How to Cut Healthcare Costs: Regional Health Information Organizations

Niam Yaraghi

Enormous spending in the US healthcare system is not news anymore. Even before Steven Brill’s brilliant report in Time magazine, many Americans had received hospital bills with shockingly high charges. Those who had not personally faced these costs are now fully aware of them, thanks to the huge media coverage on the Obama administration’s most challenging task, the rollout of the Affordable Care Act.

The high cost of the current healthcare system is probably the only thing that both opponents and supporters of universal healthcare coverage agree upon. Yet surprisingly, the strategies that may reduce rather than redistribute these costs have not received enough attention.

A part of healthcare expenditure is definitely necessary. Ensuring the quality and convenience in healthcare, like every other service, has a price tag. Spending on medical research and education which will ultimately result in better care is an example of a necessary healthcare expenditure. Another part of healthcare spending is inevitable at least in the short run and consists of the certain costs that an inefficient healthcare market inflicts on payers. The Bitter Pill article of Time magazine provides an abundance of such examples. The last part which comprises nearly half of the total healthcare costs, is just excessive spending. According to PricewaterhouseCoopers’ report, inappropriate medical care and inefficient healthcare business administration account for two thirds of wasteful spending.   

Efficient exchange of patients’ health information between different providers can significantly reduce some of the excessive healthcare costs. If providers have instant access to the complete medical histories of their patients, they can not only avoid redundant tests and procedures but also make better medical decisions leading to higher quality care.

Health Information Exchange (HIE) platforms are viable solutions to efficient exchange of medical information. These platforms electronically retrieve, store and distribute medical data between healthcare providers and enable them to instantaneously access the records of their patients. There are three major forms of HIE. The first one, enables care providers to send and receive medical information of their patients over the internet via a secure messaging system. This approach is similar to secure email exchanges. The second form of HIE is focused on patients. In these systems, the patients will have electronic access to their medical records and can personally manage the access of the care providers to their records online. The failed Google Health project was an example of this form of HIE. The third form, operates as a central or federated database in which the medical data of a large population of patients is stored and can be accessed by care providers. To create such platforms, different stakeholders such as hospitals, medical test centers and clinical practices form a consortium to share the medical information of their patients with each other. The Regional Health Information Organizations (RHIO) and proprietary HIEs are both examples of this form. RHIOs are funded by federal and state governments and can be considered as a public good which provide their services to a much larger set of healthcare providers. Proprietary HIEs are supported by private vendors as commercial services and are mainly focused on generating revenue among a limited set of healthcare providers.

RHIOs act as neutral organizations which promote and facilitate the exchange of medical information among the providers within a geographical region and have three advantages over the other forms of HIE. First, they often have a larger membership base and thus can collect a larger volume of medical data. This enables their members to have access to a comprehensive medical history of their patients. Second, when patients visit multiple healthcare providers, the larger membership base of RHIOs helps with the efficiency of care coordination and transition. Third, since RHIO’s medical data comes from various sources and includes large population of patients, it can serve as a unique source for public health and medical science research projects. Due to these advantages, most policymakers have focused on Regional Health Information Organizations (RHIOs) as the primary model of HIE.

Despite the potential benefits of RHIOs in decreasing costs and increasing the quality of healthcare many of these platforms are still not fully functional and do not have sustainable revenue generation models. State and federal governments can increase their support for the RHIOs as a means to ultimately eliminate wasteful spending on duplicated tests and inappropriate medical procedures. In addition to direct financial support, the governmental entities can also help RHIOs by providing specific research grants to scholars to study and develop innovative, pragmatic and cost-effective HIE solutions. These research grants will eventually lead to more efficient RHIOs which will not only reduce healthcare cost for payers but also increase the quality of care for patients.