Cost of Obama E-health Plan Could Reach $100B

But the former head of the federal e-health office estimates annual savings of $300 billion.

A national electronic health records system remains a first-term priority for President Barack Obama, but its price tag may far exceed current estimates, according to some health care experts.

"The magnitude of what we're going to need to do on the Obama scale is just incredible to think about, when you consider linking all these medical records across all these different towns, cities, states," said Charles Frazier, vice president of clinical innovation at Riverside Health System, a health care provider in Newport News, Va. "We have enough of a problem with that in our own health system."

During his campaign, Obama pledged to invest $10 billion per year over the next five years on an electronic health records program that would be designed to streamline workflow at hospitals, clinics and physician offices. Backers assert that EHR systems will improve care while significantly cutting overall health care costs.

Some experts said that Obama's initial estimates of the cost and time of implementation are likely far below what will be needed to create and roll out an EHR system across the U.S. Many said that the price tag could be closer to $100 billion and that implementation could take up to 10 years.

That initial plan called for funding the EHR system with part of an $825 billion economic stimulus package that the president hopes to push through Congress early this year. A White House spokesman said the e-health plan remains a key part of Obama's agenda, but he declined to disclose any details about the plan or its expected cost.

The administration of President George W. Bush launched an effort in 2004 to build a national EHR system and created the Office of the National Coordinator for Health Information Technology (ONC) to oversee the effort. Since then, the ONC has launched some pilot projects, but the e-health concept has been slow to expand beyond that.

For example, a survey of 2,700 U.S. doctors by the New England Journal of Medicine last July found that only 4% are using "fully functional" EHR systems. The rest, the journal found, are all still keeping mostly paper-based records.

However, David Brailer, who served as Bush's first health information czar, noted that 25% to 35% of the nation's 5,000 hospitals use or are in the process of rolling out computerized order-entry and medical record systems.

Brailer, now chairman of Health Evolution Partners, a San Francisco-based investment firm that specializes in funding health care providers, headed the ONC from 2004 until 2006. He was succeeded by Robert Kolodner, who still holds the post.

Brailer said that implementing a full, secure EHR system is a multiyear -- and very expensive -- project. Such a system would include patient care order-entry systems, an ability to fill pharmacy prescriptions, and networks to share patient data among hospitals, primary care physicians and insurance companies.

He cited multiple studies that estimate implementation costs at between $75 billion and $100 billion. "Hospitals will have to make sizable, potentially multi-hundred-million-dollar budget commitments," Brailer explained.

However, he described the funding needed to implement the system as "a one-time cost in an industry that spends $2.2 trillion a year now and will spend $3.7 trillion per year 10 years from now. So it's a relatively small amount of money."

Brailer said a fully functioning national electronic health system could decrease U.S. health care costs by between $200 billion and $300 billion annually by cutting down on duplicate records, reducing record-keeping errors, avoiding fraudulent claims and better coordinating health care among providers.

Nonetheless, Brailer and others acknowledged that such market forces may not be enough to convince private practices and small, rural hospitals to move forward on EHR projects.

"Electronic medical records gut your organization, and everything you do will be different after it," noted Larry Garber, vice chairman of Massachusetts eHealth Collaborative Inc. (MAeHC).

The Bush administration did a good job of getting e-health standards and plans in place, said Charlene Underwood, a member of the board of directors for Chicago-based Healthcare Information and Management Systems Society, a trade group that promotes the use of IT systems in health care. But "it didn't move the needle forward on adoption," she noted.

Underwood, who is also director of government and industry affairs at Siemens AG's Erlangen, Germany-based Siemens Healthcare unit, suggested that the Obama administration should spend as much as necessary to create a system for monitoring hospitals and private health care practices to make sure that they are up to date with e-health technology and standards.

And hospitals employing order entry work systems for physicians, electronic prescription services or other e-health systems should be eligible for funding to continue or upgrade those services, she added.

A federal e-health effort should also require that health care providers implement standardized "evidence-based order systems" -- electronic templates that spell out best practices for treating specific patient problems, Underwood said.

For example, a patient who leaves a hospital after surgery following a heart attack would automatically be prescribed aspirin as part of the postoperative treatment.

"We're trying to put in place evidence-based standards to reduce variation in care," Underwood said.

State-Level Efforts

The ONC has had some success in getting state and local governments to support the creation of regional health information organizations (RHIO), which are designed to bring together health care organizations in defined areas and control their exchange of information. To date, 66 RHIOs have been created in the U.S., and many of them are now working to create electronic health records.

Massachusetts is one of 30 states that have introduced or passed legislation calling for the statewide adoption of standardized health IT systems. Under a law enacted last summer, Massachusetts wants 14,000 private physicians' offices to adopt EHR systems by 2012, and its 63 hospitals by 2014.

MAeHC, which is overseeing implementation of the state's three regional RHIO operations, projects that the process of creating a statewide EHR system will take two to three years and cost about $100,000 per physician, Garber said.

JudyAnn Bigby, Massachusetts' secretary of health and human services, estimated that implementing a statewide EHR program will cost about $340 million.

Some of the funding -- about $25 million per year -- will come from increased taxes on tobacco products. State officials also expect the private sector to chip in, Bigby added.

In addition to legislating EHR implementation, Bigby said, Massachusetts is developing payment models that would reward physicians who use the state's disease registries or other electronic medical support tools to care for patients.

She said the state also plans to evaluate whether it should use one of the various online EHR services, such as those offered by Google Inc. and Microsoft Corp.

Microsoft launched its HealthVault beta program in 2007 and has partnered with Kaiser Permanente and the American Heart Association, among others, to create a database accessible by patients and authorized care providers.

Earlier this year, Google launched a beta version of its online health records system, called Google Health.

Meanwhile, Duke University Health System is in the process of a five-year plan to roll out a $6 million EHR system, called HealthView Patient Portal, according to Asif Ahmad, CIO of the Durham, N.C.-based health care provider.

In the second year of the effort, Duke has moved to keep costs down by using already installed technologies to run an EHR system built internally using IBM's Java-based WebSphere development tools.

The health care provider may also use an online e-health system, Ahmad added, noting that it is in talks with Google and Microsoft.

Copyright © 2009 IDG Communications, Inc.

  
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