This Week, Industry Snapshot Looks at
Healthcare Information Systems

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This Week's Industry Snapshot

It's not possible to have control over healthcare costs until there is control over healthcare information. That is the fundamental thesis driving development in the healthcare information systems industry. Of the $1 trillion that was spent last year on healthcare, it is estimated that $180 billion was spent on "administrative costs," that is, the costs of distributing care. All it takes is one trip to the doctor's office to verify this number.

It would seem that the rallying cry of the digital revolution fell on deaf ears in some pockets of the healthcare industry. A fact reinforced once you have completed filling out your fifth form at the physician's office, essentially duplicating all the same information in the lost tradition of medieval scribes. Unnecessary duplication and other inefficiencies, while the bane of the corporate world, have yet to be addressed in an integrated fashion in the healthcare industry. While this is hardly news (thus far this piece may have run virtually verbatim back in 1989), one important element of healthcare information technology (HIT) has changed dramatically, and that is payer/provider perceptions regarding the need for information technology.

In its annual survey of healthcare providers, the Healthcare Information & Management Systems Society (HIMSS) reported that for the first time in the survey's eight year existence (1997) respondents did not list "the need to control costs" as the primary driver of computerization. Instead, 57% of providers cited the need to "achieve a competitive advantage in the market." It would seem that the gap between cost control and competitive advantage has been bridged by the understanding that investments in information technology are now of strategic necessity.

An increasingly common scenario that highlights the concerns of many in the field today is brought to life by industry commentator Christian Hester, "I have XYZ HMO coming to me saying that they'll give me X dollars for every hip replacement I do (or whatever procedure it might be). Is it profitable for me to take it, or is it not profitable? How do I know? And if I take it and it's not profitable, I'm going to lose my shirt." As can be inferred, the dominance of managed care in conjunction with the ubiquity of pre-paid forms of reimbursement make it increasingly likely that providers will be driven into the arms of HIT systems that enable them to manage their costs.

This is a significant long-term trend that won't be derailed, but in the near term, both payers and providers are engaging in a balancing act. They must manage the tradeoff between the long-term strategic benefits of a broad, integrated information systems plan with the near-term necessities of cost pressures and meeting profitability requirements.

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