The calculus of change

Two decades ago, Dr. Armand Gonzalzles wanted to install electronic medical record (EMR) systems in his Chicago pediatrics office, but they were prohibitively expensive. The software alone would have cost $30,000.

Convinced that automation was a good idea, he persisted. Gonzalzles joined a larger organization, then decided to lead his own practice, known as Riverpoint Pediatrics, in 1999. He found that EMR systems had become more affordable, flexible and user-friendly by then.

Gonzalzles chose a system that was well suited to his practice, he said. Because of the EMR system, he can spend more time with patients and get faster payments on insurance claims. He also has eliminated paper from his office and increased the quality of care he provides. The system, which runs on a Microsoft Windows Server network in his office, paid for itself in three years.

"Practicing medicine has become easier and more fun," Gonzalzles said. It's also more profitable. "We were able to buy a building as a result of all the money we were able to collect," he said.

But at least three-quarters of physicians don't share Gonzalzles' vision of the value of information technology, according to a Commonwealth Fund report on the use of electronic health records systems. Most doctors who still rely on paper records are in small practices. Health insurers, Medicare and malpractice insurance companies are flattening those practices' profits. They have little interest in investing thousands of dollars in IT systems that would force them to change their professional habits.

In addition to the troubles of acquiring hardware, software and network services, doctors fear the potential loss of income, said Dr. Barry Blumenfeld, associate director of clinical informatics research and development at Partners Healthcare System in Boston.

For example, medical practices lose money when their staff must spend time learning a new system, converting paper files to e-files and changing how they handle information.

Their question is this: What's in it for me? That's where the federal government, insurance companies and others come into the picture. The public cannot afford to wait for a new generation of tech-savvy doctors, they say. Health care providers need incentives for adopting new technology, and government, among others, might be able to foot that bill.

Not IT for IT's sake

The litany of benefits that IT can provide to physicians and their patients is becoming familiar. For example, EMR systems help doctors find information, reduce paperwork delays, automate reminders of patient treatments, avoid allergic reactions to medication and minimize unneeded procedures.

Estimates vary on the savings that health IT could bring. They range from $50 billion to $300 billion annually.

Regardless of the numbers, wise IT investments could generate major returns not only in dollars but also in better health for patients. Businesses will also benefit because healthier employees translates into fewer sick days, more productivity and reduced insurance costs.

"The overall benefits of [health IT] ultimately will greatly exceed the investments necessary to realize them," states the final report from the Health Information Technology Leadership Panel, a group of business executives. "Including anticipated and unanticipated economic benefits of [health IT], current estimates of net savings are likely conservative."

The panel submitted its report in March to the Department of Health and Human Services' Office of the National Coordinator for Health IT. The national coordinator's mission is to promote and facilitate the widespread adoption of interoperable health records within 10 years.

After people agree that implementing health IT is worthwhile, the next issue is deciding who should pay for it.

Generally, physicians pay the entire cost of an office IT system, but they get only about 11 percent of the system's financial benefits, according to various industry estimates. The rest of the benefits accrue to patients, insurers, health plan sponsors, government agencies and other players in the system.

Not surprisingly, some people would like the federal government to step in with subsidies. But the Bush administration has no plans to introduce such measures.

"We will not achieve our goals by spending mostly taxpayer dollars on this," said Dr. David Brailer, the national coordinator for health IT, at the Connecting Communities for Better Health conference in May.

But HHS provides incentives to some doctors, regional health information exchanges (RHIOs) and others to demonstrate IT's value. The savings add up to less than half a billion dollars — small change by Washington, D.C., standards.

To speed the implementation of clinical IT in doctors' offices, the Centers for Medicare and Medicaid Services (CMS) will launch a demonstration program this fall in which small and midsize medical practices will be offered incentive payments for using health IT.

Jody Blatt, a project officer at CMS' Office of Research, Development and Information, said that about 800 doctors' offices in four states will probably take part in the three-year program, which also involves measuring the quality of care for some conditions such as congestive heart failure and diabetes.

Those four states — Arkansas, California, Massachusetts and Utah — are home to CMS contractors called quality improvement organizations (QIOs), which have provided technical assistance with IT implementations in doctors' offices since 2002.

Originally created to work with doctors on improving the quality of care for Medicare patients, the QIOs are moving into nationwide IT assistance this fall, following successful demonstration programs in the four states.

The Agency for Healthcare Research and Quality, another HHS organization, is spending $50 million on grant programs, too. But those programs will help only a handful of hospitals and doctors' offices with their IT implementations — and there are about 6,000 hospitals and 200,000 physicians' offices in the United States.

Using its clout

To accelerate IT implementation in small and midsize physicians' offices, HHS may push to reform the way it compensates doctors and other medical professionals for their services.

"The incentives in our health care system are just wrong — wrong for providers, wrong for payers, wrong for patients," HHS Secretary Mike Leavitt said. "Providers get paid on the basis of the quantity of the care they provide, not the quality of outcomes."

Most payers of medical fees — federal and state Medicare and Medicaid programs, insurance companies and health plans, for example — historically have paid little for preventive care, such as health screening, patient education, and exercise and nutrition programs. Instead, they pay for treating ailments after they have become acute.

"This approach has rewarded the over-utilization and misuse of services and resulted in higher payments when health care complications arise," said Karen Ignagni, the president and chief executive officer of America's Health Insurance Plans, a trade association, in testimony before a House subcommittee in May.

The system discourages providing quality care. Quality medicine may keep patients healthier, so they make fewer revenue-generating office visits. Efficiency may reduce the number of unnecessary or duplicative tests and procedures, likewise cutting revenues.

The federal government is by far the nation's largest health care payer. It pays 32.5 percent of all health care bills, not including the costs of health insurance for federal employees. "Federal purchasing power should be used to accelerate the adoption of HIT among health care providers," the HIT Leadership Panel's report states.

That's not a new idea. Health insurers have been using pay-for-performance strategies for several years to reward doctors for delivering quality medicine. Under those strategies, insurers review doctors, and if they follow quality guidelines for treating patients, they get a bonus payment once a year, or an extra sum for each patient treated.

Quality guidelines vary, but they generally include following best practices, such as keeping children's immunizations current, sending newly diagnosed diabetics to patient education programs and follow-up monitoring of their blood sugar levels, or referring patients of a certain age for periodic colon cancer screening.

Empowered by the Medicare Modernization Act of 2003, CMS has begun a series of demonstration programs to experiment with rewarding hospitals and doctors for providing quality care. CMS announced in May that the first year of its pay-for-performance demonstration program for hospitals had resulted in measurable increases in quality care. This month, the agency expects to make its first bonus payments to the best performers among the 270 participating hospitals nationwide.

A demonstration program that started in January for large physician groups has 10 participants. A larger demonstration will seek to improve health care outcomes for chronically ill Medicare recipients.

Only one of those demonstrations — the one that will begin this fall in four states — directly involves health IT. However, the quality movement has indirect connections to IT adoption.

For example, using computerized records, doctors can more easily inform an insurance company or CMS about the number of patients who received certain tests or immunizations. For example, Gonzalzles said his EMR system helps him comply with the rules and reporting requirements of the managed care organizations that pay the bills for some of his patients.

The connection between quality and IT is clear to everyone who is active in the movement to increase IT adoption rates. Quality of care is "why we're paying for the IT" in the demonstration involving doctors' offices, Blatt said.

Although IT isn't mandatory for the quality portion of the program, she said, "we think people will score better on those measures if they've implemented" EMR systems.

In short, rewarding doctors for providing quality care could be one of the ways to reward them for implementing IT.

That's why it was no accident that bills to substantially expand the Medicare pay-for-performance demonstrations and encourage the implementation of health IT were introduced by four senators at a joint press conference in June.

A task force sponsored by the eHealth Initiative, a nonprofit, public/private organization devoted to advancing health IT, concluded this year that quality incentives should include health IT incentives and health IT should have quality benefits.

"Approaching these two key issue areas in a siloed manner — without strong integration across both areas — will result in missed opportunities, unintended consequences and possibly reduced impact in both areas," according to the report, "Parallel Pathways for Quality Healthcare."

In the end, some incentives are necessary for doctors to adopt health IT. But how much it will take to get them to invest in it still isn't known. The CMS demonstration programs may provide some answers. n

At the heart of the drive for health information technology is the knowledge that the health care industry wastes billions of dollars. Most experts agree that widespread adoption of health IT can yield significant industry savings, though estimates of the exact amount vary.

For example, the Office of the National Coordinator for Health IT estimates that health IT can reduce health

care costs up to 20 percent per year by saving time and reducing duplication and waste, according to figures posted on the office's Web site.

The total annual cost of U.S. health care is usually cited as $1.6 trillion, so the office's estimate would be about $320 billion in savings. However, when Department of Health and Human Services Secretary Mike Leavitt named David Brailer as the national coordinator for health IT, Leavitt said IT could save the nation $140 billion annually in health care spending.

Meanwhile, a January study by the Center for IT Leadership at Partners HealthCare System in Boston produced an annual savings estimate of almost $78 billion.

Laurence Baker, a Stanford University health economist, found that figure to be too high by at least $28 billion, although he did not offer an alternative estimate of his own.