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In Second Look, Few Savings From Digital Health Records

Jill Fromer | Photodisc | Getty Images

The conversion to electronic health records has failed so far to produce the hoped-for savings in health care costs and has had mixed results, at best, in improving efficiency and patient care, according to a new analysis by the influential RAND Corporation.

Optimistic predictions by RAND in 2005 helped drive explosive growth in the electronic records industry and encouraged the federal government to give billions of dollars in financial incentives to hospitals and doctors that put the systems in place.

"We've not achieved the productivity and quality benefits that are unquestionably there for the taking," said Dr. Arthur L. Kellermann, one of the authors of a reassessment by RAND that was published in this month's edition of Health Affairs, an academic journal.

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.

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.

Health care spending has risen $800 billion since the first report was issued, according to federal figures. The reasons are many, from the aging of the baby boomer population, to the cost of medical advances, to higher usage of medical services over all.

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.

The recent analysis was sharply critical of the commercial systems now in place, many of which are hard to use and do not allow doctors and patients to share medical information across systems.

"We could be getting much more if we could take the time to do a little more planning and to set more standards," said Marc Probst, chief information officer for Intermountain Healthcare, a large health system in Salt Lake City that developed its own electronic records system and is cited by RAND as an example of how the technology can help improve care and reduce costs.

The RAND researchers pointed to a number of other reasons the expected savings had not materialized. The rate of adoption has been slow, they said, and electronic records do not address the fact that doctors and hospitals reap the benefits of high volumes of care.

Many experts say the available systems seem to be aimed more at increasing billing by providers than at improving care or saving money. Federal regulators are investigating whether electronic records make it easier for hospitals and doctors to bill for services they did not provide and whether Medicare and other federal agencies are adequately monitoring the use of electronic records.

Technology "is only a tool," said Dr. David Blumenthal, who helped oversee the federal push for the adoption of electronic records under President Obama and is now president of the Commonwealth Fund, a nonprofit health group. "Like any tool, it can be used well or poorly."

While there is strong evidence that electronic records can contribute to better care and more efficiency, Dr. Blumenthal said, the systems in place do not always work in ways that help achieve those benefits.

Federal officials say they are drafting new rules to address many of the concerns about the current systems.

A handful of lawsuits have been filed over the systems. In the fall of 2010, for example, Girard Medical Center, a small hospital in Crawford County, Kan., hired Cerner Corporation to install an electronic records system. The hospital was hoping to obtain federal financing for it.

But after receiving $1.3 million in payments, Cerner employees failed to get the system up and running in time for the hospital to qualify for federal incentive payments. The company then notified the hospital that it was abandoning the project, according to a lawsuit Girard filed against Cerner last year. The case is in arbitration. A lawyer for Girard and a spokeswoman for Cerner declined to comment.

Late last year, a physician practice in Panama City, Fla., filed a lawsuit against the health care technology firm Allscripts after the company stopped supporting an electronic records system called MyWay that it had sold to 5,000 small-group physicians at a cost of $40,000 per physician.

The lawsuit said that the system had problems and that the physician group was unable to meet the criteria for federal incentive money. A spokeswoman for Allscripts said it would defend itself vigorously.

The 2005 RAND report helped Cerner executives and others sell the new systems, despite criticism at the time that the analysis was too rosy. RAND said that the report was not influenced by its financial backers and that, in fact, it disclosed the corporate sponsorship prominently in the report itself.

The study was harshly criticized by the Congressional Budget Office for overstating expected savings.

The new analysis was not sponsored by any corporations, said Dr. Kellermann, who added that some members of RAND's health advisory board wanted to revisit the earlier analysis.

Dr. David J. Brailer, who was the nation's first health information czar under President George W. Bush, said he still believed tens of billions of dollars could eventually be squeezed out of the health care system through the use of electronic records. In his view, the "colossal strategic error" that occurred was a result of the Obama administration's incentive program.

"The vast sum of stimulus money flowing into health information technology created a 'race to adopt' mentality — buy the systems today to get government handouts, but figure out how to make them work tomorrow," Dr. Brailer said.

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