Savings from a national electronic heath record: Reality or illusion?

October 1, 2005

Health-care costs continue their relentless rise, and many reformers-including the president-are looking to the electronic health record as a miracle cure: Computerized records, accessible and interoperable among health-care facilities, would, they say, greatly reduce costs by avoiding duplication and preventing medical errors. Most recently, the RAND Corporation joined in the chorus in an article last month in

Health-care costs continue their relentless rise, and many reformers-including the president-are looking to the electronic health record as a miracle cure: Computerized records, accessible and interoperable among health-care facilities, would, they say, greatly reduce costs by avoiding duplication and preventing medical errors. Most recently, the RAND Corporation joined in the chorus in an article last month in Health Affairs.

Using a computer simulation, RAND researchers calculated that implementation of a nationwide electronic health records network would take about 15 years to launch, and would cost about $98 billion from hospitals and $17 billion from physician practices. If 90% of providers adopted the system, annual savings would total $81 billion from improved efficiency and $4 billion from reduction in medical errors. The health-care system would see 200,000 fewer adverse drug events among hospitalized patients, Medicare would save about $23 billion annually, and private insurers would save about $31 billion annually.

But skeptics question this rosy scenario. Accompanying perspectives in the same issue of Health Affairs attacked the RAND study for "unproven assumptions and wishful thinking" and for concentrating on savings that, even if they were to materialize, would not offset the rising costs of new technology and an aging population. (The study report and accompanying commentary are in Health Affairs 2005;24[5], available without charge at http://www.healthaffairs.org/.)