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Technology Is Not Going to Dramatically Change Health Spending

By April 2, 2018Commentary

I am a little tired of constantly reading how various forms of health information technology, including mobile apps, are going to make a dramatic change in health spending and/or the quality of health care.  There is very little, if any, support in the research for this proposition and just a little bit of actual logical assembly of facts and analysis would indicate that while information technology may provide some minor improvement, it is not going to make a serious dent in our health system issues.  Health spending is the product of two basic factors–the number of services used and the unit price of those services.  The unit price of services, and products like drugs and medical devices, isn’t declining and isn’t going to decline.  Basic economic factors like inflation will prevent that from happening and health care generally isn’t seeing any kind of productivity increases that would support a unit price fall.  And of course the rampant and unchecked consolidation among providers and payers ensures ever-growing market power that translates to higher prices and lack of incentives to control costs.  Health IT nibbles at the edges by providing cheaper telemedicine costs, for example, and use of lower-cost clinicians, like physician assistants or nurse practitioners can help, but those are very minor offsets.  So over the next decade, I would anticipate continued unit price growth, even after accounting for inflation.

There is similarly no reason to expect utilization to decline.  We have already seen large falls, especially in the commercial population, in hospital inpatient use, which is the most costly category of care.  There are reasons to expect this to plateau, potentially even increase, as the aging population inevitably becomes sicker.  And all the prattling on and on about evidence-based medicine and care guidelines doesn’t foretell any significant reduction in care use, in fact, as I have repeatedly pointed out, if everyone was in maximal health and received the absolute maximal care to maintain that health, we would be adding at least as many services as we reduce.  And, as is apparent to anyone who looks, health spending is very concentrated among patients who HIT is generally not going to make a difference on.  Dementias are the emerging single largest cost disease, sorry but mobile apps aren’t going to help those people.  I am a big believer that in general, real human interaction will do more to help manage high-cost patients than any technology.  One trend that is good is a focus on the social aspects of health and health care–the immediate living environment and situation of patients.  Having a clinician or support team member attend to those issues in a personal way can have a beneficial effect on utilization and spending.  So I am always more impressed by companies that are delivering that excellent interpersonal interaction than on ones with some whiz-bang mobile app.

Where information technology can potentially make a difference is in administrative costs; especially the interaction between various participants in the system–providers, payers, patients, product suppliers–but even there, after spending tens of billions of dollars on EHRs and other IT, it appears that costs may have been raised rather than lowered.  And while health IT may encourage patient engagement, it tends to be most used by those who are already healthy and it also appears to have the potential to increase health service utilization and spending as much as reduce it.  None of this is to say that expanding the role of health IT isn’t a good thing, especially if it is voluntarily chosen by patients and providers, but stop trying to sell it as some big impending tipping point on health spending.  Health IT needs to be understood to be as likely to raise costs as to lower them.

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