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A Medical Mystery

Joe McKendrick
Insurance Experts' Forum, December 16, 2009

At the end of last month, researchers at Harvard Medical School issued the results of a study with a startling conclusion: years of information technology implementations haven't saved health care establishments any money, rather, it actually has raised costs at these institutions.

The health care debate continues to rage on in the halls of Congress as well as town halls, but there is one area where everyone is in agreement: health care costs have been out of control. The insurance industry has been an easy target for politicians and pundits alike, but many of the rising costs have been coming out of the medical sector itself. And information technology—seen as the knight on a white horse for cost containment—may have been a dud so far.

The Harvard Medical study, titled, “Hospital Computing and the Costs and Quality of Care: A National Study", covered 4,000 hospitals—both technology leaders and laggards—concluded that computing tends to drive up administrative costs, but only has had a mild impact on productivity and quality. Even those hospitals at the cutting edge of computerization barely saw a ripple in their total efficiency. One of the report's authors, Dr. David Himmelstein, associate professor at Harvard Medical School, summed up the challenge this way in a follow-up interview: “First, you spend $25 million dollars on the system itself and hire anywhere from a couple-dozen to a thousand people to run the system. And for doctors, generally, it increases time they spend [inputting data].”

The conventional wisdom for decades has been that increased automation will bring tremendous efficiencies and cost savings to the beleaguered health care system. The report notes that a 2005 prediction forecast close to $80 billion in savings as a result of IT.

However, what these forecasters overlooked and, for that matter, a point missed by the Harvard researchers was a fundamental tenet of IT. That is, computer equipment and software cannot, by itself, clean up the mess that health care organizations find themselves in. As many in the insurance industry and other sectors have already discovered, broken or inefficient processes are the result of poor design, uninspired management, and hidebound corporate cultures that suppress innovation and initiative. And, to some degree, external pressures, such as overbearing regulatory bodies, skew priorities. Today's health care sector is essentially a ramshackle assemblage of competing interests, heavy-handed regulations and cost pressures.

There are exemplary leaders, such as Ronald Peterson of Johns Hopkins Hospital, who are cutting through the inefficiencies while improving services to customers. But most hospitals don't know whether to behave as businesses or function as wards of the state. Fresh thinking and innovation is needed in this sector, only then will IT begin to have its desired impact. And this is an important lesson for all organizations connected to the health care complex. 

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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