Electronic records turn out to potentially add costs rather than reduce them

posted at 1:21 pm on January 11, 2013 by Ed Morrissey

Remember how the White House and Democrats promised that ObamaCare would “bend the cost curve downward”?  One key initiative involved spending billions to convert medical records into digital form, which supposedly would reduce costs by as much as $81 billion a year. Instead, the same group that insisted that would happen now says it might make costs rise — in part by allowing providers to bill patients and insurers more:

The report predicted that widespread use of electronic records could save the United States health care system at least $81 billion a year, a figure RAND now says was overstated. The study was widely praised within the technology industry and helped persuade Congress and the Obama administration to authorize billions of dollars in federal stimulus money in 2009 to help hospitals and doctors pay for the installation of electronic records systems.

“RAND got a lot of attention and a lot of buzz with the original analysis,” said Dr. Kellermann, who was not involved in the 2005 study. “The industry quickly embraced it.”

But evidence of significant savings is scant, and there is increasing concern that electronic records have actually added to costs by making it easier to bill more for some services. …

Officials at RAND said their new analysis did not try to put a dollar figure on how much electronic record-keeping had helped or hurt efforts to reduce costs. But the firm’s acknowledgment that its earlier analysis was overly optimistic adds to a chorus of concern about the cost of the new systems and the haste with which they have been adopted.

Legislate in haste, repent at leisure.  How exactly did this influential report come to be?  Three guesses:

RAND’s 2005 report was paid for by a group of companies, including General Electric and Cerner Corporation, that have profited by developing and selling electronic records systems to hospitals and physician practices. Cerner’s revenue has nearly tripled since the report was released, to a projected $3 billion in 2013, from $1 billion in 2005.

In fact, the CBO “harshly criticized” the analysis at the time, the New York Times notes far into the article.  RAND’s new analysis gets its funding from disinterested sources, and is being conducted in part because RAND’s board wanted to revisit the industry-funded results from 2005.

It’s a little late for that now. Congress has passed billions of dollars in subsidies to this supposed cost-saver, without ever asking the pertinent question: if electronic records save so much money, why didn’t providers adopt it on their own?  Why didn’t insurers insist on it? Those stakeholders have the most immediate incentive to save costs.  There may be other benefits to having electronic records, but clearly cost savings isn’t among them, and the lack of a rush to adopt the practice should have been the first big clue to Congress that ObamaCare wasn’t going to deliver what Barack Obama promised.

Now that the money has been allocated, of course, we get the full Emily Litella.  Too bad there wasn’t as much scrutiny on these promises from the media — and where and how they originated — at the time.


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