NCPA - National Center for Policy Analysis


May 12, 2005

Information technology (IT) has revolutionized most aspects of the economy -- improving consumer choice, productivity and efficiency. However, the health care industry has been slow to utilize IT. The proper use of IT could save billions of dollars and thousands of lives, says the Economist.

IT in health care is more than simply the presence of computers. It means a highly developed system of protocols and procedures that allow for the easy flow of information. While difficult to create, it would have great benefits, says the Economist:

  • One study argues that redundancy and inefficiency account for between 25 and 40 percent of the $3.3 trillion the world spends on health care every year and could be eliminated with proper IT.
  • Another study estimates that a third of America?s $1.6 trillion in annual health-care spending goes to procedures that duplicate one another or are inappropriate --costs that could be reduced with IT.
  • A fully interoperable network of electronic health records could yield $77.9 billion a year in net benefits, or 5 percent of America's annual health-care spending.

Better use of IT would also improve patient care. There would be faster referrals between doctors, fewer delays in ordering tests and getting results, fewer errors in oral or hand-written reporting, fewer redundant tests and automatic ordering and refills of drugs. According to the Economist:

  • Electronic ordering of drugs can reduce medication errors by 86 percent.
  • Other IT could prevent 2 million adverse drug interactions and 190,000 hospitalizations a year.

One problem with developing these IT networks is that the cost of buying and using the technology would largely fall on private practices, but the benefits would largely accrue to insurance companies. Consequently, the government might need to subsidize the introduction of such technology, says the Economist.

Source: "IT in the health-care industry," Economist, April 30, 2005.

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