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Inside the Democrats' HIT Savings Claims

August 28, 2008
by E2556BEF60524A5689D02EEBDAEFEDB6
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The following will be included in the next issue of my bi-weekly Healthcare IT Value Digest (let me know if you'd like a free subscription):

The Democratic National Platform committee says that cutting costs and eliminating waste in the healthcare system would save the average family "up to $2,500 per year". These savings would come from “…state of the art health IT systems, privacy protected electronic medical records, reimbursement incentives and an independent organization that reviews drugs, devices and procedures to ensure that people get the right care at the right time."

Our Take

Next week the Republicans will raise the savings estimate to $3,000 per year ;^).

But seriously, where did the Democratic figure come from? The first two items on their list are health IT, although more privacy protection could actually increase costs. Reimbursement incentives could certainly help cut costs, and it sounds like the independent review organization would determine which therapies were most cost-effective and encourage their use.

We searched for but did not find any details to back up the Democratic cost savings calculations. That may mean that there aren't any, or that they don't want to be held to the specifics, but here are two likely sources for their health IT-related cost savings estimates:

The Center for Information Technology Leadership has done several studies of the value of health IT, including:

Ambulatory CPOE: "Nationwide adoption of advanced ACPOE systems will save the US healthcare system approximately $44 billion per year in reduced medication, radiology, laboratory, and ADE-related expenditures."

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Healthcare Information Exchange and Interoperability: "...standardized HIEI would deliver $77.8 billion in annual savings in the United States...Providers would realize annual new returns of $33.5 billion with full implementation of standardized HIEI. Other stakeholders...would also benefit..."

IT Enabled Diabetes Management: "Electronic diabetes registries used in physician offices can save a net of $14.5 billion in diabetes-related costs over 10 years."

Provider to Provider Telehealth Technologies: A hybrid telehealth model that combines store-and-forward and real-time video can save $3.61 billion annually. "In addition...a reduction in patient travel from mileage costs alone could save $912 million."

The RAND Corporation has authored several high-profile studies on the value of health IT, including:

Richard Hillestad, J. Bigelow, A. Bower, F. Girosi, Robin Meili, Richard Scoville, and Roger Taylor, "Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits, Savings, and Costs," Health Affairs, Volume 24, Number 5, September/ October 2005. "Annual savings from efficiency alone could be $77 billion or more. Health and safety benefits could double the savings... Implementation would cost around $8 billion per year, assuming adoption by 90 percent of hospitals and doctors' offices over 15 years."

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Anthony Bower, The Diffusion and Value of Healthcare Information Technology, MG-272-1-HLTH, Santa Monica, CA: RAND, 2004.

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James H, Bigelow et al., Analysis of Healthcare Interventions That Change Patient Trajectories, MG-408-HLTH, Santa Monica, CA:

RAND, 2005.

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Katya Fonkych and Roger Taylor, The State and Pattern of Health Information Technology Adoption, MG-409-HLTH, Santa Monica, CA: RAND, 2005.

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Federico Girosi, Robin Meili, Richard Scoville, Extrapolating Evidence of Health Information Technology Savings and Costs, MG-410-HLTH, Santa Monica, CA: RAND, 2005.

In addition, the author of the first of these reports, Richard Hillestad, recently testified before the Senate Finance Committee (see the transcript).

Just for reference, there are approximately 111 million households in the U.S., so a $2,500 annual savings per family (assuming that households are the same as families) would add up to $278 billion in savings annually. All of CITL's savings combined would add up to about $140 million annually, and RAND's total potential savings are estimated at $80 million annually, so if these studies are the source of the Democratic estimates they are obviously counting on more than just IT-related savings.

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