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In 2003, RAND Health began a broad study to better understand the role and importance of Electronic Medical Record Systems (EMR-S) in improving health and reducing healthcare costs, and to help inform government actions that could maximize EMR-S benefits and increase its use. This report provides the technical details and results of one component of that study: national-level efficiency savings brought about by using Healthcare Information Technology (HIT). We quantify those savings — what results from the ability to perform the same task with fewer resources (money, time, personnel, etc.) — by providing a methodological framework to scale empirical evidence on the effect of HIT to the national level and to project it into the future. A key element of this framework is a projection of the rates of adoption of HIT in the inpatient setting and in the ambulatory/outpatient setting. Next, from the evidence found in our search of peer-reviewed and gray literature (the body of reports and studies produced by local government agencies, private organizations, and educational facilities that have not been reviewed and published in journals or other standard research publications), we considered savings from 10 different sources (5 inpatient; 5 outpatient). Then, we compared the efficiency savings with the costs the nation has to incur in order to be able to realize those savings, using a modeling framework analogous to the one developed for the extrapolation of savings and cost data from the literature or given to us by providers. We found that savings outweigh costs by a factor of 5, which implies that, even if a large portion of savings is not realized, the ratio of benefit to cost is still larger than 1. Finally, we studied what might be the effect of those financial incentives presented to providers that lower the cost of EMR-S and quicken the pace of HIT adoption. A general result that does not depend on the size of the behavioral response of physicians is that incentive programs are more likely to be cost-effective if they start early and do not last long, but are sizable. The report concludes with a summary chapter. The report should be of interest to healthcare IT professionals, other healthcare executives and researchers, and officials in the government responsible for health policy.

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The research described in this report was conducted within RAND Health and sponsored by a consortium of private companies, including Cerner Corporation, General Electric, Hewlett-Packard, Johnson & Johnson, and Xerox.

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