RAND Study: Industry-wide health IT adoption could save $162 billion annually

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If the healthcare community would fully implement information technology such as EMRs and various other health IT systems -- the cost savings could potentially reach $162 billion annually, according to a pair of new RAND Corporation studies released yesterday in the journal Health Affairs.
The study, the first of its kind, also looked at health benefits to be gained from HIT implementation. The RAND team used computer models to show the potential benefits if EMR systems were broadly used.

"The potential savings from HIT is mind-boggling, but it isn't going to happen overnight," says lead author Richard Hillestad, senior management scientist for the Santa Monica-based RAND. "The federal government will need to step in to speed the diffusion of HIT and remove some major barriers if we are going to reap the tremendous benefits it could have on improving quality, managing diseases, and extending people's lives," he added.

The study found the greatest barriers to wider adoption of HIT include:
  • High initial acquisition and implementation costs;
  • Slow and uncertain financial payoffs for healthcare providers;
  • Disruptive effects on physician practices during implementation; and
  • Payment systems that result in most HIT-enabled savings going to insurers and patients, while most adoption and care improvement costs are borne by providers
According to Hillestad and RAND, the federal government will have to step in quickly during the initial steps of adoption so that national standards are followed with regard to EMR systems and patient data sharing, and to be sure that high quality patient care is rewarded.

RAND also recommends that the government and employer groups adopt policy initiatives designed to accelerate adoption in order to get an assortment of things rolling, including performance-based competition, payment differentials to providers who adopt standards-based EMR systems, and targeted subsidies to help communities create regional information exchange networks.

There are numerous health benefits to widespread EMR system adoption, according to RAND. For example, one-third to one-half of the 8 million adverse drug events a year in doctors' offices and outpatient clinics could be prevented.

The research team estimates that computerized physician order entry (CPOE) systems have the potential to eliminate 2 million adverse drug events in the ambulatory setting and 200,000 ADEs in the hospital setting. As a result, $3.5 billion a year in the ambulatory setting could be saved with $1 billion a year in savings possible in hospitals. The study suggests that Medicare also would benefit greatly.

The studies also suggest that EMRs can be essential in better management of chronic diseases. According to RAND, there is a potential of saving several tens of billions of dollars annually as a result of reduced hospitalizations and emergency room visits.
Widespread use of HIT also will lead to more short-term preventive care, according to findings.