Research & Commentary: Health Information Technology

Published February 20, 2009

As part of the federal government’s economic stimulus package, Congress has authorized spending about $20 billion on health information technology (health IT) and another $1 billion on comparative effectiveness research. These provisions achieved wide bipartisan support in Congress and in the health care industry, based on the hope that the investment will help improve efficiency, cut costs, and result in better care. The reality is likely to be far different.

Proponents of this spending rely heavily on a short RAND Corporation analysis from 2005 that predicted $77 billion in annual savings and improved outcomes. RAND estimated “implementation would cost around $8 billion per year, assuming adoption by 90 percent of hospitals and doctors offices over 15 years.” It said, “The benefits can include dramatic efficiency savings, greatly increased safety, and health benefits.”

Unfortunately, RAND assumed an error-free system that is quickly and enthusiastically adopted by virtually the entire health care system. That might happen, but it is an absolute best-case scenario. Even then, instead of “dramatic savings,” the $77 billion hoped-for savings amounted to a mere 4.5 percent of total costs, placed at $1.7 trillion by RAND.

Far more likely is that every penny of the $20 billion will be wasted on systems that don’t work and can never be implemented. That was the outcome of federal attempts to upgrade technology at the IRS, the FBI, and the air traffic control system. And these are all relatively simple enterprises involving single federal agencies. Health IT is vastly more complex and must include hundreds of thousands of private organizations that have invested in legacy systems that work reasonably well and are as varied as there are providers.

This also has been the experience of the United Kingdom, which has been trying to adopt a similar information technology upgrade for its National Health Service (NHS) since 2002. This plan was far less ambitious than the U.S. version, involving merely 30,000 physicians and 300 hospitals, all of whom are already employed by the NHS. Originally estimated to cost 2.3 billion pounds, it is already at 12.7 billion pounds—$18.4 billion, or about as much as provided in the stimulus package for the entire United States. A recent report to Parliament admitted the program is four to five years late and may never be implemented as envisioned. The project has lost two of the four vendors who were working on it, and some of the elements that have been installed are not meeting expectations.

This is not to say health IT is a bad idea or that hopes for it are unwarranted. Quite the opposite. The health care system sorely needs better management tools and better application of technology. There is currently a vast amount of entrepreneurial energy, innovation, and money being invested in developing, refining, and marketing the tools the system needs to come into the twenty-first century.

The danger is that massive federal intrusion will bring all that innovation to a screeching halt. Systems work best when they are developed from the ground up, not imposed from on high. In ground-up development, flaws can be detected and eliminated without much systemwide damage. Poor vendors can be removed without disruption to the whole system.

We do not yet know what the optimal system will be. Imposing federal standards on health IT in 2009 means the entire system will be locked in to those standards for very long time to come and innovation will not be rewarded.

The RAND study said “market forces” are an obstacle to health IT. Just the opposite is true. The market is the best way to test and refine new ideas. The process of repeated testing and refinement may seem slow to people who want instant solutions and shortcuts, but the failure to engage in that process often results in massive mistakes and wasted billions.

The following articles address some of these concerns and examine health IT from a free-market perspective.

(Thanks to Scot Silverstein, MD of Drexel University and Linda Gorman of the Independence Institute for helping develop this listing).

Can HIT Lower Costs and Improve Quality?
RAND Corporation, 2005
This is a short issue brief from RAND that is the basis for most of the estimates of systemwide cost savings. It does not look at the possible difficulties at all and claims the cost savings could reach $77 billion a year in 15 years.

The National Programme for IT in the NHS: Progress since 2006
The Public Accounts Committee of the UK
“By the end of 2008 the Lorenzo care records software had still not gone live throughout a single Acute Trust. Given the continuing delays and history of missed deadlines, there must be grounds for serious concern as to whether Lorenzo can be deployed in a reasonable timescale and in a form that brings demonstrable benefits to users and patients. Even so, pushing ahead with the implementation of Lorenzo before Trusts or the system are ready would only serve to damage the Programme.”

Health IT: Intelligent Evolution
Health Affairs Blog by Esther Dyson
Esther Dyson, the well-known technology investment guru, argues health IT can help bring about improved health care, “But government standards efforts (or magical thinking) won’t make it happen. Rather, I think it will pretty much happen by itself—or rather by the decentralized efforts of millions of people and the slightly more centralized or at least clustered efforts of hundreds of companies, mostly start-ups but eventually some larger ones, too.”

Health Information Technology: A Few Years of Magical Thinking?
Carol Diamond and Clay Shirky
Argues that the current push by the federal government to perfect standards on health technology has it exactly backwards. “If you computerize an inefficient system, you will simply make it inefficient, faster.” The authors write, “[T]echnology and standards alone will not lead to health IT adoption, let alone transform health care. There are serious structural barriers to the use of IT that have nothing to do with technology.”

Sociotechnologic Issues in Clinical Computing: Common Examples of Healthcare IT Difficulties
Blog by Scot M. Silverstein, M.D., Drexel University, College of Information Science & Technology
Dr. Silverstein has developed a Web site that summarizes scores of case studies documenting how various forms of health IT have wasted resources or endangered patient care. He concludes, “The appropriate levels of critical thinking and skepticism essential in a demanding area such as introduction of computer automation in medicine appear largely absent.”

Safely Implementing Health Information and Converging Technologies
Joint Commission on the Accreditation of Hospitals
“Any form of technology may adversely affect the quality and safety of care if it is designed or implemented improperly or is misinterpreted. Not only must the technology or device be designed to be safe, it must also be operated safely within a safe workflow process.”

Current Approaches to U.S. Health Care Information Technology Are Insufficient
National Academies of Science
“Many care providers told the committee that data entered into their IT systems was used mainly to comply with regulations or to defend against lawsuits, rather than to improve care. As a result, valuable time and energy is spent managing data as opposed to understanding the patient.”

Australian Health Information Technology
Blog by Dr David More MB, PhD, FACHI
“This blog provides a commentary on the progress (or not) of e-health in Australia from the perspective of someone who has worked in the field for over 20 years and has become a bit jaded with the lack of apparent progress in a very important field.”

Electronic Health Record Use and the Quality of Ambulatory Care in the United States
Archives of Internal Medicine, 2007
A large study of 1.8 billion ambulatory visits in 2003 and 2004 found no difference in 14 of 17 quality indicators between using electronic health records (EHRs) and not using them. The use of EHRs resulted in significantly better quality in two indicators and significantly worse quality in one.

Role of Computerized Physician Order Entry Systems in Facilitating Medication Errors
Ross Koppel, Ph.D., et al., Journal of the American Medical Association, 2005
This study found that using Computerized Physician Order Entry (CPOE) Systems increased 22 types of medication errors.

Bad Health Informatics Can Kill
European Federation of Medical Informatics
Summary of 33 separate studies from 1985 to 2009 showing that health IT was the cause of or a significant contributor to medical errors.

Pessimism, Computer Failure, and Information Systems Development in the Public Sector
Shaun Goldfinch, University of Otago, New Zealand, Public Administration Review, 2007
Not about health care per se, but this is an exceptionally well-done cautionary article on IT that should be read by every health care executive, documenting the widespread nature of IT difficulties and failure and the lack of attention to the issues responsible. It recommends a much more critical attitude toward IT.

Preventing Chronic Disease: An Important Investment, But Don’t Count On Cost Savings
Louise B. Russell, Health Affairs, 2009
“Over the four decades since cost-effectiveness analysis was first applied to health and medicine, hundreds of studies have shown that prevention usually adds to medical costs instead of reducing them. … Careful choices about frequency, groups to target, and component costs can increase the likelihood that interventions will be highly cost-effective or even cost-saving.”

Disease Management for Chronically Ill Beneficiaries in Traditional Medicare
David M. Bott, Mary C. Kapp, Lorraine B. Johnson, and Linda M. Magno, Health Affairs, 2009
“Since 1999, the CMS has conducted seven DM [disease management] demonstrations involving some 300,000 beneficiaries in thirty-five programs. … Final evaluations on twenty programs found [only] three with evidence of quality improvement at or near budget-neutrality, net of fees. Interim monitoring covering at least twenty-one months on the remaining fifteen programs suggests that [only] four are close to covering their fees.”

For further information on the subject, visit the Health Care issue suite on The Heartland Institute’s Web site at

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, you may contact Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute, at [email protected].