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Study: Model Health IT Network to Require $156 Billion in Capital Investment

AUGUST 1, 2005 -- Creating a "model" national health information network would require $156 billion in capital investment and $48 billion in annual operating costs over the next five years, according to a study released Monday.

The study renews the debate over how much the federal government should contribute toward those costs.

National Health Information Technology Coordinator David Brailer was among the panel of experts that compiled the estimates. Brailer supported the Department of Health and Human Services' funding of $86.5 million in fiscal 2005 and the administration's $125 million request for fiscal 2006 to create a nationwide "health IT" network.

"I think no one's disputed that this is very expensive for the industry to do. I think the question is should the government do it," Brailer said in an interview.

Relying on tax dollars as the primary financing mechanism would be "incredibly inefficient and it comes with all kinds of strings attached and all kinds of rules and regulations that would stop us from achieving the goal" of interoperable medical records, he said.

Many health care experts and lawmakers agree that creating a national network to allow computer systems across the country to share individuals' medical information—with the proper confidentiality protections in place—could help improve medical care while reducing costs.

Researchers say the study, published in the Aug. 2 issue of the Annals of Internal Medicine, is the first of its kind to model and estimate the cost of implementing a national health information network (NHIN) across the country.

Brailer helped develop the financial model on which the estimates were based. But he said he thought the numbers were somewhat high and that other studies are needed.

Authors Rainu Kaushal of Brigham and Women's Hospital and David Blumenthal of Massachusetts General Hospital and their colleagues estimate that two-thirds of the $156 billion estimate for capital investment would be spent annually on getting such systems up and running, while one-third would be spent on interoperability, which would allow such systems to share information.

Annual operating costs would be more evenly divided, with about $27 billion spent on functionalities and $21 billion on interoperability.

If the current trajectory of information technology adoption continues, the health care system will spend about one-quarter of the costs of the functionalities of a model NHIN and probably not even begin to address issues of interoperability, the authors wrote.

"These findings suggest that policy initiatives are needed if we are to close this gap," the authors note. "Clearly the implementation of an NHIN will be expensive."

Often those costs are incurred by a few players in the health care system while the benefits accrue to many. For example, the authors note, hospitals pay the cost to install computerized physician order entry systems although financial benefits from such investments accrue to many. Since institutions tend to invest in areas where they may see a direct financial benefit, "it seems unlikely that the private sector will move forward rapidly to adopt IT without public sector investment or incentives, both in terms of money and leadership," the report says. But the risk is that public dollars will substitute for private dollars invested in health IT over the next five years, the authors add.

An editorial published in the same issue of the Annals of Internal Medicine notes that "the federal government has not shown the willingness or ability to invest more than a fraction" of what the study's authors say is necessary to create health information technology and electronic health records.

The study was funded jointly by the Harvard Interfaculty Program for Health Systems Improvement and The Commonwealth Fund.

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