Health Care Information Systems

note.jpgIn today's NY Times, Newt Gingrich and Patrick Kennedy identify a problem but propose the wrong solution. They see the archaic information systems so prevalent in most hospitals and want to completely overhaul them to bring them into the modern era.

Much of what Gingrich and Kennedy say is true. Speaking as a medical resident, it is certainly the case that information systems in hospitals are among the most antiquated in any industry. Many man-hours are wasted trying to piece together patient histories, lab results, and imaging studies, resulting in expenditure of valuable money and resources. Sloppy handwriting is rampant in patient charts. Medical errors, many of them life-threatening, happen due to miscommunication between various departments within the hospital.

On a typical call night, when a new patient is admitted to the hospital, the intern often spends as long as two hours piecing together various pieces of data from faxes, prior hospital records, and the patient's own verbal history for a single patient. Much of the written information he sees is handwritten, often incoherent or illegible. Valuable information is often lost. On average, up to ten patients might be admitted to a single intern's team in a night. He spends a large chunk of time simply collecting and interpreting unorganized data, instead of participating in actual medical care, adding to the obstacles sleep deprivation creates. Although I have not seen any studies quantifying the waste of resources and harm to patients created by poor information systems, anecdotally, I think that most people would be surprised how high the figures might be.

Unfortunately, Gingrich and Kennedy want to create a top-down solution to the problem. They think that medical information systems need to be "transformed" by the "widespread adoption of electronic health records". How do they want to go about actually doing this?

Therefore, widespread adoption of technology will depend in large part on federally organized public-private partnerships. Treasury dollars could help bring providers in a particular part of the country together to map out plans for a regional health information network, and to divide up the costs and the savings fairly between them. Medicare could sweeten the pot by reimbursing providers for money spent to use electronic health records connected to a regional network.

They are trying to create incentives for providers to upgrade information systems. That is all well and good, but most suppliers of goods other than health care already have incentives to cut costs, improve efficiency, and enhance productivity. Why do health care providers lack such incentives? The authors propose an answer to that.

Unfortunately, health care providers are famously stingy investors in information technology. The primary reason is that when new technology reduces the duplication, errors and unnecessary care, most of the financial benefits don't go to the providers who generate the savings, but to insurers and patients.

The lack of incentives to cut costs occurs due to "third-party payment syndrome". When buyers are not directly involved in evaluating, discriminating, and choosing a good, there is little incentive for the provider to make his product cheaper and more appealing. The effect is even more enhanced when the third-party is either a monopoly such as medicare or a safely entrenched third-party such as an employer who obtains tax benefits by providing insurance to employees.

The same effect is seen when college students have to buy textbooks assigned to them by their third-party professors. Does the professor really care about how much those textbooks cost the student? Are the students truly in a position to change professors based on the costs of the textbooks they are assigned?

The solution to the information systems mess in hospitals is not more tinkering with a failed system, but rather massive deregulation of the system. Most health care expenses should be paid out of pocket, and insurance should be restricted to catastrophic coverage, as it naturally would be in a free market. Only when buyers themselves are in a real position to directly choose among providers will providers have a true incentive to upgrade information systems.

One last note about something Gingrich and Kennedy too easily gloss over: privacy.

If all Americans' electronic health records were connected in secure computer networks that safeguarded patient privacy, health care providers would have complete records for their patients, so they would no longer have to re-order tests that have already been done.

Creating a massive nationwide information system for health care providers does not enhance privacy; it profusely degrades it. When the government wants information about you for political reasons, it will get it, even if it means breaking its own laws. With information becoming a more and more valuable part of our lives, people need to start thinking of information as a valuable market commodity that they need to secure on their own. Promises and oaths will not protect it. You have to give those who you share information about you an incentive to keep it private. Nothing works better than mutual self-interest.

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I am not in favor of the

I am not in favor of the Gingrich/Kennedy plan for all the reasons you oppose it.

But, insurance coverage only for catastrophic events?? I think we would witness people's overall health go immediately to hell in a handbasket!

A LOT of the medical records dilemna can be solved by people learning to be responsible about healthcare, and that means also the keeping of accurate, and up to date records about their healthcare. [One of my personal beefs are people who come into the er with not a list of their medications -- but a BAG full of various pills. YIPPIE!] :p

As for handwriting, mine is required to be neat and readable. Why it isn't the same for docs, I don't know. I personally don't have any problem making it clear to any doctor that if they don't make sure I can read their orders, they risk their ass being called back into the hospital whenever -- because I won't 'guess' what their scribble means.

People's cars are generally

People's cars are generally only covered for catastrophic events, and most people's cars are taken care of fine.

Why is biological maintenance different?

The whole point of insurance

The whole point of insurance is to protect against large risks. Routine medical costs are already known about in advance, which makes insurance a poor method for dealing with them.

Brian, I don't know what

Brian, I don't know what kind of car you drive -- but mine is covered for everything from oil changes to batteries for my remote start.

Micah, I can see this coming

Micah, I can see this coming from you -- but am amazed to hear it coming from a medical student/resident!

Micah, I can see this coming

Micah, I can see this coming from you ? but am amazed to hear it coming from a medical student/resident!


Michi, You purchased


You purchased insurance for oil changes? Did you also purchase insurance for gasoline refills?

Here is an excerpt from an article by two economists, Matthew Rabin and Richard Thaler (Journal of Economic Perspectives, Volume 15, Number 1, Winter 2001, Pages 219-232):

    Give us an expected utility maximizer who buys small-scale insurance such as internal wiring protection . . . and we'll give you a money pump you can hang your hat on. In this case, the Phone Company representative who has just sold a devout expected utility maximizer the wiring protection would go on: "While I have you on the phone, The Phone Company is willing to insure you against all of life's $55 risks. Do you realize, sir, that as we've been talking, the value of your stock market protfolio has several times swung wildly up and down by more than $55? We'll protect you! Give us $55,000 and we'll insure you against the possibility of a $50,000 loss." A true expected utility maximizer who has just bought wiring protection would jump at the offer. By contrast, myopic loss-averters would call the Better Business Bureau to report a scam.

Jonathan, 'Why?' Because


'Why?' Because Micah is not in medicine, and I would think a person in the field would understand how non black & white it can be, and how vital for a persons overall health good preventative care can be, and how those needs can vary from patient to patient.

Who is going to decide exactly what 'catastrophic' care entails? What poor soul is going to break the news to the low or middle wage worker that a test they need to monitor a condition is not going to be covered by insurance? After they are told, do you think they will continue to have the tests? I doubt it, and eventually, possibly too late, it will become catastrophic.

We live in a country where immunizations for children are FREE for anyone who needs them everywhere, yet we're still doing well if everyone takes advantage of this.

Catastrophic health coverage only just sounds, well, catastrophic.

Micah, My car is under


My car is under warranty, and when the warranty runs out -- I'll get another car. :)

My auto insurance does cover me if I run out of gas, and they send someone to me with enough gas to get me to a gas station. [luckily, I haven't had to test that one.] It isn't coverage that cost me anything 'extra'.

Here's another random

Here's another random thought: How do you suppose catastrophic coverage only would affect the chances of special needs children being adopted?

Suddenly, you not only need loving people willing to see to the care of a child with special needs -- but they also have to be able to foot the bill for anything not deemed 'catastrophic'.

an alternative to having a

an alternative to having a central repository of everyone's medical records is to enable everyone to carry their own medical records. The chip on my military id card has tons of information on it and is only accessed when I give it to someone that has the proper reader and lets me put in a pin code.

I'm not really that worried about a central repository to begin with since I'm sure all of our credit card transactions are securely dealt with in this manner anyway.

Michi, Opposing health


Opposing health insurance for everything but catastropic coverage is not the same as opposing prevantative care.

Again, the purpose of insurance is to protect against large risks. In general, insurance is always a bad deal for the consumer, because insurance companies have to pay for all the administrative costs in addition to paying out claims. The only time insurance is a "good deal" for the consumer, even though the expected benefit is always negative, is when a large cost would be a too burdonsome for a lone individial. Insurance spreads this risk to make it bearable, but at a cost.

This is why it is a bad idea to insure oneself against small risks. The point of the quote I mentioned was to show that if people were willing to insure themselves against all small risks, they would have no money left, regardless of how much they start with. This is why it does not make sense to insure against oil changes or gasoline refills or routine medical costs.

I did not ask about emergency car maintaince; I'm talking about routine gas refills - the kind you do every week or so. No one purchases car insurance for this kind of routine car maintance, and if they do, they are fools. So too, it makes little sense to insure against routine medical costs like dental and eye exams. The only reason people do purchase this kind of insurance is because it is subsidized through government tax breaks on employment benefits.

Why has everyone missed so

Why has everyone missed so far the fact that in a market-based healthcare system where people had sensible insurance, everyday and preventative care would be orders of magnitude cheaper than it is today? The fact that health care is enormously expensive arises from 3rd-party-payer phenomena. Re-internalize costs and benefits, and watch prices re-align with people's preferences.

And though Micah pointed it out, the point that routine medicine is fundamentally non-insurable is also being missed. Insurance, by nature, exists to cover unforseeable costs. Routine care is therefore uninsurable by definition.



- Josh



S-O-R-R-Y! I'm used to calling him by another name.

Micha, I think that you are


I think that you are missing is what differentiates 'health' insurance from other types of insurance is not the level of benefits, but the concept of managing care through prevention and maintenance.

The distinguishing characteristic of health insurance is the overall value that is added to services, such as care management, disease management, there is also a coordination of information and accreditation standards that ensure certain levels of quality.

If health insurance would be limited to catastrophic events, it would cease to be health insurance.


Michi, Prevention and


Prevention and maintenance do not need to be paid for through an insurance mechanism. The benefits of insurance, as I already mentioned, is protection against large difficult-to-bear riskts. The costs of insurance, however, are manifold.

From The Concise Encyclopedia of Economics entry on Health Insurance:

    The primary reason health care costs are rising is that most spending on health care is done with someone else's money rather than the patient's. As a result patients avoid making tough choices between health care and other goods and services. The most wasteful kind of health insurance is insurance for small medical bills. These are the expenses over which patients exercise the most discretion and for which opportunities for waste and abuse are greatest. Moreover, by the time an insurance company gets through processing a twenty-five-dollar physician fee, the cost will be fifty dollars?thus doubling the cost of medical care.

    The alternative to third-party insurance is individual self-insurance. The alternative to having third parties pay every medical bill is to have people pay most medical bills with their own money. The alternative to having large bureaucracies limit spending decisions with arbitrary rules and regulations is to let people make their own decisions.

    Many economists who have studied the health insurance market believe that a more prudent approach would be to choose a high deductible and put the savings (from lower premiums) in individual medical savings accounts. In a short period of time, the vast majority of people would have accumulated savings far in excess of the annual deductible. If not spent, these funds could be used for postretirement medical expenses or as a supplement to retirement pensions. Singapore, for example, has built its entire health care system around individual self-insurance. Singapore workers are required to put 6 percent of their income into medical savings accounts every year.

    In the United States we have moved in the opposite direction. Every dollar in premiums spent by employers for third-party health insurance receives a generous tax subsidy. Every dollar employees try to save is taxed.