Healthcare Gets a (Digital) Backbone

Posted by Mark Brousseau

The digital backbone that connects health providers, payers and vendors is expanding, according to Behind the Numbers: Healthcare Cost Trends for 2008, a new report from Pricewaterhouse Coopers’ Health Research Institute (www.pwc.com/hri).

Connecting the health system electronically will aid payers in better managing both performance and compliance throughout the continuum of care, the report concludes. Clinicians and business offices are increasingly using technologies such as personal computers, electronic health records, wireless systems, biometric devices, and imaging software to coordinate and improve care. For example, widespread adoption of electronic medical records and other health information technology is estimated to save $162 billion a year by improving care management, reducing preventable medical errors, lowering death rates from chronic disease, and reducing the number of employee sick days, the report finds.

Providers are beginning to invest substantially in their own health information technology (IT) systems. During the past few years, most hospital systems have been allocating an average of 25 percent of their capital spending on health IT, according to Fitch Ratings, a New York ratings agency. While initial spending on IT has been shown to add to costs, the longer-term effect is one of reduction in costs. Health IT investment typically reaches a tipping point in terms of cost, according to Pricewaterhouse Coopers’ research released in 2007. That tipping point tends to reflect continued investment after which hospital operating costs are reduced. Building the digital backbone requires connecting to physicians, and an increasing percentage of physicians themselves are going business electronically as well, Pricewaterhouse Coopers found.

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