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Blog - RAND standing firm

Give RAND Corp. researchers Arthur Kellermann and Spencer Jones a gold star for integrity for pointing out the predictions in a totemic 2005 RAND report haven't quite panned out yet.

Their latest analysis of the value of health IT, published in the January edition of Health Affairs, notes that the billions of dollars in annual savings from the adoption of health IT systems projected by RAND peer Richard Hillestad in 2005 haven't materialized.

The Hillestad study was often cited by EHR advocates, including a few federal legislators, as an economic argument for promotion of health IT.

What seems to be getting lost in some recent news reports and follow-up discussions about both RAND reports, however, is that while the predictions of Hillestad and his team “have not yet come to pass,” it is not because their cost-savings projections were flawed, according to Kellermann and Jones, but rather because of “sluggish adoption of health IT systems,” EHRs that are “neither interoperable nor easy to use,” and providers who fail to re-engineer their care process to best leverage the IT systems they have.

Some analysts have interpreted Kellermann and Jones' report as RAND crawfishing.

Hillestad, now retired, says he has been keeping up on the controversy and is standing firm.“I was feeling better yesterday, and then I saw some of the news reports out today, and I saw that people would like to twist and say initially we were wrong and were backing off,” Hillestad said during a telephone interview. “As far as I can see, Art (Kellermann) was picking up on the things that we said were necessary and they're not yet here yet. But we're not backing off.”

Hillestad's 2005 RAND group had set a baseline assumption of EHR adoption levels of 90% for hospitals and office-based physicians before their projected $81 billion in annual savings could occur. They also estimated a 15-year adoption period was needed to get to 90%.

It won't take that long thanks to the American Recovery and Reinvestment Act of 2009, game-changing legislation Hillestad could not have foreseen in 2005.

My main criticism of the analysis by Kellermann and Jones is their characterization of EHR adoption as “sluggish.” That may have been true in 2005, but today, it's out of date.

Kellermann and Jones based their assumptions on EHR adoption data from statistically solid but annually conducted surveys, which themselves were old news even before they were published. That's because EHR adoption is increasing so rapidly due to the ARRA's health IT incentive programs.

The programs paid out a record $1.25 billion in December, three times more than in any previous month, according a presentation last week by CMS official Robert Anthony. He estimated that through December 2012, 83% of eligible hospitals and 33% of physicians and “other eligible professionals” had been paid under the Medicare or Medicaid EHR incentive payment programs.

By definition, that means they had at least acquired a tested and certified EHR. In all likelihood, at least another one-third of physicians and other professionals have signed up for the incentive programs and could be receiving payments for implemented EHRs soon, as in weeks, not months. On Jan. 2, the first business day of 2013, about 2,000 providers submitted applications for EHR incentives, Anthony said. A CMS spokesman subsequently reported that a total of 11,000 physicians and other eligible professionals had attested as EHR users through Jan. 11.

We'll likely see 90% or higher EHR adoption levels by hospitals in the next couple of months, and we could get close to that level by physicians and other professionals by the end of 2013.

That's not sluggish adoption, that's cheetah-fast adoption.

I don't do economic modeling, so I won't comment on Hillestad's estimate that once 90% adoption levels are achieved, the annual savings could be in the $81 billion range. Return-on-investment analyses within health IT organizations are as rare as unicorns, so doing one for the national healthcare economy would be a neat trick, even retrospectively. But in any regard, it's well above my pay grade.

Maybe in a year or so, ONC can coax Hillestad out of retirement and ask for a second opinion.

I'd certainly like to see it.
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