Healthcare IT: Does It Raise or Lower Costs?

January 12, 2011

A look at how "Fiddler on the Roof" and the debate over the pros and cons of cost savings tied to healthcare IT have a lot more in common than you would think.

“Fiddler on the Roof” is one of my favorite movies. In an early scene in the movie, Tevye, the main character, is listening to several other men from his village arguing about the state of society. Tevye responds to one man, “He is right.” Another man then makes a statement that is pretty much in complete opposition to the first man, and Tevye says, “He is also right.” At this point one of the other men in the conversations says to Tevye, “He is right, and he’s right? They can’t BOTH be right.” To which Tevye replies, “You know, you are also right.”

Arguments concerning the pros and cons of healthcare and IT are much the same. There are many articles and studies claiming that hundreds of millions or even billions of dollars can be saved annually by the adoption of healthIT. Two major studies, one by the RAND Corporation and another by the Center for Information Technology Leadership, estimate annual savings of about $80 billion for the adoption of IT in healthcare. There are also statements in these and other articles that healthcare IT adoption can reduce medical errors, eliminate duplication of costly tests, speed patient throughput, and lead to higher quality healthcare overall.

There are also positive articles that purportedly originate from clinics and hospitals that have done a major IT implementation, reporting glowing results. Some of these “case studies” are barely more than a press release from a technology vendor or implementation partner, and if you look carefully at the language, you can frequently ascertain that the implementation has not even been completed, and that the savings and efficiencies are projections, not results.

And then at other times - and sometimes in the exact same issue of the same journal - there are articles and studies from various groups that purport to show exactly the opposite is the case, that HIT costs money, reduces patient throughput, or makes patient care even worse.

As an example, in a recent study done by IT firm CDW, a survey of physicians who did not currently have EHRs estimated they would lose more than $120,000 in first-year productivity alone. A 2009 article published jointly by the Wharton School of Business and the University of Pennsylvania Health System, contains several quotes that claim healthcare IT could actually raise costs. Other quotes in this article imply any savings would be hard to measure, and if there are indeed savings, they would be small.

Here again, these reported “facts” would really be more appropriately labeled opinions. In the case of the CDW “study,” the $120,000 first-year loss statistic was actually based on an opinion survey of hundreds of doctors who did not have an EHR system. But the headline, and the writer of the article itself, gave the impression that the $120,000 first-year loss number was based on actual experience, not opinion. One had to read the survey results much more carefully to determine the basis of the argument.

How can this dichotomy exist? As Avram said to Tevye in Fiddler, “They can’t BOTH be right.”