The IT Transformation Health Care Needs

Reducing costs while improving care

by

and

David M. Cutler

by

and

David M. Cutler

From the Magazine (November–December 2017) · Long read

Getty Images/Hiroshi Watanabe

Summary.

In recent years, health care organizations have made sizable investments in information technology. They’ve used their IT systems to replace paper records with electronic ones and to improve billing processes, thereby boosting revenue. But so far, IT has been of little value in making medical care delivery more effective or less expensive.

How can health care organizations change this? One key is to prioritize quality improvement over cost cutting. By harnessing IT to help design better clinical practices, it’s possible to achieve better patient outcomes and better financial performance. It is also vital to gather good information—by using simpler, more-organic collection methods—and to make it actionable by applying analytics. Finally, many organizations will need to forge new business and operating models, expanding their IT staffs, revamping how their clinical staffs work, and creating new payment structures.

The authors provide numerous examples of health care organizations that are taking these steps—and seeing impressive results.

In Brief

The Problem

In recent years, health care organizations and the U.S. government have invested tens of billions of dollars in information technology. So far they have little to show for it: The impact on the cost and quality of clinical care has been modest, and productivity growth in the sector continues to lag that of other industries.

The Root Cause

The priorities of most providers have been replacing paper records with electronic ones, improving billing to maximize reimbursements, and monitoring existing clinical processes.

The Solution

Use IT to transform clinical care. This entails emphasizing the improvement of care over cost cutting, making data collection easier and better, turning the data into actionable information for clinicians, and forging new operating and business models.

In the mid-1990s, everyone knew that health care organizations across the United States were plagued by wasteful spending. The question for Intermountain Healthcare, which serves residents of Utah and Idaho, was where to start looking for savings internally. Data analyses quickly identified the most promising targets: 104 of the 1,440 clinical conditions that Intermountain treated accounted for 95% of the care it provided, and two services—newborn delivery and treatment of ischemic heart disease—accounted for 21% of its work.

A version of this article appeared in the November–December 2017 issue (p.128–138) of Harvard Business Review.

Nikhil R. Sahni is a fellow at the Harvard economics department and a consultant at McKinsey & Company. Previously, he worked at the Health Policy Commission, an independent state agency in Massachusetts, and was senior director of strategy, planning, and operations at Kyruus, a health IT start-up.
Robert S. Huckman is the Albert J. Weatherhead III Professor of Business Administration at Harvard Business School, where he is the Howard Cox Faculty Chair of the HBS Health Care Initiative and head of the Technology and Operations Management unit.
robert_huckman
Anuraag Chigurupati works in operations at Devoted Health, a start-up health plan. Previously he served as a policy director at the Massachusetts Health Policy Commission and was an engagement manager at McKinsey & Company.
David M. Cutler is the Otto Eckstein Professor of Applied Economics at the Harvard Kennedy School of Government and author of Your Money or Your Life: Strong Medicine for America’s Health Care System, published by Oxford University Press. He served on the Council of Economic Advisers and the National Economic Council during the Clinton Administration and was the senior health care advisor to the 2008 Obama Presidential campaign.

The IT Transformation Health Care Needs

In Brief

The Problem

The Root Cause

The Solution

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