The ABCs of systemic healthcare reform - Cerner Corporation

The ABCs of Systemic Healthcare Reform
The direction of the $2.3 trillion current U.S. healthcare system is clearly unsustainable.
Our healthcare spending growth has outpaced the rest of our economy for 40 years, and
it is on pace to double in the next 10 years, when spending will exceed 20% of our overall
GDP. (For the record, every other G8 country has a similar growth rate, so it is not as
though they have figured something out that we missed. They just have a different starting
point.) The Obama administration is making healthcare reform a priority, using strategic
investment in HIT as a key element in the effort to transform the system.
There is a present convergence of forces that could lead to real healthcare reform this
next decade with HIT leading the way. We, as a society, have been handed a significant
opportunity, and we cannot afford to waste it. At Cerner, we believe it is always very important
to begin any long journey with the end in mind. With the unprecedented investment that
is going to be made, citizens should be asking what type of change will be created with
a completely digitized healthcare system, and how society should benefit. While no one
asked for our opinion, I felt compelled to write Cerner’s view of the direction of reform and
the future state of such a healthcare system. As you might imagine, we see systemic change. Our position is in my short paper
called The ABCs of Systemic Healthcare Reform. A couple of comments on what it is not. It is not a comprehensive solution to
all of the healthcare issues that must be solved—for example, how to provide benefits to the uninsured population—but it creates
the platform to enact these types of changes. It is also not a peer-reviewed paper—you’re not going to see this in Health Affairs
next month—but it does contain some evidence to support it. Entrepreneurs are not researchers. We do not study problems, we
fix them. But we do also read scholarly journals from time to time.
As an impatient entrepreneur, here is what I believe and what I propose should be the benefit to society for their investment in
healthcare information technology. For the full version of the ABCs with sources, go online to www.cerner.com/ABCs.
We believe that up to $500 billion per year could be saved in the U.S. healthcare system by fully digitizing and optimizing healthcare
delivery. Up to $300 billion of this savings can come from modernizing how we deliver care and an additional $200 billion by
modernizing how we pay for care. Many of our clients have objected to past efforts to reduce healthcare costs because U.S. policy
has simply been to reduce the amount paid to hospitals and doctors, introducing chaos in the industry. However, most healthcare
executives with whom I have spoken believe that the ABCs, as described below, would produce powerful positive systemic benefits
for healthcare delivery. With the right blueprint, almost everyone can agree about how to improve the system.
The first three steps are currently underway with many of our clients. Progress starts when we (A)utomate the current healthcare
delivery processes and workflows by fully implementing EMRs. A 2005 RAND study suggests this can yield $77-100 billion in
recurring savings when broadly adopted. Next, we must (B)ase treatment decisions on evidence, not anecdote and memory.
It takes approximately 17 years for new evidence to make it into routine practice of care. A 2003 study published in the New
England Journal of Medicine found that Americans receive the recommended care only about half of the time. Basing decisions
on evidence will drive this important cause of variance out of healthcare. Although there is no single study to estimate the total
savings, there are numerous smaller studies that suggest significant savings. I believe the annual savings could be in the range
of another $100 billion. Then, (C)oordinate care across the fragmented pieces of healthcare. The 2005 RAND study suggests
this step could return $82-100 billion.
The first three of the ABCs have the potential to reduce annual U.S. healthcare spending by $300 billion. However, a sizable
opportunity for savings and improvement remains. We must (D)isrupt the incoherent claim-based payment system with healthcare
e-commerce that determines eligibility and pays at the point of service. Shifting healthcare administration costs from 31% to an
achievable 21% would save another $230 billion annually.
Achieving the four objectives above could potentially save the United States $500 billion annually. With reform as our objective,
though, I think we would be short-sighted not to ask for two additional steps, which I believe are foundational to lasting systemic
change. It is important that we (E)volve to consumer-controlled Personal Health Records (PHRs). Every American should own his or
her own Personal Health Record and determine who can access it and under what circumstances. The PHR becomes the source of
medical information for anyone who needs to treat the person. The PHR also would allow for advanced uses of “cloud computing”
concepts that would work on behalf of the person. And last, (F)inancial innovation must come in the form of new business models
for paying physicians. Today’s approach pays healthcare providers based on the volume of procedures they perform. At a time when
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