Wednesday, March 01, 2006

IT and Health

I think, if I am reading him correctly, that Arnold makes a fatal assumption with the statement below.
Up close, it turns out that in order to benefit from information technology, a business has to be organized to take advantage of it. I suspect that the practice of medicine needs to be standardized before information technology can have big impact. Whether standardization is desirable or feasible is an open question.

It’s the same flaw that proponents of socialized healthcare make – that medicine is somehow different than the rest of the marketplace. Specifically in this case, that the healthcare industry – as a whole – hasn’t benefited from IT advancements because somehow that industry is fundamentally different from every other sector that has benefited from IT.

Software development has advanced to the point that industries do not need to be standardized in order to receive value from automation, or to make developing customized applications for your specific business valuable. Patients are not fundamentally different than any other customer. There is data that identifies who you are and then there is information about you that the doctors want to know.

Customer Relationship Management (CRM) is sufficiently robust and flexible to provide this type of data. The reason that doctors and hospitals haven’t invested in this type of software is that they don’t have to because they don’t compete on price. IT takes significant investment and that investment has to have a payoff somewhere and the current marketplace just doesn’t provide it.

Patients don’t shop for doctors, in fact they don’t typically even know what they paying for services. Because there is no sensitivity on price there is no incentives for providers to lower their prices. If there is no incentive to lower price then there is no reason to become more efficient to increase the profit margin. If doctors want to make more money, they just charge more.

In short, if there is a need for the healthcare industry to use IT to become more efficient the only way to accomplish that is for patients to start paying for their own bills.

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