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Unraveling the IT Productivity Paradox — Lessons for Health Care

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14 June 2012

There is ongoing debate about the wisdom of the $27 billion federal investment driving the adoption of health information technology (IT) under the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009. Proponents expect IT to catalyze
the transformation of health care delivery in the United States from a fragmented cottage industry plagued by poor quality and high costs to a highly organized, integrated system that delivers high-quality care efficiently. Skeptics suggest that the productivity benefits of health IT have been overstated, arguing that it may create safety problems and could even increase costs.

Debates about the productivity yield of IT are new to health care but not to other sectors of the economy. During the 1970s and 1980s, the computing capacity of the U.S. economy increased more than a hundredfold while the rate of productivity growth fell dramatically to less than half the rate of the preceding 25 years.1 The relationship between the rapid increase in IT use and the simultaneous slowdown in productivity became widely known as the "IT productivity paradox," and economists debated whether investing billions of dollars in IT was worthwhile. The Nobel laureate economist Robert Solow observed in 1987 that "you can see the computer age everywhere but in the productivity statistics."

1.That earlier IT debate and its resolution carry important messages for today's health IT debate. Solow's famous observation launched more than two decades of research on IT's effect on productivity, and that research revealed numerous explanations for the paradox – as well as evidence that earlier conclusions about the relationship between IT and productivity were incorrect and that under the right conditions, IT could indeed yield significant productivity gains.

Explanations for the IT productivity paradox fell into three categories: mismeasurement, mismanagement, and poor usability. Mismeasurement explanations traced the paradox to shortcomings in research; the latter two categories highlighted shortcomings in practice. All three categories proved relevant: some productivity effects of IT were hidden because of limitations in the data and analytic methods used to evaluate productivity, and some benefits were limited by ineffective management and poor usability.

The paradoxical findings of early studies of IT and productivity often resulted from inherent limitations in the productivity measures used. Conceptually, productivity is a simple ratio of what is produced (outputs) to the resources necessary to produce it (inputs), but it is notoriously difficult to measure, particularly in service industries such as health care. Important dimensions of service output such as accessibility and convenience – factors that are greatly improved by IT – are difficult to quantify and are rarely captured by productivity metrics. By contrast, inputs, such as the number of computers purchased, are relatively easy to measure. This measurement asymmetry means that IT rarely looks like a good investment according to simple productivity metrics. For example, standard metrics in the banking sector showed almost no productivity growth during the 1970s, even as automatic teller machines (ATMs) were introduced and spread throughout the country. Why? The standard metrics of banking productivity failed to capture the greatly enhanced consumer convenience attributable to ATMs.1

Similar measurement difficulties abound in health care. The performance measures used to assess the costs and quality of health care are drawn from administrative data that lack key details needed to detect the effects of health IT. In fact, one study showed that less than 2% of ambulatory performance metrics were suitable for measuring the effects of health IT.2 Furthermore, measures of health care productivity, such as relative value units, are predicated on traditional forms of use. Health care providers who, for example, use telephone calls or e-mail in lieu of some office visits will appear less productive on measures of productivity, even if they are actually delivering more convenient, accessible, and effective care.

In resolving the original IT productivity paradox, the mismeasurement challenge was addressed through a combination of more detailed data and improved empirical techniques that better accounted for service outputs.1 Similarly, assessment of the value of health care outputs could be improved through the more sophisticated use of clinical data to understand access, convenience, and health outcomes. Such a measurement approach may prove far superior to simple counts of tests ordered or services delivered.

In terms of mismanagement, the introduction of new technologies usually forces reexamination of the assumptions that underpin less productive processes. Early 20th-century manufacturers spent nearly two decades figuring out how to realize the productivity benefits of electricity. Initially, factories simply swapped waterwheels and steam engines for large electric motors but retained inefficient belt-and-pulley systems to transmit power from the central power source. Real productivity gains came only after manufacturers realized that many small motors distributed throughout a factory could generate power where and when it was needed; ultimately, it was the reengineering of processes coupled with the new technology that generated explosive growth in U.S. manufacturing productivity.3

Similarly, studies of the IT productivity paradox suggested that the productivity payoff of an IT investment did not follow quickly but instead required periods of intensive process reengineering. For every dollar invested in IT systems, firms typically had to invest several dollars for implementation, training, and process redesign to realize productivity gains. Furthermore, IT-driven productivity growth was not inevitable in all organizations but was more likely in organizations with such characteristics as high levels of education and individual autonomy, self-directed work teams, and incentive systems that reward team performance.4

Although health care organizations have favorable characteristics that can maximize IT's benefits, the reengineering of health care delivery is only beginning. Health care professionals are tempted to simply digitize paper–based workflows, but swapping out the medical record cabinet and prescription pad for a computer is proving insufficient to realize the benefits of health IT. Instead, newly IT–enabled processes that support teamwork, care coordination, and innovative approaches such as interactive patient portals have the potential to yield greater convenience, access, and quality for patients and physicians at a lower cost – the definition of greater productivity.

Finally, research on the IT productivity paradox showed that poor design and usability undermined productivity gains.5 For example, in the mid-1980s, the Internal Revenue Service purchased 18,000 computers and specialized software, hoping to increase the productivity of field agents. However, the new system required agents to load as many as 18 different diskettes to perform a single audit. Productivity dropped by 40%, and most agents refused to continue to use the system.5

New health IT systems risk failure if usability isn't carefully addressed. User-centered design calls for end users to be involved in every stage of product development. The principles of user–centered design have improved usability for many IT products. The merits of such design processes are illustrated by the evolution of "smartphones," from their early monochromatic displays and clumsy thumb keyboards to today's high–definition touch screens that use the electrical properties of the human body to enhance responsiveness.

In health care, some institutions have already succeeded in developing widely used "homegrown" IT systems relying on user-centered design practices. Maximizing the productivity of health IT will require that commercial IT vendors also adopt user-centered design principles, but such practices aren't yet sufficiently widespread.

The resolution of the original IT productivity paradox suggests that current conclusions about the value of health IT investments may be premature. Research suggests three lessons for physicians and health care leaders: invest in creating new measures of productivity that can reveal the quality and cost gains that arise from health IT, avoid impatience or overly optimistic expectations about return on investment and focus on the delivery reengineering needed to create a productivity payoff, and pay greater attention to measuring and improving IT usability. In the meantime, avoiding broad claims about overall value that are based on limited evidence may permit a clearer focus on the best ways of optimizing IT's use in health care.

Disclosure forms provided by the authors are available with the full text of this article at NEJM.org.

Source Information
From the RAND Corporation, Boston (S.S.J., R.S.R., E.C.S.) and Santa Monica, CA (P.S.H.); and the Division of General Medicine and Primary Care, Brigham and Women's Hospital, Harvard Medical School, and Harvard School of Public Health – all in Boston (E.C.S.).

source:-"The New England Journal Of Medicine"
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