IBM Viewpoint: Reforming Healthcare: A Key Emerging Market For The 21st Century

Armonk, NY - 07 Feb 2006: Healthcare is becoming as important to the vitality of businesses, governments and nations as it is to the well being of individuals. Soaring healthcare bills add $1,500 to the cost of every car made by General Motors, for example, compared to $200 per car for the company’s nearest foreign competitor.

In fact, higher healthcare spending does not guarantee better delivery or outcomes. America spends 16 percent of its GDP on healthcare - the highest in the world - but ranks only 37th in the overall performance of its healthcare system by the World Health Organization. Moreover, more than 100,000 Americans die each year from preventable medical errors. This adds up to more fatalities than from AIDS, homicides, and traffic accidents combined. Meanwhile, 45 million Americans have no healthcare insurance and 15 million are under-insured.

Many factors contribute to this healthcare crisis, from changing demographics to the spread of “diseases of affluence” and chronic illnesses. But perhaps the most treatable disorder is underinvestment in healthcare information technology. Lifesaving medical advances have not come accompanied by improvements in the way members of the healthcare ecosystem (from public and private payers, to providers, researchers and consumers) use IT to work with one another. As a result, the “system,” such as it is, functions much like a fragmented cottage industry. This IT failure has been well documented in a recent study by the Rand Corporation, which concludes that a modern healthcare IT infrastructure could save up to $165 billion per year by reducing hospital stays, encouraging tests and early treatment, and cutting administrative costs.(1)

GROWTH AHEAD
The Rand study is part of a growing consensus that the healthcare crisis has reached a tipping point. Governments, businesses and patients can no longer tolerate the system’s spiraling costs. There is broad agreement that building a modern information infrastructure that ties together the healthcare ecosystem is the most readily available means to control healthcare inflation and improve delivery.

At the moment, healthcare IT spending averages just two-to-three percent of overall healthcare spending. This compares with as much as 12-15 percent in other information-intensive industries, such as financial services. Analysts forecast that, as countries address this massive underinvestment, healthcare IT spending will grow at a faster pace than overall IT spending. Gartner estimates that worldwide healthcare IT spending will surpass $100 billion in 2006, and grow at a compound annual rate of 6.6 percent between 2004 and 2009, lead by business process outsourcing (BPO), IT outsourcing (ITO), consulting, and IT development and integration.

This extra investment in healthcare IT is already well underway. America has launched a 10-year effort to build a healthcare IT infrastructure that will save billions of dollars. Similar long-term projects are underway in Europe. These include Britain’s Connecting for Health program, and the European Commission’s e-Health Initiative.

IBM is well positioned to capture this increased healthcare IT spending. Thanks to IBM’s combination of industry insight and leading information technologies and services, IBM has the expertise and the relationships to motivate and align system participants and build the infrastructure and processes which will connect them.

IBM’s acquisition in April 2005 of Healthlink Incorporated, America’s foremost healthcare process improvement and IT consulting-services firm, enriches IBM with healthcare domain expertise, business process knowledge, and proprietary methodologies. Healthlink has practice areas in hospital applications, strong relationships with independent software vendors and more than 2,000 clients, including the U.S. Department of Defense and Department of Veterans Affairs.

RESULTS
IBM is leading a worldwide effort to help business and public-sector organizations put in place key components of the roadmap for 21st century healthcare.

* Building a prototype Nationwide Health Information Network for the U.S. Department of Health and Human Services. IBM is heading a consortium of healthcare and health information technology organizations to develop this 21st century healthcare network. This engagement will have a big effect on healthcare in America and on all Americans. It is the start of a major transformation of America’s healthcare industry. It will also move the nation closer to President Bush’s goal of arming each citizen with a personal Electronic Health Record.
* Deploying IT to transform healthcare. IBM is working with the University of Pittsburgh Medical Center (UPMC) to transform its IT infrastructure into a utility-based, on-demand environment while consolidating and virtualizing operations. As part of a $352 million IT solution, IBM will provide UPMC with hardware, software, services and financing. IBM and UPMC will co-develop and potentially commercialize innovative solutions around key healthcare issues, such as patient records management, bio-security, information-based medicine, and computational biology. Both parties will jointly invest a minimum of $50 million (and up to a potential $200 million over eight years) in this initiative.
* Leading by example: employee Electronic Health Records (EHRs). IBM is offering its 180,000 U.S.-based employees a first-of-its-kind Web-based Electronic Health Records (EHR) system. The system will let employees track their prescription drugs and chronic conditions, and ultimately will provide access to updated insurance claims, drug prescriptions and test results. IBM is hoping this initiative will spur other companies to adopt personal EHRs and link them to hospitals, clinics, and physician offices. With medical professionals and individuals and their families using information technology systems connected to one another, IBM can improve healthcare delivery by providing continuity of care across many sites, including the home.
* Ensuring that personal genetic information is not used in employment decisions. IBM became the first corporation in the world to announce formally that it will not use genetic information when making decisions on hiring, promotion, and employee compensation, and will not actively collect employee genetic information except in cases where employees give their express consent.

Healthcare reform has reached a point of inflection. Affordable, high-quality healthcare is no longer simply a social goal. It has become an economic imperative, for businesses and governments alike. Together with its healthcare partners, IBM has the strategy, specialized systems integration expertise and track record of client success to capture growth in this emerging marketplace.

Contact Information

Jeanne Orfinik

IBM Media Relations

IBM

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