Ph.D., F.A.C.M.I. Paul C. Carpenter, M.D., F.A.C.E. Daniel J. Friedman, Ph.D. Robert Miller, Ph.D. Arnold Milstein, M.D., M.P.H. J. Marc Overhage, M.D., Ph.D., F.A.C.M.I. Scott S. Young, M.D. Kepa Zubeldia, M.D. Requests for permission to reproduce any part of this work should be sent to: Ellen S. Rosenblatt, Program Manager Center for Information Technology Leadership Partners HealthCare System 93 Worcester Street Wellesley, MA

3 The Value of Healthcare Information Exchange and Interoperability Partners HealthCare System Boston, Massachusetts

4 2004 by the Center for Information Technology Leadership Published and distributed by the Healthcare Information and Management Systems Society (HIMSS). All rights reserved. No part of this publication may be reproduced, adapted, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Requests for permission to make copies of any part of this work should be sent to Ellen S. Rosenblatt, Program Manager Center for Information Technology Leadership Partners HealthCare System 93 Worcester Street Wellesley, MA erosenblatt@partners.org ISBN X For more information about CITL, please visit

5 Contents CITL Preface...v Executive Summary...1 Chapter 1: Introduction...7 Chapter 2: Approach to Analysis...13 Chapter 3: Benefit of Interoperability between Outpatient Providers and Laboratories...21 Chapter 4: Benefit of Interoperability between Outpatient Providers and Radiology Centers...33 Chapter 5: Benefit of Interoperability between Outpatient Providers and Pharmacies...47 Chapter 6: Benefit of Interoperability between Providers...57 Chapter 7: Benefit of Interoperability between Providers and Public Health Departments...67 Chapter 8: Benefit of Interoperability between Providers and Payers...79 Chapter 9: HIEI Costs...95 Chapter 10: Net Value of HIEI Chapter 11: Limitations Chapter 12: Conclusions Appendix 1: Methods iii

6 Appendix 2: Literature Search Strategy Appendix 3: Model Building Blocks Appendix 4: Expert Panel Biographies Index The Value of Healthcare Information Exchange and Interoperability

7 Preface CITL We are pleased to present CITL s report on The Value of Healthcare Information Exchange and Interoperability. CITL s mission is to illuminate the value of specific healthcare information technologies. We hope our analysis is helpful to healthcare leaders who wrestle with IT investment decisions, to solutions providers who develop systems to meet their needs, and to policymakers who consider incentives to encourage the adoption of information technologies in healthcare. CITL is ultimately responsible for the content of this report. However, we had a great deal of assistance along the way, and we are indebted to many contributors and reviewers. In addition to our Expert Panelists, we owe special thanks to W. Holt Anderson, Dr. Peter Basch, Cynthia Bero, Jeffrey S. Blair, Joseph Brenner, Dr. Monte Brown, Jonathan S. Bush, Dr. Wei-Ti Cheng, Brian F. Chiango, Gary Christopherson, Dr. Christopher G. Chute, Gregory J. DeBor, Dr. Bob Elson, Steven Flammini, Dr. Mark Frisse, Dr. W. Edward Hammond, Dr. Max Henrion, Dr. Stanley M. Huff, Dr. Robert M. Kolodner, Ned McCulloch, John J. Pappas, Robert Pruim, Jeffrey W. Rose, Robert Seliger, Dr. Richard N. Spivack, John Stone, Dr. Milenko J. Tanasijevic, Dr. Paul C. Tang, Dr. Gregory C. Tassey, Johnny Walker, Julia S. Whelan, and Dr. William A. Yasnoff. We invite your feedback. Only you can judge how well this report meets your needs. We hope you will send your comments to us at info@citl.org. v

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9 Executive Summary CITL As healthcare in the United States evolves, information technology is becoming an essential component of efforts to improve quality and contain costs. While individual organizations are making headway in digitizing administrative transactions and providing clinical information to their clinicians, electronic flow of information between organizations is nascent.this report examines the impact, both in qualitative and quantitative terms, of such Healthcare Information Exchange and Interoperability (HIEI). Drawing on an extensive review of a wide range of literature, interviews with clinicians and healthcare executives, and consultations with experts, the Center for Information Technology Leadership (CITL) synthesized existing evidence and built a software model to project the value of different levels of HIEI. It examined transactions between providers (hospitals and medical group practices) and other providers, and between providers and stakeholders with whom they most commonly exchange information: independent laboratories, radiology centers, pharmacies, payers, and public health departments. CITL identified potential sources of benefits and costs for each relationship and quantified the value where it could find sufficient evidence.with today s prevailing phone and mail communications (Level 1 HIEI) established as a baseline, the model projected the value of HIEI at three different levels of sophistication: Level 2 Level 3 Level 4 Machine-transportable data (standard fax) Machine-organizable data ( and electronic messaging) Machine-interpretable data (interoperable data exchange with standardized message formats and content) This summary presents brief descriptions of costs and both qualitative and quantitative benefits that support CITL s findings, outlines limitations of the analysis, and describes the conclusions derived from the study. Benefits of HIEI This section summarizes both the qualitative and quantitative benefits of HIEI.Where CITL could find sufficient evidence, it quantified benefits for a range of providers (small, medium, and large medical group practices, and small, medium, large, and jumbo hospitals) and for the nation. 1

10 Benefits of interoperability between outpatient providers and independent laboratories Both freestanding and hospital-based clinicians use external laboratories, and interoperability between these providers and laboratories will clearly improve clinical care. It will give clinicians better access to patients longitudinal test results, eliminate errors associated with verbally reporting results, optimize ordering patterns by making test cost information readily available to clinicians, and make testing more convenient for patients. At the time of this study, data exist that allow CITL to project two quantifiable sources of potential cost savings. First, it enables computer-assisted reduction of redundant tests. Second, it reduces delays and costs associated with today s paper-based ordering and reporting of results, leading to administrative savings for the remaining, non-redundant tests. From these savings alone, individual hospitals and group practices would save between $15,600 and $2.95 million annually, depending on their size. CITL s model projects that the U.S. would reap the following benefit each year: Level 2 Level 3 Level 4 $8.09 billion $18.8 billion $31.8 billion Benefits of interoperability between outpatient providers and radiology centers Most imaging procedures ordered by office-based clinicians, and some ordered by those in hospital-based ambulatory practices, are performed in external radiology centers. Connectivity between these providers and radiology centers improves ordering by giving radiologists access to relevant clinical information, thereby enabling them to recommend optimal testing and reduce errors of commission on the part of ordering physicians. It improves patient safety by alerting both the provider and the radiologist to test contraindications. It improves coordination of care for both providers and patients and helps prevent errors of omission by enabling automated reminders to both clinicians and patients when follow-up studies are indicated. And it helps the environment by reducing the use of chemicals and paper used in film processing. Provider-radiology connectivity also reduces redundant tests and saves time and costs associated with paper- and film-based processes. CITL projects that these improved efficiencies could save individual provider organizations between $15,300 and $2.09 million dollars each year, depending on their size. For the nation as a whole, these sources would lead to the following savings annually: Level 2 Level 3 Level 4 $8.34 billion $14.4 billion $26.2 billion 2 The Value of Healthcare Information Exchange and Interoperability

11 Benefits of interoperability between outpatient providers and pharmacies Outpatient provider-pharmacy interoperability will improve clinical care by enabling the formation of complete medication lists, thereby reducing duplicate therapy, drug interactions and other adverse drug events, and medication abuse. It could also generate automated refill alerts, give clinicians easy access to information about whether patients fill prescriptions, complete insurance forms required for some medications, and identify affected patients in the event of drug recalls or the discovery of new side effects. And for providers, payers, pharmacies, and pharmacy benefit managers, interoperability may improve formulary management and promote adherence to formulary guidelines. While these attributes of interoperability contain obvious clinical and financial benefits, CITL s quantitative analysis focuses only on the degree to which electronic prescribing saves phone time for clinicians and pharmacists. CITL s projected value based on these potential savings demonstrates that individual providers could save $19,200 to $382,000 annually, depending on their size. Each year, the nation would save Level 2 Level 3 Level 4 $2.19 billion $2.66 billion $2.71 billion These overall benefits are relatively modest. On the other hand, CITL believes the nation will reap far more significant savings from pharmacy-payer interoperability, which will enable better adherence to widely varying formulary requirements. Benefits of interoperability between providers and other providers Patients often see multiple clinicians, with their medical records scattered across several offices and hospitals. As a result, clinicians are missing information from other practices or institutions in about a quarter of ambulatory visits, forcing them, in the interest of timely and cost-effective care, to substitute educated guesses for objective information. Provider-provider connectivity reduces this fragmentation of care and improves quality. It also improves referral processes by giving clinicians the patient-specific information they need to effectively consult on a case. CITL could not find sufficient evidence to quantify the clinical impact of HIEI on these interactions. However, provider-provider connectivity also saves time associated with chart requests and referrals. Assuming providers request charts when they are missing information, potential annual savings from these sources could range from $46,700 to $3.15 million for individual provider organizations, depending on their size. For the nation as a whole, annual benefits from time saved managing such information requests would be Level 2 Level 3 Level 4 $2.92 billion $8.11 billion $13.2 billion Executive Summary 3

12 Benefits of interoperability between providers and public health departments The U.S. public health system is a network of local, state, and federal agencies that pursues a wide array of population health objectives.the most significant impact of public health interoperability will almost certainly derive from (a) earlier recognition of emerging disease outbreaks and (b) biosurveillance, as it becomes easier to identify warning signs and trends by aggregating data from many sources. Robust quantitative evidence about the value of HIEI in earlier recognition of disease and biosurveillance does not yet exist, and CITL did not project value from these sources. However, provider-public health connectivity also makes reporting of vital statistics and cases of certain diseases more efficient, potentially saving the nation the following amounts each year: Level 2 Level 3 Level 4 $63.2 million $107 million $195 million Benefits of interoperability between providers and payers Payers and providers exchange administrative data in order to document services delivered and to ensure that providers are reimbursed according to contracted rates. Currently, these transactions enjoy a relatively high degree of standardization, largely due to the Administrative Simplification provisions in the Health Insurance Portability and Accountability Act (HIPAA). HIPAA already mandates standards for electronic provider-payer interoperability (Level 4); non-standardized electronic transactions (Levels 2 and 3) are not legally permitted. Provider-payer connectivity makes the exchange of seven categories of administrative data (eligibility inquiry and response, claims submission, claims attachments, claims status inquiry, remittance advices, referrals and preauthorizations, and coordination of benefits) more efficient. Moving to full interoperability for all of these transactions potentially could save the nation the following each year: Level 2 Level 3 Level 4 Not applicable Not applicable $20.1 billion Costs of HIEI CITL projected HIEI costs for new internal clinical systems for providers, provider interfaces to stakeholders, and stakeholder interfaces to providers.the model calculated costs over a 10-year implementation period and annual maintenance costs following 4 The Value of Healthcare Information Exchange and Interoperability

13 implementation. Because Level 3 requires more interfaces, costs are higher for Level 3 than for Level 4. CITL did not attempt to estimate the cost of systems for laboratories, radiology centers, pharmacies, payers, or public health departments. At least some of these systems would require additional public and private sector investment to make them HIEI-capable. Net Value of HIEI For reasons described above, a complete projection of HIEI benefits and costs cannot yet be accomplished. Nevertheless, considering only those benefits and costs for which CITL can assign a dollar value, at three levels of full implementation, the United States will realize billions of dollars in net value: Implementation Steady State Cumulative Annual Years 1 10 Starting Year 11 Level 2 Level 3 Level 4 Benefit $141 billion $ 21.6 billion Cost $ 0.0 billion $ 0.0 billion Net Value $141 billion $ 21.6 billion Benefit $286 billion $ 44.0 billion Cost $320 billion $ 20.2 billion Net Value ($34.2 billion) $ 23.9 billion Benefit $613 billion $ 94.3 billion Cost $276 billion $ 16.5 billion Net Value $337 billion $ 77.8 billion Limitations of Analysis This analysis cannot be considered comprehensive. With little real-world experience with HIEI or its impact, quantitative evidence about its value is limited. The analysis incorporates the best evidence available, combining estimates from experts and a small number of studies in a mathematical model. It is a financial analysis; it does not impute a value to clinical or organizational improvements due to HIEI. It considers transactions between providers and five other healthcare stakeholders and ignores transactions Executive Summary 5

14 among many other participants that would be supported by HIEI. It assumes full costs for some transactions that are currently incomplete, such as provider-provider chart requests.though it includes estimates of the costs for providers to install HIEI-capable systems, it does not account for corresponding costs to laboratories, radiology centers, pharmacies, payers, and public health departments. Furthermore, it does not estimate the cost of developing the standards that will be essential for achieving Level 4 HIEI. Conclusions from Analysis National implementation of any of the three levels of HIEI will produce qualitative improvements in healthcare and important public health measures, along with positive financial returns for the nation. Systems that enable standardized information exchange, or Level 4 HIEI, are by far the best investment for the nation as a whole, with net savings that likely represent 5% of current U.S. healthcare expenditures. Standardized information exchange is also the best investment for hospitals and medical offices, as well as for independent laboratories, radiology centers, pharmacies, payers, and public health departments. The CITL analysis was unable to identify all the costs associated with implementing HIEI. Nevertheless, CITL estimates the value of standardized information exchange is even higher than these numbers suggest, since the model did not quantify the value of improved quality of care, improved clinical workflow, impact on public health or biosurveillance, and other important factors where quantitative evidence is insufficient to support projections. Non-standardized information exchange, or Level 3 HIEI, is not a good national strategy either for the long term or as an interim step toward standardized Level 4 HIEI. Investments in non-standardized information exchange lock in local solutions, divert resources from developing more universal approaches, delay conversion to national standards, and guarantee that additional costs will be incurred down the road to convert to national standards, once they exist. If the U.S. is to have cost-effective healthcare information exchange and interoperability, developing national standards is an absolute requirement. It is likely that national HIEI will grow from regional data sharing initiatives. If national standards can be set for them to adopt from the start, these networks may one day be knit together into a seamless national Level 4 healthcare information system. CITL estimates that Level 4 HIEI will improve the quality and safety of healthcare delivery and lower the nation s net healthcare expenditures.at a time of national tumult over quality, safety, and cost, achieving seamless interoperability among vital sectors of the delivery system is an opportunity that must be seized. 6 The Value of Healthcare Information Exchange and Interoperability

15 Chapter 1: Introduction CITL U.S. healthcare is undergoing a fundamental change in its approach to delivering care. Faced with rampant inefficiencies and quality failures, payers, providers, and patients alike have come to understand the critical role information technology (IT) plays in reducing costs and improving quality. IT that was once visionary, such as the electronic health record (EHR), is now a common topic in healthcare discussions. By now, most providers have investigated the potential impact of implementing an EHR or clinical decision support system whose value has been documented in clinical settings. 1,2,3 The adoption rate of EHR in outpatient settings is currently 20% to 25%, with a projected increase to 50% to 60% in the near future. 4 In inpatient settings, computerized provider order entry (CPOE) adoption estimates range from 3% to 21%, and planned future adoption from 27% to 67%. 3 The Need To date, IT has enabled progress towards optimizing the effectiveness and efficiency of healthcare delivery by individual providers in the context of individual organizations. But a critical piece of IT infrastructure that would enable providers and other healthcare stakeholders full access to the data they need to treat patients or perform basic administrative activities is missing. In our decentralized and fractured healthcare delivery system, patients often interact with providers in multiple settings (e.g., primary care office, specialist office, laboratory) that are rarely connected. According to Medicare data, patients see unique providers annually, with the average beneficiary seeing Therefore, a patient may have anywhere from one to a dozen or more medical records that largely do not interact with one another.vital data stored in these records cannot be easily accessed or integrated to present a clear and complete picture of the patient. A study in an outpatient clinic found that pertinent patient data were unavailable in 81% of cases, with an average of four missing items per case.the entire medical record was unavailable 5% of the time. 6 Another study estimated that 18% of medical errors that result in an adverse drug event in an inpatient setting are due to inadequate availability of patient information. 7 This situation requires providers to spend significant time tracking down and exchanging data, such as clinical notes and letters, test results, x-rays, and bills. Academic medical centers and other large delivery systems have started to address this problem through internal electronic exchange of clinical and administrative data. Most providers rely on phone, fax, or methods for this information transfer, none of which guarantees timely or reliable information exchange. Further, these channels require people to Chapter 1: Introduction 7

16 become communication portals, acting both as the source and transmitter of information among various healthcare providers.this is both a burden and an inherently errorprone method of sharing data. It is estimated that up to 90% of the 30 billion healthcare transactions in the U.S. every year are conducted via mail, fax, or phone, 8 resulting in avoidable medical error and higher costs. The need for interoperable healthcare information systems that share data electronically to support clinical and administrative transactions is clear. First Steps toward Interoperability Electronic information exchange and interoperability are the next steps in using IT to address quality failures and inefficiencies.this is not a new idea. Beginning in the 1980s, communities experimented with Community Health Information Networks (CHINs). 9 These efforts largely failed. But the advent of the Internet and development of improved data security methods and standards, combined with increasing cost and quality pressures, now make comprehensive healthcare information exchange an attainable vision. The Indianapolis Network for Patient Care, a citywide EHR system that started in 1995 with the goal of improving emergency room care, has since expanded into public health areas and is working toward an intranet system that will allow more than 2,000 physicians to communicate electronically at the city s five largest hospital systems. 10 The Santa Barbara County Care Data Exchange is investigating how a patient s clinical information can be readily accessible by any authorized person, including the patient. It seeks to determine whether regional health information exchange is feasible, sustainable, and can improve the quality of care. Interim findings on financial sustainability are positive. 11 Perhaps the most burdensome information exchange, between providers and payers, has received the greatest effort to date towards achieving interoperability. The Health Insurance Portability and Accountability Act (HIPAA) includes a federal mandate for provider-payer interoperability and offers a comprehensive set of standards for electronic communication of nine categories of administrative data. Sparked by the HIPAA mandate, the New England Healthcare EDI Network (NEHEN) began in 1998 to join the major provider and payer organizations in New England to implement electronic administrative health data exchange. The NEHEN Project has been very successful in electronically routing eligibility and referral data, but is not yet routing clinical information. 12 The National Health Information Infrastructure (NHII) initiative, formed within the Department of Health and Human Services in 2001, is an essential step towards realizing comprehensive interoperability on a national level. Over the next ten years, NHII seeks to promote a complete network of interoperable systems of clinical, public health, and personal health information The Value of Healthcare Information Exchange and Interoperability

17 Potential Power of Interoperability The potential benefit of improved electronic information exchange is wide-reaching. First, patient safety and clinical quality are improved, as systems bring medical record information to the point of care, integrate health information from multiple sources and providers, and integrate decision support tools with guidelines and research results. Second, patients can gain access to their own personal health information, which empowers them to better manage their health.third, the public health system benefits from improved reporting of communicable diseases and real time aggregation of data for biosurveillance and detection of emerging disease patterns. Fourth, aggregating electronic billing and payment data will facilitate better understanding of healthcare costs. Finally, significant potential financial benefit may accrue from decreasing human involvement in information exchange and reducing redundant procedures. Interoperability is powerful because it leverages current technologies, such as hospital information systems, pharmacy systems, EHR, and CPOE, to reduce costs and improve quality. By connecting existing payer and provider systems, for example, authorized users could have instant access to the administrative data they need. Well-recognized network effects may arise, with the value of a network and its data growing exponentially with the number of users. The full value of interoperability will be realized when every participant is connected, and information exchange occurs seamlessly among all stakeholders. Implementation Challenges Achieving a fully interoperable healthcare delivery system is a daunting task facing numerous barriers. All delivery systems, hospitals, and large and small physician offices must first be willing to participate and share data with organizations that could be considered competitors. Assuming participation, all organizations must adopt internal systems to automate their own clinical and administrative information management. Any system implementation is burdensome, tapping significant labor and funding resources. And many organizations may be wary of installing systems that could be incompatible with local or national information infrastructures. The need for provider and patient identifiers to support information exchange remains the subject of much debate. Moreover, once new systems are in place, additional risks may arise related to maintaining patient privacy. Providers may also be at risk for how they choose to use, or not use, information newly available from sources outside their own practices. Thorough review of all available data could seriously disrupt provider workflow, but failure to do so could put providers at risk for malpractice lawsuits. As the costs of limited information exchange are not well understood at this point, it is difficult to know how best to address these risks. As Chapter 1: Introduction 9

18 interoperability evolves, risk mitigation tactics must be addressed to ensure successful implementation. The critical issue for healthcare information exchange and interoperability is adoption of basic electronic communication standards that allow stakeholders to format, transmit, receive, and store data. In order for participants to manage and interpret data in meaningful ways, optimal interoperability requires adoption of controlled vocabularies, code/data sets, and other advanced communication standards. Multiple public and private sector groups have tackled some of these required standards, including HL7, Consolidated Healthcare Informatics (CHI), Connecting for Health, and a joint venture of Healthcare Information and Management Systems Society (HIMSS), Radiological Society of North America (RSNA), and the American College of Cardiology (ACC). However, for those attempting to make systems interoperable, multiple standards breed confusion. To be successful, technology requirements and standards, appropriate financial incentives, and other enabling policies must be tackled on a national level and implemented locally. This Report This CITL report on the value of healthcare information exchange and interoperability (HIEI) considers the financial benefit and cost of data exchange between providers and their principal business and care partners: other providers, payers, pharmacies, external laboratories and radiology centers, and public health departments. It addresses such questions as the following: Which information exchanges are likely to yield the most value for key healthcare stakeholders? What is the value of interoperability to the nation? What are the benefits? What are the costs? By providing a clear understanding of the HIEI value proposition, CITL hopes to help build a national vision of interoperability. The assessment begins with a definition of HIEI and a description of CITL s approach to the analysis (Chapter 2). This is followed by chapters presenting the benefit of HIEI for each transaction type (Chapters 3 8), the cost of implementing HIEI (Chapter 9), and the net value of HIEI (Chapter 10). Research limitations (Chapter 11) and conclusions (Chapter 12) complete the report. Illustrations, graphs, and summary tables are included in the text of each chapter as figures. More detailed supporting tables are located at the end of each chapter. 10 The Value of Healthcare Information Exchange and Interoperability

19 References 1. Kaushal R, Shojania KG, Bates DW: Effects of computerized physician order entry and clinical decision support systems on medication safety: a systematic review. Archives of Internal Medicine 163(12): , Jun. 23, Wang SJ, Middleton B, Prosser LA, Bardon CG, Spurr CD, Carchidi PJ, Kittler AF, Goldszer RC, Fairchild DG, Sussman AJ, Kuperman GJ, Bates DW: A cost-benefit analysis of electronic medical records in primary care. American Journal of Medicine 114(5): , Apr. 1, Barlow S, Johnson J, Steck J: The economic effect of implementing an EMR in an outpatient clinical setting. Journal of Healthcare Information Management 18(1) Winter Brailer DJ,Terasawa EL: Use and adoption of computer-based patient records in the United States: A review and update. California HealthCare Foundation Oct Berenson RA, Horvath J: The clinical characteristics of Medicare beneficiaries and implications for Medicare reform. Partnership for Solutions Mar Connecting for Health:The Steering Group. Connecting for Health Jun. 5, Connecting for Health, Menduno M: Apothecary. now, Hospitals and Health Networks, Jul. 1999, pp Gartenfeld E:The community health information network: A model for hospital and public library cooperation. Library Journal 103(17): , Hospitals to launch messaging system, patient database. ihealthbeat Dec. 9, Brailer D, Augustinos N, Evan L, Karp S: Moving toward electronic health information exchange: the interim report on the Santa Barbara County data exchange. California HealthCare Foundation Jul Glaser JP, DeBor G, Stuntz L: The New England healthcare EDI network. Journal of Healthcare Information Management 17(4):42 50, The National Health Information Infrastructure. Chapter 1: Introduction 11

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21 Chapter 2: Approach to Analysis CITL This chapter presents the basic framework underlying the analyses in this report. It describes CITL s taxonomy of healthcare information exchange and interoperability (HIEI) functionality, the scope of transactions considered, some basic assumptions and building blocks used throughout the analysis, and an overview of research methods. All amounts throughout are in 2003 dollars unless otherwise noted. HIEI Functionality HIEI is a conceptual framework describing how healthcare entities share information. CITL created a functional taxonomy based on three factors in data exchange: the amount of human involvement, the sophistication of IT, and the adoption of standards. The taxonomy has four levels (Figure 2-1). Level Attributes Healthcare Information Exchange and Interoperability Taxonomy 1 Non-electronic data transfer of information that is written down or shared verbally. Relies heavily on human facilitation to rapidly review large volumes of data on paper and manually convert and extract content. Figure 2-1 Examples: mail, phone 2 Machine-transportable data transfer of information via basic IT, such as fax and . Still requires significant human involvement. Technical: binary data such as faxed or scanned documents. Content is only indexed to the document level. Computers can store and retrieve the information but assist clinicians minimally in the management of information. Computerized logic cannot be applied to the data. Manual re-keying of content required. Examples: PC-based and manual fax, of pictures, portable document format (PDF) continued on next page Chapter 2: Approach to Analysis 13

22 Figure 2-1 Healthcare Information Exchange and Interoperability Taxonomy (continued) Level Attributes 3 Machine-organizable data IT largely replaces human involvement in data exchange but uniform standards are not used. Requires multiple, customized interfaces to exchange data between systems. Human involvement needed to translate incoming data from the sending organization s vocabulary to the receiving organization s vocabulary. Usually results in imperfect translations due to incompatible vocabularies. Technical: formatted data with field definitions and meta-data. Content is indexed down to the field level;however, the actual content of the field remains unregulated. Computers can organize, search, and filter the data based on fields and meta-data, but computerized logic cannot be used to fully process the information due to inconsistent content format. Secure transfer. Electronic content extraction with human conversion and interpretation of content. Examples: secure of free text or incompatible/proprietary file formats, HL7 message 4 Machine-interpretable data idealized state of full computer-to-computer, standardized data exchange without human involvement. All systems exchange data using the same messaging, format, and content standards, removing the need for multiple, customized interfaces. Technical: data encoded using accepted, controlled vocabularies. Full syntactic and semantic interoperability: content is not only indexed down to the data point level, but also consistently formatted and encoded. Secure transfer. Computerized logic can now be applied uniformly to offer full decision support capabilities. Fully electronic content extraction and conversion. No human intervention required for information transfer or interpretation. Example: automated entry of LOINC results from an external lab into a primary care provider s electronic health record (EHR) HIEI Levels 1 and 2 are the predominant models for communication today.this report focuses on the value of moving to interoperability at Levels 3 and 4 where IT plays a central role. Both Level 3 and Level 4 systems use standardized transportation or messaging protocols, such as TCP/IP and HL7. Level 4 is differentiated from Level 3 by the use of standard, controlled vocabularies that enable systems to understand incoming data, such as LOINC, SNOMED, DSM, ICD, and CPT codes. In the ideal state, Level 4 systems not only share vocabularies but also have the same underlying information model, thus achieving semantic interoperability. The lack of vocabulary or content standards at Level 3 results in structured interoperability, with perfect transport of unclear content. This creates work on the receiving end and can introduce error as incoming data are translated into the local vocabulary. 1 Error is introduced as a result of different levels of detail in coding systems that can be translated in multiple ways. Data exchange at Level 4 is therefore the most desirable because it requires the least human effort, thereby minimizing error. Taken together, a standardized information model describing data and information relationships, and a standardized controlled medical terminology describing allow- 14 The Value of Healthcare Information Exchange and Interoperability

23 able values and attributes of the information model, constitute a reference interoperability framework. There are multiple options for how interoperability could occur. In a peer-to-peer model, information is exchanged directly between entities. In a centralized model, all information travels to a central repository accessible to all users. Both of these models accomplish interoperability but they have different technical infrastructures. This report does not address the question of how interoperability is achieved from a technical architecture perspective. It considers solely what is needed for healthcare organizations to exchange data electronically: system interfaces and a reference interoperability framework. If the data are stored electronically on both ends of an exchange, an interface between the sending and receiving systems is all that is required, given the reference interoperability framework to facilitate data transformation as necessary.thus, this analysis ignores the technical infrastructure that determines how information is routed and focuses instead on interfaces that allow information to be exchanged at Levels 3 and 4. Scope of Analysis Information is exchanged by thousands of healthcare system participants, and national Level 4 interoperability would provide a complex communications web. To define a manageable valuation task, CITL created an analytic model that focuses on data sharing between providers (hospitals and clinician offices) and other providers, and between providers and five stakeholders with whom they most commonly exchange information: laboratories, pharmacies, radiology centers, public health departments, and payers. This model is provider-centric and data-focused. The majority of information exchanged between healthcare entities originates with providers, whose processes and outcomes are more likely to be studied and reported than transactions between stakeholder entities like payers and pharmacy benefit managers (PBMs). The analysis does not consider exchanges between stakeholders. The flow of transactions considered in this report is represented by the arrows in Figure 2-2. Chapter 2: Approach to Analysis 15

24 Figure 2-2 Overview of Provider-Stakeholder Relationships Public Health Other Providers Radiology Provider Pharmacy Primary (in scope) Payer Laboratory Secondary (out of scope) The model is encounter-centric, encompassing clinical and administrative data needed for transactions that directly relate to a clinical encounter, including eligibility verification, electronic health records and charting, order entry and results reporting, and claims submission, adjudication, and payment. The model quantifies the benefits and costs of HIEI between providers and stakeholders exchanging clinical and administrative data. It does not consider the value of HIEI within an enterprise. For example, the value of a test ordered electronically in a hospital and sent to the hospital s lab is not included. Model Building Blocks CITL built a model that represents how system and participant organization characteristics interact to generate value.it was created as an influence diagram using Analytica software from Lumina Decision Systems, Inc. 2 This software combines both qualitative and quantitative information and incorporates probability distributions in order to be explicit about uncertainties in research findings. Results in this report were projected by the software model. 16 The Value of Healthcare Information Exchange and Interoperability

25 This section describes some basic assumptions and starting points fundamental for understanding the model results presented in this report. Many calculation layers support the results, and the analytic approach and calculations behind the model s projections are described in some detail in each chapter. It is not possible, however, to present comprehensive information about all the analytic layers. Appendix 3 includes more information about analytic constructs not described in the text. No accounting for the current state CITL s goal was to quantify the financial value derived from HIEI through more efficient healthcare transaction processes. Today, health care operates at varying levels of HIEI. However, data are not available to capture accurately at what HIEI level each provider and stakeholder is exchanging data.to simplify, the model does not account for current state of affairs ; it quantifies the value of the entire system moving from Level 1 to Level 2, 3, or 4. Level 1 is the baseline.the exception to this assumption is provider-payer interoperability. Data are available on the current number of transactions between providers and payers that are performed electronically, and this real world baseline is incorporated into the analysis. Provider size categories The analysis projects annual benefit to hospitals and to provider group practices, as defined in Figure 2-3.Appendix 3 includes additional information about these provider size categories. Provider Group Small Group Medium Group Large Group Small Hospital Medium Hospital Large Hospital Jumbo Hospital Provider Size Categories Size 5 clinicians 10 clinicians 25 clinicians < 49 beds beds beds 400+beds Figure 2-3 Assuming full utilization with interoperability Due to the burden of Levels 1 and 2 communication, some information exchange simply does not happen today. For example, infectious disease cases are not fully reported to public health departments (described in Chapter 7).The HIEI analysis assumes that Levels 3 and 4 interoperability will eliminate these barriers to communication, and the model is based on full reporting. Specific instances are explained in the text. Chapter 2: Approach to Analysis 17

26 Upper bound of efficacy and HIEI impact The benefit over Level 1 that can be achieved at HIEI Levels 2, 3, and 4 is a product of two factors.the first factor is the proportion of transactions executed at that particular level. CITL assumes that at least 5% of transactions are always executed in less efficient ways (i.e., lower HIEI levels). This accounts for unanticipated costs, incomplete usage, and other effects that may diminish returns. The second factor is the impact of each HIEI level on the remaining 95% of transactions. CITL interprets the second factor as the frequency of savings at that HIEI level. For example, for lab transactions at Level 3, a source may report that cost savings occurs in two of three transactions (67%). CITL would combine the transaction proportion estimate (for example, 50%), to arrive at the efficacy number (34%) used in the model. Source of benefit CITL approached this financial analysis by considering separately the benefits and costs of each provider-stakeholder relationship. A large portion of benefit is reduced labor/administrative cost, in the form of saved time from work that no longer needs to be done manually once data are exchanged electronically. Throughout the report, this benefit is referred to as administrative savings and is translated directly into dollar savings. This benefit would accrue to all organizations participating in interoperability. Interoperability also leads to fewer redundant services, procedures, and tests performed. This benefit accrues to the payers and providers bearing financial risk. Sensitivity analyses CITL measured the sensitivity of its projections to changes in various model inputs. Each chapter reports the impact of increasing and decreasing these factors by 50%, while holding all other factors constant. Many model inputs that were estimated (by CITL or the Expert Panel, described below) are included. Systemic factors, such as the U.S. population, are excluded. Providers vs. clinicians vs. stakeholders Throughout this report, the term providers refers to hospitals (inpatient and clinics) and group practice offices. Clinicians refer to the professionals in those organizations who write orders and deliver patient care. Stakeholders are external laboratories and radiology centers, pharmacies, public health agencies, and payers. Format of reported results Results are rounded to three significant digits to reflect the heterogeneous nature of inputs, with varying levels of precision. As a result, sums in tables may appear to be incorrect. Unless otherwise noted, all amounts are in 2003 dollars. 18 The Value of Healthcare Information Exchange and Interoperability

27 Methods CITL employed a variety of methods literature reviews, expert interviews, Expert Panel estimates, and influence diagrams to gather and synthesize evidence included in this report. Generally, CITL depends on published sources for data. Where lacking, CITL calls on experts to fill critical gaps.we searched academic publications and a wide array of non-academic literature, including trade journals, government publications, general press, vendor and consultant studies, proprietary research services, and studies by foundations and professional associations. Because of the varying levels of precision in the estimates obtained from these heterogeneous data sources, all results presented in this report are limited to three significant digits. CITL convened an Expert Panel of nationally recognized experts to provide advice throughout the project: David J. Brailer, MD, PhD. Senior Fellow, Health Technology Center. Chairman and CEO, CareScience. Adjunct Professor of Health Care Systems, The Wharton School; Clinical Professor of Internal Medicine, University of Pennsylvania Health System; and Senior Fellow, Leonard Davis Institute of Health. William R. Braithwaite, MD, PhD, FACMI. Independent Consultant. Former Senior Advisor on Health Information Policy, Department of Health and Human Services. Paul C. Carpenter, MD, FACE. Associate Professor of Medicine, Divisions of Endocrinology-Metabolism and Health Informatics Research, Mayo Clinic, Rochester, MN. Daniel J. Friedman, PhD. Independent consultant. Robert H. Miller, PhD. Associate Professor of Health Economics in Residence, Institute for Health & Aging and Department of Social and Behavioral Sciences, University of California San Francisco. Arnold Milstein, MD, MPH. Medical Director, Pacific Business Group on Health. U.S. Health Care Thought Leader, Mercer Human Resource Consulting. J. Marc Overhage, MD, PhD, FACMI. Investigator, Regenstrief Institute for Health Care.Associate Professor of Medicine, Indiana University School of Medicine. Scott S.Young, MD, FAAFP. Senior Clinical Advisor, Office of Clinical Standards and Quality, Centers for Medicare and Medicaid Services. Kepa Zubeldia, MD. President and CEO, Claredi Corporation. On June 17, 2003, CITL staff facilitated a day-long roundtable discussion with the expert panel. During this session, experts assessed a draft analytic framework and debated CITL s preliminary findings. Each expert took multiple opportunities to comment on each topic. After the roundtable, the expert opinions and views were summa- Chapter 2: Approach to Analysis 19

28 rized; further discussions in the ensuing weeks led either to consensus or, in some cases, a compromise on several findings. CITL used knowledge obtained from this meeting to revise and refine the model, to refine HIEI levels, and to firm up research conclusions. CITL also interviewed more than 20 experts in addition to the panelists, including information system executives and directors of regional data-sharing initiatives. Appendices 1 and 2 present further information about methods, including a description of CITL s Healthcare IT Value Framework, the HIEI Expert Interview Guide, and a detailed description of the literature search strategy.appendix 4 contains expert panelist biographies. References 1. Middleton B:Testimonies before the Department of Health and Human Services, National Committee on Vital and Health Statistics, Subcommittee on Standards and Security, Work Group on Computer-Based Patient Records.Thursday, Oct. 14, Analytica version 3.0.0, Los Gatos, CA: Lumina Decision Systems, The Value of Healthcare Information Exchange and Interoperability

29 Chapter 3: Benefit of Interoperability between Outpatient Providers and Laboratories CITL Both hospital-based and freestanding clinician offices use external reference laboratories. Nonhospital-based clinician offices typically perform simple tests onsite (for example, urine dipstick, finger-stick glucose, cholesterol, pregnancy), and send other tests to external labs. While nearly every hospital has its own laboratory, some esoteric tests are sent outside to regional reference laboratories or others specializing in these uncommon tests. Quest Diagnostics, one of the major independent laboratory chains, defines esoteric tests as tests that are performed less frequently than routine tests and require more sophisticated technology, equipment and materials, professional hands-on attention and more highly skilled professional and technical personnel. Because it is not costeffective for most clinical laboratories to perform the low volume of esoteric tests inhouse, they generally refer many esoteric tests to an esoteric clinical testing laboratory. Due to their complexity, esoteric tests are generally reimbursed at higher levels than routine tests. 1 This chapter focuses on tests ordered during outpatient visits to hospital clinics and freestanding clinician offices, and then sent to external labs. CITL was unable to find data to project benefit from inpatient testing, but the benefit is assumed to be small, as only a small proportion of inpatient tests are sent out. Connectivity between provider and external laboratory information systems enables providers to transmit orders to laboratories, and enables laboratories to transmit results back to providers (Figure 3-1). Overview of Provider-Laboratory Transactions Orders Figure 3-1 Providers Results Laboratories The model defines the levels of interoperability between providers and labs in Figure 3-2. Chapter 3: Benefit of Interoperability between Outpatient Providers and Laboratories 21