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Costly information system eventually pays off

MANAGED CARE March 2005. © MediMedia USA
Managed Care Outlook

Costly information system eventually pays off

MANAGED CARE March 2005. ©MediMedia USA

Standardized national health care information exchange and interoperability systems (HIEI), while extremely costly to implement, produce financial gains after five years. That's according to the Boston-based Center for Information Technology Leadership, a not-for-profit research organization that helps health care organizations realize the full benefit of IT investments.

CITL, in a recently published report, estimates that national implementation of standardized technology systems would deliver savings of $77.8 billion annually after full implementation. This would result in significant direct financial benefits for providers and other stakeholders. CITL found that national standards for information exchange systems would save billions compared to information exchange systems without standards.

"The value of national standards is substantial, about $54 billion a year," says Blackford Middleton, the chairman of CITL. The organization developed a 10-year national implementation cost analysis and found that while implementation costs are considerable, net returns would amount to $337 million over the course of 10 years.

To analyze the available data, CITL categorized the amount of human involvement required to implement an HIEI system into four levels. CITL also considered the amount of sophistication of IT and the amount of standardization required.

Level 1 was designated as having no electronic data — no use of IT to share information; level 2 was designated for systems that used machine-transportable data (e.g., fax or personal computer); level 3 represented machine-organizable data — transmission of structured messages containing nonstandardized data (e.g., computer based exchange of files in incompatible/proprietary file formats); and level 4 represented machine-interpretable data — transmission of structured messages containing standardized and coded data (e.g., automated exchange of coded results from an external lab into a provider's electronic medical record).

Ten-year rollout and annual costs of HIEI
  Rollout costs ($ billions) Annual cost ($ billions)
  Level 3 Level 4 Level 3 Level 4
Clinician office system cost 163.0 163.0 9.1 9.1
Hospital system cost 27.1 27.1 1.6 1.6
Provider interface cost 124.0 76.2 9.0 5.4
Stakeholder interface cost
(e.g., laboratories, radiology centers,
payers, or pharmacies)
6.4 9.9 0.5 0.6
Total, rounded 321 276 20 17
Source: The Value of Health Care Information Exchange and Interoperability, Health Affairs, Jan. 19, 2005.
Net value of HIEI to the nation
  Level 2 Level 3 Level 4
  Implementation* Ongoing† Implementation Ongoing Implementation Ongoing
Benefit 141 22 286 44 613 94
Cost 0 0 320 20 276 175
Net value 141 22 -34 24 337 78
*Implementation, cumulative years 1–10 ($ billions)
†Steady state, annual starting year 11 ($ billions)
Source: The Value of Health Care Information Exchange and Interoperability, Health Affairs, Jan. 19, 2005.

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