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How Much for a Health IT Network?

Use of information technology (IT) could improve the safety, quality, and efficiency of care, but adoption has been slow, mainly due to cost. But just how great are the costs involved?

According to a Fund-supported study, building a national health information network (NHIN) in five years would require $156 billion in capital investment, plus $48 billion in annual operating costs. Those amounts, while substantial, represent a fraction of current health care expenditures.

In The Costs of a National Health Information Network," (Annals of Internal Medicine, August 2, 2005), Rainu Kaushal, M.D., M.P.H., and colleagues estimate the cost of a model NHIN, which would include electronic health records (EHRs), secure communication networks, electronic claims submissions and eligibility verification, the ability to view and share test results, computerized physician order entry (CPOE), and electronic prescribing.

The system would need to be functional, as well as interoperable, in order to link health care providers. Hospitals would likely incur the greatest functionality costs ($51 billion), mainly because of expensive EHR and CPOE systems. Skilled nursing facilities and office practices would incur high costs ($31 and $18 billion, respectively) because they have limited IT now in place.

Because interoperability costs are associated with the number of providers, office practices would require the bulk of funds ($31 billion), followed by pharmacies ($10 billion), skilled nursing facilities ($5 billion), and hospitals ($2 billion).

Given such costs, the authors conclude that the private sector is unlikely to readily adopt health IT without public sector investment and incentives.

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