Can HIT Solve the Healthcare Cost Problem?

Paul Roemer, Managing Partner, HealthcareITStrategy .com

Healthcare IT is to healthcare like baseball is to America.  It is an underpinning, something that holds the fabric together.  Most of the recent attention around HIT has to do with Electronic Health Records and CPOE.  That is where the money is, and because of the money those garner most of the attention and notoriety.

Will the impact of EHR and CPOE live up to the notoriety, or are there other areas where HIT’s contribution can be greater?  I’ve spoken with hospital financial executives and with the executives of firms which audit hospitals and I think the answer is ‘yes.’

HIT’s access to what occurs in the hospital may be unparalleled.

Mark Twain wrote, “Figures often beguile me, particularly when I have to do the arranging of them myself … There are three kinds of lies: lies, damned lies, and statistics.”  The idea behind the phrase is that numbers can be persuasive.  Indeed they can be.  There are numerous fallacious proofs such as the one showing 1 + 1 does not equal 2. (http://mathworld.wolfram.com/Fallacy.html).

A great deal has been written about the cost of healthcare, especially as relates to hospitals.  I tried to find information about those costs.  There are more Google hits than one can read using the term “hospital costs.”  As it turns out, these phrases are really inaccurate placeholders to try to derive information about three other phrases;

• Hospital charges
• Cost to the patient
• Prices of procedures

None of the information I found has anything to do with what it actually costs a hospital to deliver a procedure.  There are “costing” models to help providers understand how much they will be paid.  There are models to help patients figure out what they may be charged.  But there is almost no accurate information to say what it actually costs to remove one pair of tonsils.

Merritt Hawkins recently released a report entitled, “2010 Physician Inpatient/Outpatient Revenue Survey.”   I studied that to see what it may offer in terms of learning about costs — direct costs, fully loaded costs — nothing.  I learned revenues are declining across most specialties, among various sizes of hospitals, and since 2004.  It compares physician revenue against physician salaries, and the report shows that the “average” physician generates about $1,500,000 in revenues.

Really?  Damned lies.  Defining a cause and effect relationship between physicians and revenues is part of the reason why costs are so neatly hidden.  Some say, “It costs what it costs.”  Fine, but how much?  What does the procedure cost?  What does it cost the hospital from the time the patient enters the door until the patient leaves?

HIT has access to every bit of data in the hospital.  What if the data was used by HIT to create information — cost information?  Not charges.  Not payments.  Costs.  Actual costs.  What if HIT could help figure out what it costs a hospital to remove those tonsils, or what it costs to have a patient walk through its doors — a patient P&L?

The degree of difficulty of that effort — high.  The ROI of such an effort — higher.  Here’s a link to help you get started.  http://lowdenplan.com/