Health Informatics & Sciences

Health Informatics Reduces Medical Costs

Health Informatics Reduces Medical Costs
According to data collected by the Rand Corporation, health information technology< has the potential to reduce healthcare costs by more than $77 billion annually. Image from Pexels
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Katy McWhirter March 11, 2022

Health informatics can improve healthcare delivery by reducing mistakes and increasing efficiency. One underappreciated biproduct of those benefits: cost savings.

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Health informatics, a discipline whose rapid growth has been largely driven by the big data explosion, focuses on improving health outcomes, forecasting population health concerns, providing more individualized health services, and fundamentally changing the way the healthcare industry functions.

All of those goals translate into better healthcare decision-making and more effective treatment, but they also have a less-appreciated outcome: cost reductions. When healthcare organizations, insurance companies, and patients incorporate healthcare informatics systems and applications into their healthcare routines, savings invariably result.

Healthcare delivery in the U.S. has changed dramatically in recent years, producing both better outcomes and higher costs. Healthcare providers and administrators seek systems that can reduce or eliminate costly medical errors and unneeded expenditures, provide sufficient population health data to drive effective policy, and replace outdated patient records management systems. As more providers implement health IT systems, healthcare data insights stand to greatly improve quality of care while offering significant cost savings.

So, how does health informatics reduce medical costs? This articles explores this question while also discussing:

  • How to become health informatics professional

How does health informatics reduce medical costs?

According to data collected by the Rand Corporation, health information technology has the potential to reduce healthcare costs by more than $77 billion annually. While the application of health informatics systems would cost approximately $8 billion annually based on 90 percent of healthcare providers implementing health IT across 15 years, projected savings indicate that would be money extremely well spent.

Annual U.S. healthcare costs reached more than $4.1 trillion–or $12,530 per person–in 2020, with researchers estimating between $760 and $935 billion in wasted costs. Health informatics provides numerous answers to the question “How do we reduce unnecessary healthcare spending?”

Reduce medical errors

Medication errors harm more than 1.5 million patients, causing a secondary harm: hesitation and distrust among consumers when considering healthcare consultations and services. According to a PwC Health Research Institute study, 71 percent of pharmaceutical companies believe medical non-compliance can be significantly reduced by expanding pharmacists’ access to Electronic Health Records (EHRs).

It’s not just pharmaceutical companies that see the benefits of informatics. 79 percent of healthcare providers believe clinical informatics can help reduce errors in medical care. These types of issues encompass a wide spectrum of healthcare services, including areas such as diagnostics, surgeries, infections, systems failures, and devices and equipment.

A study focused on preventing and reducing medical errors found that approximately 400,000 hospitalized patients dealt with preventable harm annually, costing $20 billion each year. More alarmingly, the study found that approximately 100,000 individuals die each year due to medical errors.

Improve accuracy of diagnoses and treatments

Despite years of training and a strong passion for helping others, healthcare providers remain subjective because, well, they’re only human. Observations made about a patient scan or test can vary from provider to provider, causing missed identification or delayed diagnoses. Clinical informatics systems can be trained to interpret medical tests and potentially identify harmful illnesses such as cancer or heart disease far earlier. They can also diagnose rare diseases and conditions that practitioners might miss because they occur so infrequently.

Without the burden of reviewing scans and making diagnoses, physicians and clinicians alike have more time to work on improving treatment options. Furthermore, earlier diagnoses provide access to a wider array of effective, sometimes less invasive treatment options.

Use predictive modeling to plan population health management

Local, state, and federal governments spend approximately $93 billion each year on public health initiatives, with distressingly mixed results in terms of preparedness and response. With more access to electronic health records, public health informatics systems can more easily track emerging health issues and predict future public health concerns.

Additionally, state and local deployment of the National Notifiable Diseases Surveillance System can provide access to a database of surveillance findings for public health professionals and improve national disease identification strategies. This would not only save lives but also reduce costs.

Replace costly paper records systems with less expensive EHRs

Paper record systems require constant involvement from administrative staff and physicians alike. It’s an antiquated option prone to errors and greater likelihood of healthcare providers missing important details. Electronic health records allow physicians to enter notes directly into patient files, search keywords, and provide greater details about patient care. They also eliminate the need for a paper-based filing system where medical charts must be repeatedly pulled and refiled, each time creating a new opportunity to introduce error.

Data from the Bureau of Labor Statistics show that EHRs can also reduce staffing needs. While jobs for medical transcriptionists are projected to decline by seven percent in the remaining decade, roles for health information specialists are anticipated to expand by nine percent.

Provide access to electronic preventative care apps and programs

Health information technology provides the systems needed to better pinpoint and prevent diseases on the basis of both identifying risk factors early and ensuring patients receive personalized information about preventative measures.

For instance, patients whose health data have been added to an electronic medical record system can receive reminders about screenings and vaccinations that can reduce the chance of being diagnosed with a specific illness or disease. Researchers found that widespread use of such care systems could help prevent between 15,000 and 27,000 deaths caused by pneumonia each year.

Identify inefficiencies in healthcare practice management

With widespread implementation of health informatics systems, healthcare administration can greatly improve. In addition to reducing accidental duplication of tests, these healthcare information systems can help with time and cost savings. Overtreatment, overpayment, ineffective care coordination, and needlessly complex administrative systems all contribute to ineffective practice management.

One study on U.S. healthcare system waste found that failure of care coordination alone resulted in annual wasted expenditures of between $27.2 and $78.2 billion, while administrative complexity added another $265.6 billion in wasted spending.


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How to become health informatics professional

The need for qualified, credentialed health informatics professionals is great, as more hospitals and clinics move to health information technology systems and more uses are found for clinical informatics. While a bachelor’s degree in health informatics qualifies graduates for entry-level positions, individuals seeking roles with real decision-making power often opt for a graduate degree.

Earn a Master of Science in Health Informatics

Completing an M.S. in health informatics can take less than two years and can be done online or in person. Because many learners continue working while enrolled, online programs frequently offer asynchronous coursework for maximum flexibility. These programs cover advanced topics needed to qualify for leadership roles, including data analytics and machine learning in health science, security and legal issues in health information systems, digital health, and health information in the healthcare system.

Some programs, such as the online Master of Science in Health Informatics at the University of Pittsburgh, provide tracks to help learners focus their studies in a particular area of the discipline. These vary by program, but common options include general health informatics, data science, healthcare supervision and management, and registered health information administrator.

Most students complete their education with a semester-long capstone project or internship that allows them to apply knowledge gained throughout the program to a real-world challenge or issue.

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About the Editor

Tom Meltzer spent over 20 years writing and teaching for The Princeton Review, where he was lead author of the company's popular guide to colleges, before joining Noodle.

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