Bain's David Bellaire Visits Healthcare's Electronic Frontier

Bellaire: They inform better clinical decision-making. For example, they would help prevent the ordering of redundant lab tests, the prescription of incompatible drugs for patients, or even the rare instance when the wrong limb is amputated because lab results do not contain the right imaging results. The administrative side of medicine in the United States now consumes about 27 percent of the $1.8 trillion we spend on healthcare, and the latter figure translates to roughly 15 percent of the country's GDP. If we can find a way to better automate, routinize, rationalize, or otherwise manage the information flow and information redundancies, we might be able to get to expedient care delivered more efficiently with a much better outcome for the patient.

 
CM: How long has the capability existed?

Bellaire: Digitization has been the call of duty in the industry for almost 20 years. It started in the mid-1980s when the Institute of Medicine published a study on the subject. So, the recent push to EMR and related technologies should not come as a surprise, but there have been some major bumps in the road.

 
CM: What are the primary obstacles?

Bellaire: System interoperability, unclear financial benefit from EMR investments, and resistance to change. First, standards and interoperability platforms are not well established. You can still have 12 to 15 different systems trying to pass information between and among one another all unsuccessfully — even in some of the most revered institutions. Standards are under development, though. Second, the age-old problem in technology is that processes may get scrutinized but not streamlined in conjunction with systems implementation, which only automates what already exists in a very complex form. The financial benefits remain somewhat elusive. Third, clinicians, nurses, and others have written orders and communicated via written and oral forms for decades. By and large, they have not been masters of the digital universe. Change management, adoption and use policies, and training all need much more attention. For all of those reasons, the sector has experienced a number of implementation surprises and failures.

CM: Have those problems slowed healthcare companies' investment in EMR technology and services?

Bellaire: Survey work completed by Bain in the past six months among provider and payer organizations across the U.S. indicates that of the most important IT applications under development, EMR now ranks as number one in terms of demanding capital and other investment to build. The CAGR from 2003 to 2005 in EMR investment is running at 23 percent. It is a major driver of technology spending in healthcare. We expect electronic health records adoption to grow from 21 percent in large hospitals today to around 40 percent in 2010. Fifteen percent of small hospitals today have EMR capability, and we think that this will grow substantially in next several years.

CM: What about privacy concerns?

Bellaire: Privacy is a very big issue. HIPAA has existed for some time, although it is increasingly gathering teeth. The enforcement of HIPAA has become a more commonplace effort. There are concerns about privacy, but organizations address it well.

CM: Besides the effectiveness and efficiency improvements surrounding patient care, are there any forces driving or shaping EMR adoption?

Bellaire: The federal agenda as well as private sector investments play a role. President Bush in April 2004 unveiled his 10-year effort to drive to EMR with $100 million of seed capital. That announcement was followed by the appointment of David Brailer to the role of National Health Information Technology Coordinator role. His two-year term concluded, and the position will soon be filled. Those efforts have been followed by a number of state initiatives — particularly in states facing explosive Medicaid spending [the state and federally sponsored program for the medically indigent] — designed to better manage their spending. In the private sector, for example, Massachusetts Blue Cross Blue Shield invested some $50 million to fund an e-health collaborative effort grounded in EMR. These state and federal initiatives are all very much focused on improving quality and outcomes of healthcare at a more affordable cost. We are spending two times as much as what many other industrial nations spend on healthcare. There is a clear and pressing need to use integrated informatics to become more efficient.
 

CM: Which firms are responding to the EMR opportunity?

Bellaire: Strategy-based firms are looking at the technology from a business-model perspective. They are helping to create a new business model to drive improved effectiveness in healthcare while reducing the spend and improving the treatment outcomes. Technology must enable that. Firms like Bain that perform technology-based strategy work are contributing in that way. Systems integrators, technology-planning firms, hardware and software applications development companies are also involved. There is a lot of technology planning, systems integration, training, change management, and systems architecture strategy work to be done as well. Sourcing firms are also thinking through whether the data can be offshored and mined elsewhere for improved delivery.

CM: Are there any comparisons — for example, ERP circa 1996 — that would help those outside the healthcare sector understand the consulting opportunities that surround EMR right now?

Bellaire: There are a number of analogs, but none of them is fraught with as much complexity as healthcare. The travel industry's work toward creating traveler profiles and better understanding and leveraging the behaviors of travelers offers some similarities. As does the development of new products, such as health savings accounts, in the financial services industry; that effort requires integration of a tremendous amount of information on spend patterns, utilization, standards of living, health conditions, and much more — and then an analysis of what all that implies for what people will spend in their health savings accounts. The complex integration of knowledge and information in technology-intensive industries like aerospace is another possible analog.
 

CM: It sounds like firms are starting to help more healthcare organizations maneuver around the EMR speed bumps . . .

Bellaire: We're closing in on close to $500 billion spent every year on healthcare administration. The economic imperative to get effectively deployed technology to automate and improve administrative efficiencies has never been greater. We're finding that a number of very large institutions — the academic institutions, pharmaceutical companies, biotech companies, and health plans with which we work — are using Bain heavily to think through new business models and technology requirements that have to be there to get the best yield. They are looking for least spend and the greatest impact.