Thursday, October 7, 2010

Cost/Benefit and ROI aspects of Health Information Technology (HIT)

Whether or not EHR and other HIT systems benefits exceed costs is a question being discussed in many quarters today. A 2006 report { click here } based on research conducted by the Southern California Evidence-based Practice Center provides what I consider a good framework for a priori and a posteriori examination of the cost/benefit and ROI aspects of this question.

Despite the heterogeneity in the analytic methods used, all cost-benefit analyses predicted substantial savings from EHR (and health care information exchange and interoperability) implementation: The quantifiable benefits are projected to outweigh the investment costs. However, the predicted time needed to break even varied from three to as many as 13 years.

Many of the studies concerned HIT systems developed and evaluated by academic and institutional leaders in HIT.

  • Regenstrief Institute in Indianapolis, IN
  • Partners/Brigham and Women’s Hospital in Boston, MA
  • Intermountain Health in Salt Lake City, UT
  • Kaiser Permanente health care system
  • Vanderbilt University in Nashville, TN
  • U.S. Department of Veterans Affairs (VA) health care
As asserted above, you need to ask when a particular system will reach the break even point. You also need to examine any potential for a mismatch between who pays for and who accrues cost savings from HIT use. Private organizations deciding whether to invest in HIT must weigh the costs and benefits of doing so. Although the primary goal of nonprofit healthcare organizations may be to provide high-quality care, these organizations still need to watch the bottom line to survive, which includes understanding the costs of measures designed to improve quality. Such private return-on-investment (ROI) calculations can provide results that are quite different from those of societal cost-benefit analysis, which are often reported in clinical journals. For example, one study showed that a hospital that installed a computerized reminder system to alert providers when patients were not up-to-date on their immunizations increased pneumococcal vaccine orders by 8 percent. Another study showed that, among the elderly, each $12 vaccination averts $20.27 in hospital costs and increases life expectancy an average of 1.2 days. From society’s point of view, the reminder system saves money and improves health, so it is a win-win program. However, from a financial perspective, the hospital has spent money on a system that had no effect on the costs or revenues of current stays because the pneumococcal vaccine is not delivered in the hospital. To benefit from this intervention, the hospital must make a reputation for higher quality and convert it into profits. This is one example of the potential for a mismatch between who pays for and who accrues cost savings from HIT use. A more extreme example would be a hospital’s implementation of a HIT intervention that averts future hospitalization. In this case, HIT implementation both costs the hospital money and decreases hospital revenues, even if the HIT implementation has a net cost-savings from a societal (or Medicare) perspective.

For more, click here, here and here.