Monthly Archives: August 2010

Hospitals: reform, stimulus & codes

This month, August 2010, McKinsey has published several articles about the impact of changing regulations and other market dynamics on healthcare costs, investments and benefits. Earlier I summarized and provided a link to one of their articles: Health Insurance: reform, stimulus & codes That post addressed insurance companies; this one provides the save service for hospitals.

New regulations that require US health care providers to use electronic health records (EHR) and adhere to strict data-coding standards will force hospitals to spend billions of dollars over the next decade to upgrade their IT systems. The spending requirements risk squeezing hospital capital budgets already under strain from steadily rising costs. With government incentives covering only a small portion of the total, providers will be forced to recover quickly their investment dollars from operating changes.

… Our research shows that automating and standardizing health care information can bring benefits that extend beyond meeting demands for compliance. A provider that creates a best-practice IT platform to house and share medical records, to manage hospital resources more transparently, and to define precise guidelines for medically authorized tests and procedures can generate significant operating efficiencies. Such a platform minimizes paperwork, reduces the number of unnecessary treatments, and lowers the risk of drug and medical error.

The productivity and resource savings often pay back the initial IT investment within two to four years while also producing better health outcomes for patients. We estimate that total savings across the US provider landscape could be on the order of $40 billion annually. Achieving such a positive return on investment (ROI), however, requires distinctive change-management skills among hospital leaders, better governance, and sustained engagement from key clinicians.

Estimates suggest that a wave of US legislation and regulatory changes will affect up to 80 percent of the existing hospital IT applications. Among the most far-reaching of these developments are provisions, laid down by the American Reinvestment and Recovery Act (ARRA), requiring health care providers to implement IT capabilities such as electronic health records and computerized-physician-order-entry (CPOE) systems. While some providers use electronic health records on a limited basis, the new regulations standardize what is expected from them and make their use mandatory.

An accelerated timetable means that US health care providers have until the end of 2015 to make the investments or face fines starting at $2,000 a bed in the first year and up to $35,000 a bed by 2019.1 In addition, both revisions to the Health Insurance Portability and Accountability Act (HIPAA) 5010 and the switch to ICD-10 require providers to apply strict new data-coding standards—no small task given the number of databases, hospital systems, and clinicians affected.

…US hospitals will need to spend approximately … $80,000 to $100,000 per bed, for the required project planning, software, hardware, implementation, and training.

Our research shows that optimizing the use of labor, reducing the number of adverse drug events and duplicate tests, and instituting revenue cycle management can help typical hospitals generate savings of some $25,000 to $44,000 per bed a year. … The realization of the benefits from health care IT investments will require a radically new approach to IT on the part of the CIOs of health care providers, as well as the business leaders and clinicians those CIOs serve. Health care providers will need to use new approaches to achieve an inclusive governance process with streamlined decision-making authority, a radically simplified IT architecture, and a megaproject-management capability.

Many of the changes that are facing healthcare require new systems, new delivery processes, and new management strategies. In short: new ways of doing business. The sheer volume of work to be done and the need for new thinking suggest a need to bring in new talent to assist those already in healthcare meet the wide ranging challenges of the next few years.

The complete report is at:

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Health Insurance: reform, stimulus & codes

I have been focusing on electronic medical records from the point of view of physicians and hospitals. The impact on insurance companies may be even greater. An article in McKinsey Quarterly: The new IT landscape for health insurers, August 2010 ends with the conclusion: “… CIOs will need to transform more than 90 percent of a typical payer’s IT architecture and help other executives make the corresponding changes in their business processes.”

The article provides a comprehensive analysis supported by two exhibits that define and illustrate the issues. Excerpts:

Periodically, a dramatic change in an industry enables CIOs to step up and play a decisive role in corporate affairs. We see such a seismic shift in the US health insurance industry, which faces the most sweeping changes in its half-century history. The ranks of the health care payers comprise more than 350 companies, with combined revenues of $500 billion and combined IT spending of $13 billion annually. Three principal regulatory currents are producing the impending change:

Health care reform: The legislation anticipates 30 million new individuals will join insurance rolls, while an additional 100 million will be shifting policies. The law will usher in a fundamental change to the industry’s business model. Today: 90 percent of all private policies are paid for by employers that negotiate prices and terms of coverage. The recent legislation mandates new insurance exchanges, subsidies, and tax credits that will lead millions of consumers to contract directly with the health insurance payers.

US stimulus funding: In 2009, the US Congress passed the American Recovery and Reinvestment Act (ARRA), which contains special provisions for health care IT. These reforms will first affect providers, as over the next decade health care will become rooted in readily available, comprehensive medical records and IT-based clinical decisions. …  payers’ will need to build substantial new systems that can readily interface with health information exchanges and analyze electronic health records.

ICD-10: The modern data format documenting diagnosis and procedure codes—ICD-10—was released by the UN World Health Organization in 1994. But it is overdue in the United States, where it will replace ICD-9 and expand the available number of medical codes by a factor of eight [in some cases by a factor of 144.] This change will enable a much more detailed description of diagnoses and treatments. While ICD-10 promises to improve the accuracy of medical management and claims, its adoption will force payers to undertake an effort likely to exceed that of the Y2K campaign. Yet while the costs of adopting ICD-10 are significant, the potential regulatory penalties for failing to adopt will make it a necessity.

There are concerns being expressed in the medical community about the availability of resources to provide the infrastructure required for electronic medical records. Add the demands for resources required by insurance companies and the outlook is even more grim, unless of course, you are one of those needed resources.

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EMRs: Increasing Complexity and Capabilities II

EMRs, Intel, GE and telehealth for seniors

Intel has been studying technical and societal solutions for problems related to care for the aging for more than ten years. On August 2, 2010, Intel and GE announced the formation of a joint venture that will focus on telehealth and independent living to tackle the increasing global burden of chronic disease and age-related conditions. Said simply, using technology at places other than medical facilities to improve senior health.

Some of these technologies, particularly the diagnostics, will be heavily data oriented. As an example, monitoring and tracking the ways a person uses the telephone to detect changes that are predictors of Alzheimer’s and Parkinson’s 5 to 10 years before clinical symptoms appear. The analysis is based on subtle changes over a period of time. For an engaging explanation link to a TED MED presentation at

More and more data over an extended period of time. Almost certainly, additional providers serving the same or related areas. The providers will deal with the data collection and analysis and then what happens? It needs to be linked to other medical data, both historic and current, analyzed, and made available to the person being monitored so they can be responsible for their own health to the fullest extent possible, to their doctors – seniors almost always have multiple doctors – and the person’s caregivers, and concerned family members. Different forms and presentations of results based on the same data for different uses and users. Complexity and capabilities way beyond the scope of the systems being installed today.

Intel and GE are preparing to do this now. It will be a few years before the impact becomes a major issue but now is the time to design our EMR systems and networks to deal with the increasing need as the population ages and as the technology to assist them advances.

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Six Tech-Enabled Business Trends to Watch

The August 2010 issue of the McKinsey Quarterly is titled: “Ten tech-enabled business trends to watch.”  Six of the trends are related to EMRs and EHRs. I took advantage of an invitation to be a guest blogger to write about these six trends. The post concludes:

EMRs/EHRs started by addressing a limited opportunity: moving from paper to electronic files and to then sharing the data. The Internet is full of examples that started small and evolved in ways undreamed of. That will happen to EMRs/EHRs and, like all other changes on the Internet, it will happen with increasing speed. The six items above provide an “outside the box” look at some of what is on the horizon.

The post is at:

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EMRs: Increasing Complexity and Capabilities

EMRs and the Internet: evolutionary processes

The Internet is a place where a good idea are expanded and enhanced to make them more and more useful to more and more people. Early email often included links to “cool” sites and then we got Web crawlers that gave us access to more site and then there was Google. Email with lists of recipients grew into social networks that are still expanding.

Tomorrows medical records will be electronic, have formats that include today’s standard codes plus further refinements that make the sharing of existing and new information available for uses we have not even dreamed of.

A recent example: “Many in the medical community believe that those who treat depression would be able to dramatically reduce suicide or medication related problems if the doctors had access to daily mood diary data. Pilot data from John’s Hopkins has confirmed that. … We will use the Johns Hopkins University depression mood tracking SMS technology [the technology of Twitter] and adapt it to connect to the Practice Fusion EHR instead of the current physician standalone system [which will make it available to additional doctors and bring all relevant data to a single patient record.]”

Simply using today’s paper based formats and codes for the creation of medical records does not provide for “daily mood diary data” from cell phones and other SMS devices and the integration of the additional data with traditional medical data.

The history of the Internet argues that whatever is built today must allow for future flexibility for new uses and new technologies. Simply providing faster ways to replicate the faxing of standard code-based-forms will not provide access to the benefits that can be achieved.

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Electronic Tower of Babel II

“Friday, July 30, 2010: When the Veterans Affairs and Defense departments began testing health information sharing for their joint virtual lifetime electronic record (VLER) project, they could not initially exchange patient data successfully using the very standards specified by the Office of the National Coordinator for health record formatting. …

“Dr. Doug Fridsma, acting director of ONC’s standards and interoperability office, used the experience of VA and DOD as an example of the trickiness of getting standards right so healthcare providers can exchange health information properly. C32 is among the requirements of ONC’s recent final rule on standards and certification of electronic health records (EHRs).” Government Health IT

Two agencies of the Federal Government encounter the electronic Tower of Babel. Can 200+ vendors who are focused on individual healthcare providers with little or no financial incentive to deal with the networking of data beyond insurance do it better?

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EMRs: An Electronic Tower of Babel?

When you mix 200+ EMR vendors with $19 billion dollars of federal funding and send them out to chase 700,000 doctors and 5,000 hospitals what do you get? We are about to find out.

Years ago the commercial world learned that it is almost impossible to network and share date between computer systems sponsored by siloed organizations within a single company: marketing, production, distribution, HR, etc. The solution was enterprise systems (ERPs) from a limited number of vendors that cost millions and take years to fully implement.

Now we are looking to independent medical providers to acquire systems from a very large number of vendors driven by pressure to implement quickly with only limited standardization of some data and expecting to reap the full benefits of networked data.

It sounds more like a recipe for an electronic Tower of Babel than a solution for the 21st century. Am I missing something?

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