Study Raises Doubts About IT's Ability to Reduce Health Care Costs

Loraine Lawson

Everybody loves a technology success story, and here at IT Business Edge, we particularly like the ones that show how IT can transform the business. It's probably why I'm not a big Nick Carr fan. I think he underestimates the difference a dedicated IT team can make-and, on a more cynical note, how much managers like to control their own resources.


It's also why I shared the success of Kaiser Permanente's electronic medical records revamp, which received an award from the Healthcare Information and Management Systems Society this year. Two years ago, Kaiser made tech headlines because of problems - its unintegrated health care data system led to the failure of its kidney transplant center. Baseline, which ran a lengthy feature on the IT problems the insurance chain faced, drew a connection between this administrative failure and patient deaths, writing "twice the number of patients died waiting for kidneys at Kaiser as received transplants the reverse of regional trends, according to the Scientific Registry of Transplant Recipients (SRTR), a research group in Ann Arbor, Mich., that tracks U.S. transplant data."


But as much as it'd be nice to point to health care success stories and say, "See, IT can make a difference," facts are facts. And the facts, as uncovered by a recent study by the Harvard Medical School, show technology isn't going to be health care's white knight.

Mind you, this is a clinical research study that evaluated data on 4,000 U.S. hopsitals, over four years. They looked at some of the country's "most wired" hospitals, Computerworld reports, and the findings are, to be frank, grim, especially when you consider the government's plans to spend $19 billion on health care information technology.


Nick Carr summed up the report this way:


"The researchers combed through data on IT spending, administrative costs, and quality of care at 4,000 US hospitals for the years 2003 through 2007. Their analysis found no correlation between IT investment and cost savings or efficiency at hospitals and in fact found some evidence of a link between aggressive IT spending and higher administrative costs. There appeared to be a slight correlation between IT spending and care quality, in some areas, though even here the link was tenuous..."

Computerworld added this:


"...the immense cost of installing and running hospital IT systems is greater than any expected cost savings. And much of the software being written for use in clinics is aimed at administrators, not doctors, nurses and lab workers. ... only a handful of hospitals and clinics realized even modest savings and increased efficiency -- and those hospitals custom-built their systems after computer system architects conducted months of research."

As much as it makes me flinch to say it, it seems Carr's right. You can't throw computers at the problem and expect that to fix everything:


"There is a widespread faith, beginning at the very top of our government, that pouring money into computerization will lead to big improvements in both the cost and quality of health care.As this study shows, those assumptions need to be questioned - or a whole lot of taxpayer money may go to waste. Information technology has great promise for health care, but simply dumping cash into traditional commercial systems and applications is unlikely to achieve that promise - and may backfire by increasing costs further."

This study may further shake our faith in technology. Carr's not the only one raising questions. Recently, Jerome Pineau-a professional tech evangelist for BI vendor GoodData-called CRM a hoax.


It makes me wonder if IT is headed into the infamous trough of disillusionment.

Joe McKendrick, ZDNet's SOA blogger, pointed out that this study confirms an often-overlooked point: Technology is merely a tool. The health care system is broken, and while technology can help, it can only help if we're willing to reinvent the existing system. In today's post, he writes:


"Remember Mike Hammer's maxim: 'When you automate a mess, you get an automated mess.' As with automation in any industry, organizations need to first clear up and address underlying processes and issues before throwing software and systems at them."

It's a good warning, and a reminder that while IT success stories may be uplifting, you can't just look at the technology system changes. You've got to investigate the business changes as well. Otherwise, the same IT tactics are unlikely to translate into success at other companies, for reasons that may have everything to do with IT or nothing to do with IT.

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