Improving efficiency and reducing costs is even more important to organizations today as it was last year. IT is a strategic investment for these objectives, discussed in IT in the new normal in the McKinsey Quarterly, December 2009.

McKinsey surveyed corporate IT execs about the impact of the recession on IT. Despite the economic downturn — traumatic in several industry sectors — IT is seen as central to economic success. In fact, CxOs expect even greater IT investments next year. Organizations are keen to invest when they see a payback: in lowering costs, in improving effectiveness.

The pressure in the downturn is to deliver ever-higher efficiencies in their organizations. Companies are looking to more closely integrate IT into operating units.”

Health Populi’s Hot Points: Victor Fuchs writes about Eliminating “Waste” in Health Care in this week’s JAMA (December 9, 2009). Fuchs’ commentary marries well to the McKinsey story, helping us put IT in the new normal into the Realpolik/Realeconomik milieu of health care.

Fuchs, who has been a longtime intellectual hero of mine, first says, “President Obama is the most recent in a long line of US presidents to seek reductions in health care spending through elimination of “waste.” He then admits that defining “waste” isn’t an easy task in health. Many of us have pointed out for years that in health accounting in the US, one stakeholder’s “waste” is another’s revenue. Furthermore, what about the so-called “wasteful” digital imaging scans that may not add value to a diagnosis, but may reduce a patient’s anxiety?

Fuchs points to two possible definitions of waste in health care: medical waste, which is the latter example, where any intervention that can’t possibly benefit the patient where the risk is greater than the benefit; and, economic waste, which is any intervention where the value of the benefit is less than the costs involved.

Fuchs points out that the proportion of care that’s wasteful under that medical definition is much smaller than care delivered under the economic definition. “Economic waste is much more common because of third-party payment,” Fuchs asserts.

Thus, the lack of alignment of incentives that make sense in the macro — that is, for the overall health system — are perverted in the micro, when stakeholders’ individual interests motivate them to make decisions in the day-to-day under current reimbursement regimes.

“Identification of waste is difficult, but eliminating it is more difficult,” he concludes.

There is a Great IT Hope that once the US invests the influx of billions of dollars of incentives for health providers to adopt IT in the next few years, we’ll get to a nirvana of efficiency, effectiveness, and greater patient satisfaction. IT is necessary, no doubt about it — but the Realpolitik and Realeconomik of US health stakeholder interests will interact along the way, making the journey toward the dreamed nirvana a very bumpy one.

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