Will Electronic Health Records Increase Health Costs?

Health care reform advocates argue that encouraging providers to use electronic health records would reduce medical errors, lower administrative costs and improve patient care, but the transition could also lead doctors and hospitals to easily prescribe unnecessary care and bill more for services, increasing costs for Medicare and private insurers. From the New York Times:

Over all, hospitals that received government incentives to adopt electronic records showed a 47 percent rise in Medicare payments at higher levels from 2006 to 2010, the latest year for which data are available, compared with a 32 percent rise in hospitals that have not received any government incentives, according to the analysis by The Times.

The new health IT systems will allow providers “to better document the care they provide, justifying the higher payments they are receiving” and the Department of Health and Human Services tells the Times that the government “has strong protections in place to prevent fraud and abuse of this technology that we’re improving all the time.”

Moreover, the delivery reforms included in the Affordable Care Act, which are designed to transform the current fee-for-service system of rewarding volume and intensity of services into one that prioritizes quality and efficiency, may help discourage over billing. Offering providers a fixed payment that covers all services for a specific medical condition, for instance, or a global payment that is based on a global budget for a population under an Accountable Care Organization (ACO) could also slow costs and eliminate over treatment.

Ultimately, real world experiences and a multitude of research has concluded that health IT is essential to coordinating care and enabling doctors to access vital information in real time. As the Congressional Budget Office has concluded, the federal government will save $7 billion by 2014 as a result of health IT, which providers will benefit from $17 billion in savings.