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A plan for driving $500 billion in annual savings out of the U.S. healthcare system.
In the United States, growth in healthcare expenditures has outpaced the rest of the economy for the past forty years, and healthcare expenditures now represent more than 16% of the GDP. All forecasts expect this differential to continue with no end in sight. The need to slow or reverse the growth in healthcare costs is compelling; especially over the next thirty years as the baby boomers drive significant growth in healthcare resource utilization. President Obama recently said that the state of healthcare in the United States is “part of the [economic] emergency,” and that reform must be “intimately woven into our overall economic recovery plan.” It is our belief that a strategic investment in information technology (IT) can realize up to a $500 billion annual reduction in healthcare expenditures. This generational opportunity to reconfigure the elements of our healthcare system must be seized.
The Money Is in the System: The ABCs of Systemic Healthcare Reform
Information Technology, widely and wisely adopted and supported by changes in policy, reimbursement methodologies and practice, will enable this potential half-trillion-dollar recurring savings in the cost of providing care in the United States. The savings will come from four primary areas: the first three, the ABCs of modern care, come from inside the healthcare organizations, while area D arises from eliminating the friction and righting misaligned incentives in the current reimbursement system.
The previous steps A, B, C and D would eliminate much of the waste, error, variance, delay and friction from the current system, creating $500 billion in recurring savings for the United States while concurrently improving quality and national health. These changes alone, however, will not adequately transform our current healthcare system. Two reform steps, E and F, must be achieved in the next decade to enable a sustained systemic change:
In the recently published healthcare book Innovator’s Prescription, authors Christensen, Grossman and Hwang state, “Those fighting for reform have few weapons for systemic change … there are very few system architects among these forces that have the scope and power of a commanding general to reconfigure the elements of the system.”xi A wise investment of federal incentives in healthcare information technology, supported by changes in policy, reimbursement methodologies and practice, can yield a recurring $500B savings to the national spend on healthcare as well as lasting “systemic change.” This would relieve pressure on the overall United States economy while also making healthcare provision more streamlined, coordinated, accurate, predictive, proactive and affordable for healthcare providers and the people they serve. Rather than the baby boomers “busting” the system, they could leave behind a modern, frictionless healthcare system for generations to come.
i Hillestad R, Bigelow J, Bower A, Girosi F, Meili R, Scoville R, and Taylor R, “Can Electronic Medical Record Systems Transform Healthcare? An Assessment of Potential Health Benefits, Savings, and Costs,” Health Affairs, Vol. 24, No. 5, September 14, 2005.
ii McGlynn E, Asch S, Adams J, Keesey J, Hicks J, DeCristofaro A, and Kerr E, “The Quality of Health Care Delivered to Adults in the United States,” The New England Journal of Medicine, Vol. 348, No. 26, June 26, 2003.
iii Fisher, ES et al, Ann Intern Med. 2003 Feb 18;138(4):273-87.
iv Amarasingham R, Plantinga L, Diener-West M, Gaskin D, and Powe N, “Clinical Information Technologies and Inpatient Outcomes: A Multiple Hospital Study,” Archives of Internal Medicine, Vol. 169, No. 2, January 26, 2009.
v Institute of Medicine, Committee on Quality of Health Care in America. To Err is Human: Building a Safer Health System. Kohn LT, Corrigan JM, Donaldson MS, eds. Washington, D.C: National Academy Press, 1999.
vi Woolhandler S, Campbell T, and Himmelstein D, “Costs of Health Care Administration in the United States and Canada,” The New England Journal of Medicine, Vol. 349, No. 8, August 21, 2003.
vii HITSP: Healthcare Information Technology Standards Panel, www.HITSP.org.
viii Hillestad R, Bigelow JH, Chaudhry B, Dreyer P, Greenberg MD, Meili RC, Ridgely MS, Rothenberg J, Taylor R, Identity Crisis: An Examination of the Costs and Benefits of a Unique Patient Identifier for the U.S. Health Care System, Santa Monica, Calif.: RAND Corporation, MG-753-HLTH, 2008.
ix PQRI: Physician Quality Reporting Initiative. For more information see www.cms.hhs.gov/pqri/.
x CCHIT: Certification Commission for Healthcare Information Technology. For more information see www.cchit.org.
xi Christensen C, Grossman J, and Hwang J, The Innovator’s Prescription: A Disruptive Solutions for Health Care, New York: McGraw Hill, 2009, page xvii.
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