How technology drives up health costs

By | March 18, 2010, 6:42am PDT

Summary: Moore’s Law doesn’t stand a chance when the state-of-the-art at the top end is all that counts.

Imagine if printers controlled the PC market.

A new printer, no matter its cost, or the cost to use it, would be the coolest thing to have. If necessary you would tear out your whole network, all your PCs and other peripherals, just to support the latest printer.

Even if you had to pay thousands of dollars to print one page, you would justify it as necessary.

That’s health IT. That’s how the industry has evolved over the last decade, from CT scanners and advanced MRI machines inward, rather than from PCs and networks outward.

Moore’s Law doesn’t stand a chance when the state-of-the-art at the top end is all that counts.

There are good reasons for hospitals to have the latest imaging equipment. Today’s gear gives patients much smaller doses of radiation than in the past. Radiation cost is why scanning had been limited. As that cost goes down demand goes up.

When a new MRI machine costs $1 million you have to charge thousands of dollars to use it. But lower radiation costs, and better resolutions, both drive doctors to demand more scans, which they can then excuse as defensive medicine — fear of lawsuits. (Thus  lawyers are looking at over-use of imaging as grounds for suit.)

Everyone winds up getting too many tests, and when doctors own the equipment the conflict of interest should be obvious. But it is largely unexplored.

Right now the pushback against this is political and scientific.

To be effective it has to become economic.

By that I mean we need incentives for doctors to benefit financially when they reduce their reliance on expensive tests, and a requirement that use of the pricey peripherals be justified before their use and audited afterward.

Data can help with that. Larger population studies, examining results from millions of patient profiles, can tell you the relative value of scans. These results get more granular as more data goes into the pile. If we have data on 1 million 55 year old men with hypertension, in other words, we have more validity than when we have data on 1 thousand.

Those results need to go into best practices that physicians are told to follow. Exceptions are possible, but they need to be noted, their results tracked, and doctors held to account when it’s proven they are chasing too many wild geese.

The best price-performance in the hospital industry today comes from systems like Intermountain that also insure people and thus have an economic incentive to both limit scans and deliver results.

Aligning market incentives with efficiency, forcing doctors to justify use of the printer, is the thumb that needs to go on the health cost scale.

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Disclosure

Dana Blankenhorn

Dana Blankenhorn has been a journalist, writer and part-time futurist for over 30 years. At the present moment I run only a personal blog in addition to my ZDNet open source blog. DanaBlankenhorn.Com has the subtitle The War Against Oil. In the past I have used it to write about political history, e-commerce, personal matters, some ideas related to open source, and The World of Always On, which is the idea of using sensors, motes and RFID to turn WiFi links into platforms for applications which live in the air. My IRA account at Schwab holds a few tech shares, most notably some Intel and Applied Materials, but there are no open source companies in it. I don’t even own any CBS stock.

Biography

Dana Blankenhorn

Dana Blankenhorn has been a business journalist since 1978, and has covered technology since 1982. He launched the Interactive Age Daily, the first daily coverage of the Internet to launch with a magazine, in September 1994.

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I'll disagree on a few points
Ken_z 18th Mar 2010
"By that I mean we need incentives for doctors to benefit financially
when they reduce their reliance on expensive tests, and a requirement
that use of the pricey peripherals be justified before their use and
audited afterward."

The last time we designed a system to financially reward doctors from
ordering expensive tests we called it HMOs. I don't believe in having an
environment when doctors are financially rewarded by denying tests or
treatments.

Those results need to go into best practices that physicians are told to
follow. Exceptions are possible, but they need to be noted, their results
tracked, and doctors held to account when it?s proven they are chasing
too many wild geese.

We have standard protocols today and the doctors I have been to follow
them. Their acceptance is because they know the protocols work. I
would, however, never want to go to a doctor who is afraid to treat me
because some commission will investigate him or her for doing
something not carved in stone.

For me it gets down to the need to maintain the art of medicine as we
continue to develop the science of medicine. And let's not confuse the
science of medicine with the financing of medicine.

And let's not forget that the more you reduce the use of equipment like
MRIs that are now in place the more expensive it gets because fixed
costs are spread over fewer patients.

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