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21st Century Health Care: The Information Technology Impact on the Quality and Cost Effectiveness of

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Title: 21st Century Health Care: The Information Technology Impact on the Quality and Cost Effectiveness of


1
  • 21st Century Health Care The Information
    Technology Impact on the Quality and Cost
    Effectiveness ofHealth Care
  • William S. Bernstein, Esq.
  • Co-Chair, Government and Regulatory Division
  • Manatt, Phelps Phillips, LLP
  • June 25, 2004

80303612
2
Table of Contents
  • State of U.S. Health Care System
  • Why Investing in Health Information Technology
    Matters
  • Where We Stand Today Why Investment Has Not
    Taken Place
  • What Needs To Be Funded and What We Would Hope to
    Achieve
  • A Proposed Solution Creation of a Healthcare
    Information Technology Revolving Loan Fund Program

3
State of the U.S. Health Care System
  • Changing Demographics Americans age 65 will
    increase from 12 of population in 1997 to 20 of
    population in 2040
  • Rising Health Care Costs Premiums increased
    12.7 in 2002, 8 times the general rate of
    inflation and are likely to be higher this year

4
State of the U.S. Health Care System
  • Healthcare Professionals In Crisis Physicians
    leaving practice as a result of rising
    malpractice costs Shortfall of 400,000 nurses
    nationwide
  • Persistent Problems of Uninsured Continue
    Approximately 15.2 of all Americans lack
    insurance coverage

5
State of the U.S. Health Care System
  • Enormous Quality and Safety Issues Plague U.S.
    Health Care System
  • Unacceptable Rate of Practice Variations leading
    to 450 billion in unnecessary spending according
    to one recent study
  • Staggering number of preventable medical errors
    kill more people annually than motor vehicle
    accidents or breast cancer
  • Adverse drug events in 5 to 18 of ambulatory
    patients
  • 17 years for new knowledge generated by
    randomized controlled trials to be incorporated
    into practice

6
State of U.S. Health Care System
  • 5 Visual Images To Remember

7
High Costs
Health Care Spending Per Capita
6.9
4.8
3.1
Source Health, United States, 2002Five
Countries Luxembourg, Canada, Germany, Norway,
SwitzerlandG-7 Countries Canada, France,
Germany, Italy, Japan, United Kingdom
8
Unnecessary Costs
of Health Expenditures
Unnecessary
Necessary
Cost
Cost
30
70
Project Hope,
Wennberg
et.al., 2003
9
Number of Uninsured
Source U.S. Census Bureau, Current Population
Survey, 2002 and 2003 Annual Social and Economic
Supplements
10
Poor Quality
45
Right
Wrong
45
55
70
RAND, 2003
...17 years... - IOM Report Crossing the
Quality Chasm, 2000
...44,000 to 98,000 deaths... - IOM Report
To Err is Human, 1999
11
Poor Access to Information
12
Why Investing in Healthcare Information
Technology Matters
  • Evidence Shows Investment Can
  • Save Money
  • Improve Quality
  • Thereby, allowing for expansion of coverage to
    the uninsured
  • Saving Money
  • The Institute of Medicine estimates that medical
    errors cost the Nation 37.6 billion each year
    about 17 billion of those costs are associated
    with preventable errors

13
Why Investing in Healthcare Information
Technology Matters
  • October, 2003 GAO Report found that the 10 health
    care delivery organizations reported 13 examples
    of cost savings resulting from the use of IT,
    including reduction of costs associated with
    medication errors, communication and
    documentation of clinical care and test results,
    staffing and paper storage, and processing of
    information.
  • Center for Information Technology Leadership
    study indicated 44 billion in savings
    (prevention of more than 2 million adverse drug
    events and 190,000 hospitalization per year)
    could be realized from adoption of Computerized
    Physician Order Entry (CPOE) in an ambulatory
    care environment

14
Why Investing in Healthcare Information
Technology Matters
  • New England Healthcare EDI Network has resulted
    in substantial administrative savings for both
    payors and providers alike - - i.e. Cost of
    eligibility check reduced from 4.74 to 15 cents
  • A recent cost benefit analysis of electronic
    medical record systems showed that their use by
    primary care providers could result in 86,000 in
    savings over 5 years. Benefits include reduced
    drug spending, reductions in radiology, and
    decreased billing errors.

15
Why Investing in Healthcare Information
Technology Matters
  • Improving Quality
  • At Brigham Womens Hospital, Computerized
    Physician Order Entry reduced error rates by 55
    - from 10.7 to 4.9 per 1000 patient days
  • A recent study of intensive care patients by
    Kaiser Permanente found that when physicians used
    a computerized system, the incidents of allergic
    drug reactions and excessive drug dosages dropped
    by 75 the average time spent in the unit
    dropped by 4.9 days to 2.7, slashing costs by 25

16
Why Investing in Healthcare Information
Technology Matters
  • Harris Interactive Boston Consulting Group Poll
  • 36 physicians said e-prescribing improving
    efficiency
  • 45 physicians said e-prescribing improves
    compliance with formularies
  • 33 physicians said e-prescribing has a major
    impact on quality of care

17
Where We Stand Today Why Investment Has Not
Taken Place
  • IT Investment in Health Care Very Low

Percent of Revenue for
Information Technology 2002
18
Where We Stand Today Why Investment Has Not
Taken Place
  • Government spends its health care dollars
    elsewhere

364600
2216
1852
100
19
Where We Stand Today Why Investment Has Not
Taken Place
  • The Result is Not Surprising
  • More than 90 of an estimated 30 billion health
    care transactions each year are conducted by
    phone, fax or mail
  • Less than 5 of physicians use electronic health
    records
  • According to a recent JAMA study, only 9 of
    medical decisions are rated as informed
    decisions.

20
Where We Stand Today Why Investment Has Not
Taken Place -
Barriers To Adoption of IT
  • STANDARDS Lack of adoption of interoperable
    systems and data standards
  • LEADERSHIP At the national level, at the
    community level, within provider institutions and
    clinician practices
  • FUNDING AND BUSINESS MODEL Misalignment of
    incentives among those who pay for IT and those
    who benefit from it. Lack of upfront and ongoing
    operating capital for investment in IT
    infrastructure
  • WORKFLOW ISSUES Organizational change issues

21
What Needs To Be Funded And What We Would Hope To
Achieve
  • Medical Services Area
  • Manageable size
  • Could be a city, county
  • A Community is not
  • Physician Practice
  • Hospital
  • Integrated Delivery Network
  • County Health Department

2Hospitals
180Physicians
100,000Population
6Pharmacies
3Labs
22
What Needs to be Funded And What We Would Hope To
Achieve
Patient Data
Medical Knowledge
Couple
Identify Patient-SpecificIssues
Communicate Care Considerations to treating
physician and patient
23
What Needs to be Funded And What We Would Hope To
Achieve
Patient Data
24
What Needs to be Funded And What We Would Hope To
Achieve
Eliminating High Costs
of Savings Generated
Decision Support Systems
Electronic Health Record
Clinical Data Sharing
Source Center for Information Technology
Leadership, 2003
25
What Needs to be Funded And What We Would Hope To
Achieve
Business Platform Which Shares Costs and Benefits
of IT Investment
Others
Providers
Source Center for Information Technology
Leadership, 2003
26
What Needs to be Funded And What We Would Hope To
Achieve
Business Platform Which Shares Costs and Benefits
of IT Investment
State/Local
Households
Medicaid
Medicare
Employers
Source Health, United States, 2002
27
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • The Government can best achieve its objectives
    with respect to healthcare information technology
    investment through a public-private partnership
    model the PPP Model
  • Key characteristics of public-private
    partnerships include
  • Compelling public policy need for investment
  • Recognition that investment either would not
    happen, or would happen at an unacceptable cost
    or timeframe, without creation of the PPP

28
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • Structure which enables government to reduce its
    costs while at the same time improving the level
    of quality of services to the public
  • Economic platform which is financially
    free-standing allowing projects to be privately
    financed and operated based on revenues received
    for the delivery of goods and services

29
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • There is a long and successful history of funding
    essential infrastructure through Federal/State
    Revolving Loan Programs

Federal Revolving Loan Fund Programs
TotalFunding Commitments Amount of Projects
Financed (Figures are aggregate through June 30,
2002)
30
A Proposed Solution Creation of an
Information Technology Revolving Loan Fund
Contributions Partnership Cash Flows
  • Federal/State Contribution
  • AHRQ Grants
  • Agreement with Medicare and Medicaid Programs
  • Provision of Federal Bond Insurance
  • State Issued Bonds Tax- exempt or
    Taxable
  • Income
  • Grant Funds
  • Lease/Loan/Service Contract Repayments
  • Financing Fees
  • User Fees (where applicable)

State/RegionalHealthcare Information Technology
Corporations (HITC)
  • Expenses
  • HITC Operating Expenses
  • Repayment of P I on Indebtedness
  • Private Sector
  • Sponsorship of Projects and Obligation to Repay
    Indebtedness
  • Private Foundation Support

Net Cash Flow
HITC Share
Government Sector Share
PROJECT SPONSORS
31
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • Through supporting community-wide planning,
    provide long term term financing for
    multi-stakeholder projects that invest in
    information technology for the purpose of
    promoting good quality and efficient healthcare
  • Ingredients to Success
  • Multi-Stakeholder Participation
  • Information Technology
  • Clinical Best Practices/Process Improvement
  • Physician Adoption
  • Alignment of Financial Incentives Between
    Purchasersand Providers of Care

32
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • Key Structural Features
  • Federal/State funds used to create Revolving Loan
    Fund program which supports healthcare IT
    infrastructure projects
  • Initial funding could come from allocation of
    dollars used in connection with administration of
    Medicare and Medicaid programs
  • Federal government provides qualified projects
    with insurance allowing for low borrowing rates.
    Initial funding by Medicare and Medicaid programs
    can be leveraged to create larger capital
    financing program
  • State government issue tax-exempt and taxable
    bonds to fund qualified projects

33
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • Project sponsors obligated to repay project
    indebtedness. Funds collected in excess of funds
    required to repay debt service used to fund
    additional projects
  • Project sponsors obligated to pay financing fees
    which fund operations of administration of
    program by not-for-profits, Healthcare
    Information Technology Corporations, the Boards
    of which consist of private citizens and
    government appointed designees
  • Based on other RLF programs, other features of
    the public-private partnership program may
    include a requirement that Fund administrators
    put up matching funds equal to up to 20 of the
    federal contribution

34
A Proposed Solution Creation of an Information
Technology Revolving Loan Fund
  • Broad enabling legislation ensuring
  • Federal funding of corpus of loan funds to be
    administered by HITCs and
  • Project selection authority which allows for
    meeting of needs of local communities, while at
    the same time ensuring compliance with Federal
    standards and
  • Provision of a wide selection of credit
    facilities to eligible projects, including low or
    no interest loans, credit enhancements, such as
    lines of credit and payment guarantees,
    subordinated loans, risk pooling and extended
    repayment schedules and
  • Grants for safety net facilities and rural health
    providers and
  • The authority to provide technical assistance to
    eligible projects, including assistance with the
    funding applications, financial plan preparation
    and project design
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