Can technology heal the health care industry? What's needed are common standards, privacy assurances.

It seems like such a no-brainer: Introduce more information technology into the relatively primitive U.S. health care system to drive out huge amounts of waste, thereby lowering costs and improving the quality of care.

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But, in fact, it is a monstrously complex challenge--and not because of technological problems per se. The real stumbling blocks are human and institutional. Doctors and nurses are not trained to embrace IT, and are suspicious that too much computerization could be used to measure their performance. Doctors and hospitals don't really have an economic incentive to drive down costs because, at the end of the day, they expect that insurance companies and private employers will pay the tab. Insurers and employers want greater automation, but don't necessarily want to pay for it. Even if they did, they would lack the power to impose it on hospitals, doctors and nurses.

Understanding the real nature of the challenge might start the journey toward lasting solutions, participants at a Nov. 29 roundtable in Chicago concluded. The session, called "The Role of Information Technology in Creating a New Health Care System," was sponsored by the Blue Cross and Blue Shield Association. The subject was, and remains, timely because the Bush Administration has appointed a "czar" to champion the issue--David J. Brailer, whose title is National Coordinator for Health Information Technology within the Dept. of Health and Human Services.

The heart of the problem is that the health care industry is so fragmented and in some ways, still a cottage industry, said Gail Boudreaux, president of Blue Cross and Blue Shield of Illinois. "There are multiple parties, all with different economic benefits and outcomes," Boudreaux explained. "And those who fund one piece of the technology may not get the benefit of the investment, and that's part of the challenge."

Another fundamental problem is that there are no consistent standards to guide more computerization. Participants noted that the current systems used by hospitals, doctors, insurers and employers are not interoperable. "It's really about human behavior and process changes," said Mychelle Mowry, vice president of global health industries for Oracle. "We could have the best technology, but if we don't understand how to improve our processes and then support those new processes with the technology, then we haven't accomplished anything."

Just how many administrative dollars could be saved? Out of a total health care bill of an estimated $1.7 trillion, certainly tens of billions. But no one really knows for sure because of the complexity of the system. Scott Serota, CEO of the entire Blue Cross and Blue Shield system, which insures more than 94 million Americans, says his administrative costs are less than 10 percent of premiums. "But there are administrative aspects of physicians' offices, hospitals and pharmaceutical companies," Serota said. "Everybody has their own administration. We consider that a medical expense, but if you break it down to their level, it's an administrative expense."

It may be wrong, however, to concentrate on merely improving administrative costs. The real need is to change the behavior of physicians and patients. "How can I take care of diabetic kids over their life at a case rate that can be reduced by 40 percent?" asked Edward Sellers, CEO of Blue Cross and Blue Shield of South Carolina, which handles 400 million claims a year. "Let's go to work on that, and your savings will fall out of that. You've got to focus on diagnostic outcomes," not just administrative costs.

Much of the discussion focused on the computerization of individual health records, which are still overwhelmingly paper-based. Computerizing them obviously poses issues of privacy, which would have to be managed well, but pressure could be building to introduce more computerization. "I do believe that electronic medical records are on the horizon," said David Bernauer, CEO of Walgreen, a pharmacist by training. "I think the costs will come down. I think Hurricane Katrina has certainly done something to bring to everybody's mind how important it is to get away from those paper records."

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The federal government has, in fact, just announced grants to four major systems integrators to explore technology to link patient records with other elements of the overall health care system. Brailer's office also has created an interdisciplinary group called the American Health Information Community to push the Bush Administration's goal of having electronic health records for every American within 10 years.

Of course, aside from personal health records, there are health records controlled by providers, such as doctors. But just as individuals may resist having their health records automated for privacy reasons, physicians also may resist.

Embracing technology isn't something that most doctors learned in school, said Oracle's Mowry, a nurse, and Brandon Savage, a doctor who is general manager of enterprise solutions for General Electric's Health-care Information Technologies. "Two of us clinicians are sitting here," Mowry said. "We're educated in the old school. It's very difficult to change."

Savage argued that there's a problem in how IT knowledge is introduced and "embedded" into the workflow of physicians. "A guideline will come out in The New England Journal of Medicine and everybody says, 'Oh, that's the way you should practice,'" he explained. "But how do you get that information resource directly into the clinical workflow. It's probably why IT hasn't had a lot of success to date."

GE is trying to give physicians the tools they need to analyze how patients should be managed. "That's where information technologies start to emerge and become more robust," said Savage. "You get a tool set that says, 'Okay, this is the way a patient who's going for a magnetic image will be managed. These are the people who see them, this is the medication they get.'" But first the tools have to be created. "It's a daunting task to take paper and human relationships and try to optimize that process without an underlying infrastructure of technology," he said.

Where it gets tricky is making all the pieces of the system work together, particularly if government programs such as Medicare and Medicaid are thrown in. "How you get consensus on that becomes the real issue, and it's very difficult," said William Jews, CEO of CareFirst BCBS. "We have the government interface that changes, and we have the disaggregation of how different companies do it," he said. "What's the motivating force to build a consensus around the ultimate good?"

Even if--and it's a big "if"--systems could be linked up, the next question is one of "digital rights," meaning, who has access to what? Privacy safeguards would have to be rock-solid. "I'm surprised that everybody is willing to have iris data and their 10 finger prints stored electronically for future e-passports," said Gottfried Dutine of Royal Philips Electronics. "This is their very identity, what makes them unique. So for health records, we need some very different mechanisms in place. There are some really high security aspects."

There's something about health data that's even more sensitive than financial data. "The average person has a fear," said Denise Cesare, chief executive of Blue Cross of NEPA in northeastern Pennsylvania. "When we talk about our financial information being online, the only one who's going to use that other than me is possibly the credit bureaus." But if health care information were online, she said, that raises the fear that employers would say, "If you smoke, you can't work here." Some companies, she added, are "drawing some very hard lines in the sand" about the people they will hire and insure.

Prescription Progress

One of the most positive examples of computerization in health care seems to be the handling of prescriptions, and there, Walgreen has led the way. Bernauer, formerly CIO at the chain (which is the world's largest retail seller of pharmaceuticals), said the company started computerizing its pharmacies before PCs, using an IBM mainframe and phone links. "We did it solely because we wanted to get pharmacists to price prescriptions right," Bernauer recalled.

But the system became more complex over the last 20 years, with Medicare, Medicaid and various insurance plans, combined with the need to check patient eligibility.

By the mid-1990s, Walgreen had established online links with payers, states and even Medicaid. Now, said Bernauer, "we're doing checks for drug interactions, across not only our own database, but if you get your prescriptions someplace else," by linking to the data base of the health care provider. Walgreen also can quickly determine whether a drug is "preferred" under a health plan, which decides to what degree a prescription is covered. Making those decisions manually requires time-consuming calls to doctors. "The point is, there are about 10 pieces of this transaction that go on in two seconds, and it costs about two pennies for every one we do," Bernauer explained. "It's extremely efficient."

GE's Savage said that system could be a building block for more collaboration. "When a doctor is entering that order, it would be nice if he checks the formulary [list of drugs and their classifications] and gives the pharmacy an order that you don't have to call back on," he said. The same drug may have different codes, depending on the plan a patient has, and pharmacists have to unscramble them. "It increases the doctor's efficiency. The alignment between providers, payers and fillers of services is going to be crucial to come up with a solution for a heterogenous industry," Savage added.

That ultimately could drive down drug costs. "If you take that farther even, there is huge cost containment there," Bernauer said. "Today, everybody that walks in the doc's office has got a different formulary, because they're in a different plan. The doc doesn't have time to figure that out or worry about it. He just writes a script for what he's used to writing for, and then it comes to the pharmacy. The pharmacy, in many cases, has to make a phone call to reconcile."

More generic drugs also could be identified if doctors embraced new systems. "You'll take the cost of that drug down from $100 to $15 or $20," the Walgreen CEO predicted.

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There are other areas for progress as well. Oracle's Mowry said one is linking information about patients all the way from diagnosis through to a patient's response to a drug. Then, she said, that information should flow back to researchers to judge effectiveness. But at the moment, "there's a huge disconnect," she said.

To force industries to cooperate, the federal government may have to issue "mandates," said BCBSA's Serota. "With luck, it will be mandated practices that are already in place," Serota said. He predicted a carrot-and-stick approach. "If you don't do it, [the government] will," he said. "They carry the stick of Medicare, Medicaid and the Department of Defense, which pays for a whole lot of health care."

It won't be a smooth process. But greater use of technology may well begin to transform the 19th century cottage industry called health care.

RELATED ARTICLE: WHO'S WHO

* David Bernauer is chairman and chief executive, Walgreen, Deerfield, III.

* Gail K. Boudreaux is president, Blue Cross and Blue Shield of Illinois, Chicago.

* Denise Cesare is president and chief executive, Blue Cross of NEPA, Wilkes Barre, Pa.

* Gottfried Dutine is a member of the board of management, Royal Philips Electronics, Amsterdam.

* William J. Holstein is editor in chief, Chief Executive magazine, Montvale, N.J.

* William Jews is chief executive, Care-First BCBS, Owings Mills, Md.

* Edward M. Kopko is chief executive, Butler International and Chief Executive Group, Montvale, N.J.

* Mychelle Mowry is vice president for health care, Oracle, Redwood Shores, Calif.

* Donald W. Rucker, MD, is vice president and chief medical officer, Siemens Medical Solutions USA, Malvern, Pa.

* Brandon Savage, MD, is general manager of enterprise solutions, GE Healthcare Information Technologies, Waukesha, Wis.

* Edward Sellers is chairman and chief executive, Blue Cross and Blue Shield of South Carolina, Columbia, S.C.

* Scott P. Serota is president and chief executive, Blue Cross and Blue Shield Association, Chicago.

* Jim Shanks is president, CDW Government, Vernon Hills, III.