The Business Value of Health Care Information Technology

The American health care system is one of the world''s largest and most complex industries. The Health Care Financing Administration reports that 1997 expenditures for health care exceeded one trillion dollars, or 13.5 percent of the gross domestic product. Despite these expenditures, over 16 percent of the U.S. population remains uninsured, and a large percentage of patients express dissatisfaction with the health care system. Managed care, effective in its ability to attenuate the rate of cost increase, is associated with a concomitant degree of administrative overhead that is often perceived by providers and patients alike as a major source of cost and inconvenience. Both providers and patients sense a great degree of inconvenience and an excessive amount of paperwork associated with both the process of seeking medical care and the subsequent process of paying for medical services.Traditionally, health practitioners have sought a return to traditional fee-for-service payment to mitigate the inconvenience associated with managed care. More populist proposals include universal health insurance or mandatory enrollment in health maintenance organizations. Advocates of managed care argue that the business methods required for effective trials of this approach are only beginning to be realized. By all accounts, information technology is a necessary part of these initiatives, but there is universal consensus that our current systems are inadequate to the task. (Oxford Health System''s difficulties in 1998, for example, have been attributed in part to inadequate deployment of information technology.) To this author, the model for the current generation of health care information systems is strikingly similar to that for the information systems employed by the Internal Revenue Service. In each case, the system allows for low-cost changes to administrative code brought about by legislation, but in both cases the “ripple effects” of additional complexity and administrative burden far exceed the cost of immediate change. To paraphrase a quotation attributed to Major Richard Dailey, made about his police force during the 1998 Chicago Democratic Convention, our information systems “are not here to create disorder; they are here to preserve disorder.”This case explores one alternative source for models in health care delivery. Through an examination of a typical patient experience, we explore Porter''s notion of the value chain and “just-in-time” logistics common to successful organizations like Wal-Mart and Amazon.com (see Suggested Readings). We close with a brief discussion of how these logistics and inventory systems apply to health care. Clearly, logistics are important in patient care, accounts receivable are a cause of severe working capital problems in health care, and the logistics of caring for patients are becoming more complex. But the concepts we discuss have an even greater importance: Effective management of these issues through information technology may restore our most precious commodity—time.