August 2, 2005 in Business

Electronic health records may cost $200 billion

Associated Press
 

WASHINGTON – President Bush’s proposal to create a national network of electronic health records could cost more than $200 billion initially to build and operate, researchers said Monday.

The health care industry itself, based on current estimates, will cover less than 20 percent of that amount.

“These findings suggest that policy initiatives are needed if we are to close this gap,” said a study published in the Annals of Internal Medicine.

The government doesn’t necessarily have to come up with the difference, the researchers said.

“I don’t see them as having to foot the bill,” said the lead author, Dr. Rainu Kaushal. “They can create the incentives. Then the private sector can run with it.”

For example, the federal government could increase reimbursements for doctors who use electronic record keeping for their Medicare and Medicaid patients. That could prompt smaller physician groups to make the sizable investment that is often required for computer systems.

In recent years, many in the health care industry have already made the transition from record keeping systems based on paper files to ones based on computers. Experts say the new electronic systems save lives and money.

Members of Congress and the Bush administration, urged on by the health care sector, want to hasten that transition. So researchers tried to project how much it would cost. Their work was jointly funded by the Commonwealth Fund and the Harvard Interfaculty Program for Health Systems Improvement.

The researchers estimated that it would cost $156 billion to build the system and $48 billion annually to run it.

“We know it’s expensive,” said Dr. David Brailer, appointed by Bush to coordinate the government’s efforts for improved health information technology.

“We know it’s in the billions of dollars, perhaps in the tens of billions of dollars, and possibly even the hundreds of billions,” Brailer said. “But the principal question is not how much it is. It’s how do we create incentives to involve the private sector and prevent the federal government from financing it all. We want it to be market-driven.”

The United Kingdom has allocated about $14 billion to build a health information network. Canada has invested about $1.2 billion – an amount the researchers said likely would have to be increased.

Because the United States may make a sizable investment, researchers sought to flesh out the structure of a model system, as well as its costs.

First, the researchers relied on a panel of health care officials to give them minimum standards that a model network must meet. For example, a doctor in Denver should be able to load information into a computer that could subsequently be viewed and updated by a nursing home in Orlando.

The researchers also determined the type of facilities that should have access to the network. Those selected were doctor’s offices, hospitals, pharmacies, clinical labs, nursing homes and home health agencies.

Then they projected what it would cost to make the network available to the slew of providers around the country.

A major barrier to widespread implementation of a health information network is that costs are incurred by a few, but the benefits are spread out to the many.

“Institutions tend to invest in areas with direct financial benefits to themselves, such as new equipment or facilities,” the authors of the report said. “It seems unlikely that the private sector will move forward rapidly to adopt (information technology) without public sector investments or incentives.”

Brailer noted that the researchers relied on expert estimates – not primary data.

He estimated that the current spending throughout the federal government on health information networks totals about $4 billion a year. He believes the estimate of $156 billion in startup costs and $48 billion in operating costs to be on the high end of what the system would actually total.

Brailer and Kaushal said the investments in electronic record keeping are occurring mostly with large hospital systems.

“It’s not happening in small hospitals or small offices, which is the majority of the market,” Brailer said.

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