State of Oklahoma Return on Investment Statewide Health Information Exchange

1. State of Oklahoma Return on InvestmentStatewide Health Information Exchange March 28, 2007 This report is being provided through the efforts of SMRTNET, a joint federal/state/city/ and tribal effort to support the development of health information exchange in Oklahoma.

2. Here is Steve, our patient…

3. Chronic Headaches Diagnosed With Asthma 5-27-99 Prescribed medication for Elevated LDL Cholesterol 12-22-05 Diagnosed With Arthritis 4-29-06 Diagnosed with IBS 9-30-02 Diagnosed With Arthritis 4-29-06 Foot Surgery 1-15-02 Bone Spur removal Like most of us, Steve has unconnected healthcare providers, many of his conditions were treated under different providers, different prescriptions, different facilities, under different insurance, at different times.

4. Chronic Headaches Diagnosed With Asthma 5-27-99 Prescribed medication for Elevated LDL Cholesterol 12-22-05 Diagnosed With Arthritis 4-29-06 Health Information Exchange Diagnosed with IBS 9-30-02 Diagnosed With Arthritis 4-29-06 Foot Surgery 1-15-02 Bone Spur removal Health information exchange brings them together!

5. Data Sources • Public Health • Community Health Centers • Hospitals • Pharmacy and PBM • National Laboratories • Local Laboratories • Insurance and Medicaid • Office EMRs • Native American Tribes • Federal Hospitals • Mental Health • University Providers • The patient!

6. Community Health Record ePrescribing Personal Health Record Secure Messaging Images and Reports Chronic Disease Management Computer Physician Order Entry and ACPOE Electronic Medical Record Data FunctionalitiesNote: This economic study measures only the impact of the first two functionalities below. The other functionalities will add additional benefits.

7. Pharmacy/medication mistakes due to negative drug interactions, misread handwriting, and dosage misinterpretation Repeat laboratory procedures Increase defensive medicine costs Repeat imaging Increased capacity for fraud Paperwork costs of faxing records Increased capacity for medical overuse Increased number of medical visits Increased cost of chronic disease management Various Types of Costs from Disconnected Records

8. $ 1.2 billion in healthcare costs of $ 20.1 billion health care expenditures in Oklahoma* This is a minimum of 6% of all health expenditures 1,139 potential lost lives * Estimate based in U.S. Center for Medicare and Medicaid Services 2004 and medical inflation at 6.65 % through 2007. $ 1.7 billion projected by 2011 against medical costs of $ 25.8 billion. Cost to Oklahoman’s from Disconnected Health Records

9. The Macro Picture:Overview of Cost Savings for Statewide Adoption Year All Oklahoma State Govt. Medicaid Deaths Avoided 2007 $ 100.6 million $ 20.1 million $ 10.1 million 101 2008 $ 205.1 million $ 41.0 million $ 19.8 million 172 2009 $ 349.7 million $ 69.9 million $ 32.3 million 247 2010 $ 539.8 million $ 107.9 million $ 48.2 million 325 2011 $ 784.8 million $ 156.9 million $ 67.7 million 407 Total Cost Based on Percentage of Providers Using System

10. Cost Benefits Based on Statewide Initiative • Prescription Savings and Fraud and Abuse are the largest areas for potential savings

11. Increased Statewide Patient Safety • Throughout Oklahoma, by 2011 over 29,000 Adverse Drug Events (ADEs) will have been avoided, 1,300 potential lives saved, and nearly 21,000 provider and hospital visits avoided due to reduced Adverse Drug Events. • An ADE is any unexpected or dangerous reaction to a drug or unwanted effect caused by the administration of a drug.

12. Perhaps no other group is more medically at risk than the uninsured as their healthcare is more disconnected than any other group. While it is unlikely that we will insure these people any time soon, we can rapidly build them an “electronic medical home” through health information exchange so as they move between safety-net providers the quality and safety of their care will increase. This should relieve pressure on providers, emergency departments, improve workflow, and coordination of care. What about the 600,000 Uninsured in Oklahoma?

13. Potential improvement of health status for all Oklahoman’s in the areas of heart disease, smoking, and alcoholism through the use of scientifically based interventions Reduction in chronic disease management costs Reductions in medical paperwork/staff costs Effects of allowing Oklahoma residents’ access to their medical records including improved health and more efficient communications with providers Positive impact on our state’s ability to counteract bioterrorism and pandemic disease outbreaks Making the medical system easier and more efficient to use for everyone Additional Benefits From Health Information Exchange

14. In other states, four to ten years are estimated for the development of a large network, assuming the political, legal, organizations, and technical issues can be resolved. A three year delay in developing this network will potentially cost all Oklahoma’s residents $ 654 million in medical cost savings and 572 potential lives lost. The state government will potentially loose $ 130 million and 103 potential lives lost. Opportunity Costs

15. Average per person health costs in Oklahoma $ 5,843 Cost per year of health information exchange per per capita $ 3.60 Average savings per personYear 1 $ 28Year 5 $ 227 Average Costs and Savings Per Person

16. Cost/Benefit from Health Information ExchangeEach dollar invested in health information exchange yields:2007 $ 8.05 2008 $ 16.38 2009 $ 28.05 2010 $ 43.33 2011 $ 63.05Costs based on 30 cents per month per person * Assumes a 15%-55% adoption rate by physicians and 65% impact on each savings category.

17. Statewide - Key Findings Cost Savings Prescription drug savings by using ePrescribing begin immediately in year 1, saving over $29.47 million and growing to over $147.54 million in 2011. Reducing duplicate orders has year 1 savings of $11.07 million with a five-year projection of $49.45 million by 2011. Large potential for fighting fraud & abuse with annual savings of $472.50 million in 2011 Physician time savings from reduced phone calls for clarification of $5.1 million in year 1 and $20.67 million in year 5 (2011). Patient Safety Savings 2,368 ADEs avoided in year 1 with a compounding result of 29,450 ADEs avoided with ePrescribing over 5 years 1,900 life-threatening ADEs eliminated over the same five year timeframe ePrescribing would reduce approximately 20,780 provider and hospital visits as a result of ADEs over five years ePrescribing would potentially eliminate 1,250 potentially avoidable deaths throughout Oklahoma that result from medical error

18. Patient Safety 474 fewer ADEs in year 1 growing to over 1,900 in year 5 Approximately 1,900 life-threatening ADEs eliminated Eliminate 20 potentially avoidable deaths as a result of medical error in year 1 with a 5 year accumulation of over 240 avoidable deaths Over 4,150 provider and hospital visits avoided as a result of avoided ADEs Cost Savings High capacity for fraud and abuse cost savings, which reach $94.5 million in year 5 $5.9 million in year 1 from drug savings by utilizing ePrescribing. By 2011, savings reach $29.5 million. Over $1 million in year 1 savings by reducing redundant lab and radiology tests, which grows to over $4.4 million in 2011 Cost Savings and Patient Safety Return on Investment for Individuals Directly Covered by the State of Oklahoma

19. Statewide Model Assumptions • Oklahoma statewide population modeled • 2.5% population growth rate • 8% YOY growth rate for healthcare expenditures • Provider adoption rate • Only non-federal physicians included • Impact rate for all categories each year is 65% • Fraud and abuse assumes impact rates of: 10%,15%, 20%,25% and 30%, respectively over 5 years • Categorical growth rates • Prescription drug – 5.5% • All other categories assume a 2.5% YOY growth rate over five years

20. Data for this Study • Data for this study are based on a combination of three record systems available through SMRTNET. These include a community health record (a combined record from all sources), eprescribing (for providers and pharmacies), and a personal health record (to improve communications between providers and patients). Most health information exchanges provide one or two of these services. Therefore the benefits of this system may be greater than for other systems with fewer record systems. It is not assumed that any providers will adopt an internal electronic records system for their office or institution. • Data and assumptions for this study were produced through a detailed study of scientific research available about health information exchange and using the best available current population statistics. Some of this research is new, and will be subject to change. Conservative assumptions were taken in developing estimates. • This study is likely to be an understatement of results as it does not estimate the benefits of improved chronic disease management, decreased defensive medicine costs, and the effect of a personal health record as these are new subjects. Those will be provided in a later release. • Persons desiring data sources, studies, assumptions, and calculations may contact the project principal investigator Mark Jones, M.S., M.B.A. at markjhealth@yahoo.com phone 918 931 9410.