Make no mistake: a new hand-held device for physicians is predicted to reduce the number of medical errors by up to 50%. Will it also mean lower medical malpractice premiums and claims? (Technology: Medical Errors).

Between 44,000 and 98,000 patients die from medical errors each year. Now insurers are keeping a watchful eye on technology designed to help prevent these fatal mistakes.

Preventable medical errors--the eighth-leading cause of death in America--result in more deaths annually than vehicle accidents, breast cancer or AIDS, according to the Institute of Medicine. Several hospitals and health-care facilities across the nation are working to reduce these dramatic numbers by installing physician order-entry systems, which allow providers to access computerized health-care information--such as prescriptions and renewals, clinical laboratory results and patient histories--via a hand-held device.

Since this technology is only now gaining in popularity, insurers say it is too soon to predict what effects computerized order-entry systems will have on the industry. Many are paying close attention, however, to their potential to slash health-care costs and reduce medical malpractice premiums and claims as a result of fewer medical and medication errors.

Safety First

Preventable medication errors stem from a variety of situations, including illegible handwriting, drug overdoses from decimal-point errors and drug interactions. In addition to the thousands of deaths annually from medical errors, medication errors alone are responsible for about 7,000 deaths a year and cost hospitals nationwide an estimated $2 billion in additional expenses.

Designed to reduce the time it takes to get orders to a pharmacy, computerized physician order-entry technology also provides legible and easy-to-understand orders and encourages physicians to use formulary items. Some providers currently using the system are praising its ability to compare orders against dosing standards, check for allergies or interactions with other medications and warn physicians about potential problems.

But the systems aren't error-proof yet. While the technology can assist with dosing and drug interactions, it can't assure that medications are appropriate for a patient. The costs associated with purchasing and implementing systems also have put the technology out of reach for some facilities. Computerized physician order-entry systems cost roughly $2 million, plus $500,000 annually to maintain.

Currently, fewer than 10% of U.S. hospitals use some type of electronic order-entry system, but the number is expected to increase soon.

Earlier this year, the Leapfrog Group, a coalition of more than 100 public and private organizations that provide health-care benefits, reported that of 293 hospitals that responded to its survey on computerized physician order-entry use, 6% have fully implemented a system, 24% have made good progress in implementing one, 10% are at an early-stage effort and 61% aren't yet in the early-stage effort. Computerized order entry is one of the Leapfrog Groups three leading initiatives for improving patient safety.

Medical Malpractice

Because of the technology's touted ability to reduce medical errors by more than 50%, providers are wondering what it will mean in terms of potential cost savings for liability coverage or the reduction of medical malpractice claims.

"Customers now have a real interest in the technology's impact on medical malpractice, and we're currently at the tipping point where technology has caught up with the need for real solutions in this area," said Glen Tullman, chief executive officer of Allscripts Healthcare Solutions, which manufactures wireless hand-held clinical-automation software and computerized physician order-entry systems.

Recent legal rulings have sided against physicians in malpractice cases in which technology solutions could have prevented medical errors. Tullman said such rulings may send a wake-up call to insurers about two main issues: Currently available technology can help prevent disasters waiting to happen, and insurers need to take steps now to leverage the benefits this technology offers.

Despite challenges in earlier years, insurers now may find physicians more receptive to such technology. In the past, when larger computer systems were set up to accomplish similar tasks, physicians believed these systems didn't fit into their workflow and didn't use the technology, Tullman said. Recently developed wireless technology and clinical applications that fit into the way physicians practice are adding value, and many providers believe they make their jobs easier, provide more timely information and are cost effective.

Several of Allscripts' customers have attributed reductions in their medical malpractice premiums to the use of these systems, said Dan Michelson, vice president of marketing. For example, one of its Tennessee-based customers saw about $38,000 in medical malpractice insurance rate savings last year. At that time, Tennessee physicians, on average, were experiencing a nearly 20% increase in med mal rates, but the Allscripts customer saw only a 12% increase due to its implementation of the technology, he said.

Insurers' Views

Most insurers, however, are still waiting to see its potential. "I don't think simply implementing the system necessarily warrants automatic discounts if your loss picture does not improve over time," said Elaine Ziemba, vice president of risk management for SCPIE Cos., Los Angeles. "You could implement a system, but from an underwriting perspective, the insured still may not be a very sound risk."

Although SCPIE doesn't offer discounts to insureds that use this type of technology, Ziemba said they could be an additional incentive for hospitals to put the technology in place. But she acknowledged that the insurance industry was not yet ready to offer lower med mal rates as an incentive.

"It's way too early to tell the impact this will have on medical malpractice rates," said Dr. Mark Gorney, medical director and executive vice president for medical affairs for Doctors Co., a national physician-owned malpractice insurer, based in Napa, Calif. The industry is focused on other pressing concerns, such as the increased amounts of court awards for medical malpractice cases.

Another concern is that at least 80% of medical malpractice claims are without medical merit--that is, a practitioner isn't to blame, said Ron Kennedy, vice president of risk management for Louisiana Medical Mutual Insurance Co., Metairie, La.

"Technology is not going to address about 80% of claims that come in against our physicians," Kennedy said. "And while the technology may assist with patient-safety initiatives, it isn't addressing the claims-frequency problems we're feeling today in the medical malpractice world."

Focusing on the new technology adds to the problems professional liability insurers are already facing, Kennedy said. "We're in the midst of a medical malpractice crisis across the country, and it's a great time from a marketing point of view to play on that concern and divert practitioners from the main issues, which are the psychosocial aspects [of the fact] that 80% of suits could be avoided, had a patient or family been handled in a different manner," he said, adding that no technology currently can resolve this concern.

Kennedy discourages viewing the technology as a panacea for patient-safety problems and points out that there is no empirical proof of its ability to reduce medical malpractice exposure. "Even if it saves one life, how do you place a value on the one life it saves?" he asked.

Costly Mistakes

The availability of error-reducing technology places an even greater onus on physicians--particularly when an error occurs. "There are now more negative repercussions than ever if your organization doesn't have a physician order-entry system," said Stan Kachnowski, professor of health information management at Columbia University in New York.

"If you don't have a system in place and make a mistake, you're going out of business or your insurance premiums will go through the roof," Kachnowski said.

On the flip side, however, he said that when monetary value is applied to any kind of technology system, things begin to shift into a revolutionary phase. "I think if liability carriers had concrete numbers or saw a trend or enough data points to support this, they would then discount a certain amount each year for systems that organizations had put in place," Kachnowski said. "At that point, physicians would begin to purchase these systems much more quickly."

Health-Care Savings

Physician order-entry technology systems also might be useful in slowing health-care spending, which is increasing at double-digit rates across the United States.

Brigham and Women's Hospital in Boston, which implemented computerized order-entry technology nine years ago, has seen $5 million to $10 million in annual cost savings as a result. Nearly 50 million orders have been processed by its system, at an average of 13,000 orders per day. More revealing, however, is that nearly 400 orders a day were changed because the system caught and eliminated medication- and test-ordering errors or offered alternative, lower-cost drug options. For example, system alerts that guide doctors to equally potent but more cost-effective drugs have resulted in annual savings of up to $500,000 on a single drug.

Because the systems are said to make physicians more efficient--by eliminating the need for callbacks from pharmacies because of illegible prescriptions, for example-better-quality services and cost savings are occurring at the point of care. Many insurers are optimistic about the technology's potential.

"As it becomes part of good risk-management and patient-safety programs, I think it may ultimately lower health-care costs because of reduced hospitalization stays and overall expenditures," said Pat McBride, supervisor of risk management for Princeton Insurance in New Jersey.

"It may not reduce health-care costs, but [it] will slow any acceleration of these costs," said Dr. Edward Fotsch, CEO of Medem Inc., a national physician-practice communications network. Annual health-care dollars will be saved from the elimination of paper and other administrative costs, which are major sources of wasted dollars each year, he said.

The technology is likely to assist with long-term savings of overhead expenditures, agreed Tom Phelps, vice president for loss prevention services for ProAssurance Inc. in Birmingham, Ala.

But it is simply too early to predict how much of an impact physician-order entry technology will have on health-care spending, Phelps said.

"There's a learning curve in this process, and I don't know that we're far enough along on the curve to draw any firm conclusions, he said.

RELATED ARTICLE: legislation offers relief for technology-funding headache

As the number of prventable medical and medication errors occurring in health-care facilities across the nation continues to rise, state and federal lawmakers are introducing legislation to fund technology systems to help alleviate the problem.

In some cases, physician order-entry systems, in which providers use a hand-held device to access computerized health-care information about specific patients, have been shown to significantly reduce errors. But these often-costly systems are a budgetary concern for many health-care facilities and hospitals. To address that concern, the legislators have proposed grants and funds to offset the costs of installing and maintaining these systems.

In May 2001, Sen. Bob Graham, DFla., and Sen. Olympia Snowe, RMaine, introduced the Medical Errors Reduction Act of 2001 to establish an information-system grant program. Under the legislation, $97.5 million would be available from 2002 to 2011 to help hospitals and skilled nursing facilities pay for error-reducing information systems. Health-care facilities would select from a wide range of technologies, including computerized physicianorder entry, bar codes on medication packaging and patient ID bracelets, automated pharmacy-dispensing systems and electronic medical-record systems. The grants would fund the purchase of these technologies; improvements to existing information systems; establishment or enhancement of communications capabilities necessary for clinical data access, storage and exchange; and staff training on patient-safety information systems.

"Every day lost in implementing new technology means more lives are lost," Snowe said in supporting the legislation. She said computerized physician-order entry is one cost-effective approach to this problem.

In April, Sen. Charles Schumer, D-N.Y, unveiled similar legislation for $5 million in grants to fund computerized order-entry systems for budget-strapped New York City metropolitan hospitals. Schumer estimated that these systems could reduce errors by up to 70%. Currently, about 4% of all patients admitted to a hospital in New York State have an adverse experience--58% of those problems are attributable to medical errors, he said. The grants in Schumer's bill would cover up to 80% of the costs associated with implementing the technology systems, including purchasing computer hardware and software, installing new systems and educating hospital staff on their use. In addition, the legislation would establish a three-year, $33 million demonstration project to help skilled nursing facilities and home-health agencies develop, purchase and implement information technology systems.

California also has addressed this problem. In 2000, state Sen. Jackie Speier, D-San Francisco/San Mateo, introduced the Facility Plan to Eliminate or Substantially Reduce Medication Errors to the California Legislature. A modified version of the bill was passed by both the California Assembly and the Senate and was signed into law by Gov. Gray Davis later that year. The law requires acute-care hospitals to implement information technology, including computerized physician-order entry, to reduce medication-related errors.