RAND Study: EMRs Can Cut Health Costs, But Some Are Skeptical

Doug O'Boyle, Global Market Intelligence Analyst, IBM Sales & Distribution

A new study from RAND, published in the prestigious healthcare journal Health Affairs, finds that adoption of interoperable electronic medical records (EMRs) could yield efficiency and safety savings totaling about $81 billion annually for the U.S. healthcare industry.  The RAND study contends that although widespread deployment (90% adoption rate) of EMRs will be costly -- $98 billion investment for hospitals and $17.2 billion investment for physicians -- the costs are easily offset by savings resulting from higher productivity and reduced medical costs, among other benefits.

But some are skeptical.  In the same issue of Health Affairs, two Harvard Medical School professors and practicing physicians argue that RAND's EMR savings estimates are overblown.  "The RAND analysis ... continues the tradition of EMR hope and hype," they say, claiming RAND under-estimates the difficulty of migrating from paper medical records to EMRs.  They also note the RAND study was sponsored by vendors and say EMRs have never lived up to expectations.

The truth is probably somewhere in the middle.  The RAND study makes a number of assumptions -- the Harvard physicians call them "rosy assumptions" -- to reach its savings estimates, but generally takes a conservative forecasting approach.  The study is methodical and uses various statistical methods to compute EMR savings.  While some of the assumptions can be challenged (e.g., it assumes 100% participation in EMR-supported disease management programs), the study's methodology is well-conceived. 

The study doesn't show just one side of the EMR issue.  The RAND report cites obstacles on the road to achieving a 90% adoption rate for EMRs, including mis-aligned incentives (providers bear the EMR costs but payers get the biggest benefits from EMRs), and high EMR costs. 

Even if the RAND savings estimates are too high by 50%, it is clear that EMRs offer significant return on investment and are well worth the startup costs.  Healthcare has long lagged other industries in IT investment, resulting in error-prone, inefficient and wasteful processes.

HealthNex

Comments

[Tim Gee]

EMRs are the new CPOE; the latest health care IT fad. Sure there's some value, but like most fads, benefits are overblown and the costs and implementation challenges minimized. Katrina recently became the latest foil for puffing the need for EMRs. Yet, if the medical records for everyone in the US disappeared this instant, the only patients impacted would be the small percentage of the population with chronic disease (yes, these folks do consume the majority of health care dollars -- and I don't deny "some" benefit to EMRs).

It seems to this reader that a much bigger benefit would result if we could automate the transactions between payers, hospitals and physicians that are done today by phone and fax. I'm talking about eligibility lookups, claims adjudication, referral approvals and other pre authorizations, and other mundane transactions. The fact that the cottage industry we call health care in the US is run by phone conversations and fax machines is our industry's dirty (not so) little secret. This also represents a huge business opportunity to someone who can tease out a workable solution.

[Jack Mason]

Tim:

You raise very good points that are right in line with HealthNex's mission of promoting debate....which lever of healthcare transformation will deliver the most societal bang for the buck? And what are the biggest problems that can be most readily fixed? A similar approach to prioritizing ways to improve human health found that malaria could probably be sharply reduced for about a billion dollars, through some simple programs. My gut tells me that the real solution for healthcare transformation is not EHRs, CPOE, e-prescriptions or any other single kind of innovation, but the kind of metainnovation (in part societal) that will allow many if the above components to take root, with the most successful becoming self-evident memes that create their own momentum

[Doug O'Boyle]

Even if you limit EMR's benefits to the chronically ill, EMR's benefits would still be large, given the fact that this segment of the population accounts for 60-70% of all healthcare costs. It has been well documented that many people don't get all the medical services they should, largely because doctors are busy and forget to do things (like all of us). If EMRs do nothing else than remind doctors, medical services will greatly improve.

I agree that work must be done on the administrative front as well and that routine transactions between insurers and providers should be automated, streamlining today's cumbersome and costly manual administrative processes.

[Tim Gee]

Jack, you're right on with your medtainnovation idea. Much like PACS or cardiovascular information systems, broad proliferation of *effective* automation will enable many improvements that don't show up in short term hard dollar ROI analysis but will generate significant benefit.

[taylor]

I work for a company called Practice Fusion, and I’d like to clear up a few things about Electronic Medical Records.
There is a lot of skepticism surrounding the security and quality of EMRs, especially applications that are free and web-based. Costly applications want you to believe that you must pay for quality. However, there are many high-quality and free, web-based applications out there. Google Apps. is just one example. I can honestly say that we deliver the best product and support at absolutely no cost, and with no on-site implementation. And that is why we are one of the fastest growing physician practice communities in the United States. We have outstanding technical support, and we pride ourselves on our “Live in Five” process which allows us to get users started within five minutes of calling. If you are interested in learning more about Practice Fusion, you can check out our free EMR. Also, take a look at what others have to say about us: http://www.fiercehealthit.com/innovators/2007/practicefusion, http://blogs.zdnet.com/BTL/?p=4670, and http://blogs.zdnet.com/Stewart/?p=774”>ZD
If you prefer, you can visit the website and take a demo with a Practice Fusion team member. Give us a call at 415-346-7700.

[Greg Starr]

The value of EMR's, are very much related to number team member to utilize the EMR, the diversity of the information that the record contains, the portability of the record, the ease of the charts use, the degree of automation of entry, the intelligence of the EMR to evaluate entries for reliability, completeness and logical consistency, the ability to assure less legally vulnerable documentation. All of these factor are waiting for optimization and as such could add another three zeros to Rand's savings estimate. Unless Information Industry Titans grow up and encourage the visions of the advantages of electronic information rather than naively fomenting paranoia, these advantages may be delayed a significant number of years, furthering lessening the time to a very significant medical cost crisis. I pray that the entries in the EMR field are both bold and responsible.