Health Care Network Gets Big Payoff From a Simple Solution

For a group of New England health care companies, e-business was just what the doctor ordered.

Using a relatively simple computer interface, a consortium of health insurers, hospitals and physicians has squeezed about $10 million out of annual administrative expenses. After the entire system is up and running sometime next year, the consortium expects to save more than $66 million per year.

In the process, the New England Healthcare EDI (Electronic Data Interchange) Network has protected patient privacy and improved customer service, members say.

The network has worked because it followed the axiom “The simplest solution is the best solution.”

Instead of building a massive new database--an approach that had previously failed--they came up with a more straightforward system that let doctors, hospitals and insurers keep their existing software. Then they added new pieces to their network little by little.

All of which makes NEHEN, as the network is known, a model for organizations implementinge-business technologies.

Certainly, the health care industry has lots of room for improvement. Of the more than $1 trillion spent on health care in the U.S. each year, at least $250 billion is devoted to administrative costs, said Greg DeBor, a Computer Sciences Corp. consultant who serves as NEHEN’s program manager.

“That’s often equated to waste,” DeBor said. “A lot of people think of that as not making any of us healthier.”

But the 12 Boston-area health firms that participate in the network didn’t achieve their cost-savings by simply throwing technology at their problems.

They tried that approach more than a decade ago with community health information networks, which required every health care provider to forward their patient data to a giant central computer server that everyone else could access.

Several million dollars were needed to get the networks built, and they required participants to share sensitive and confidential information about their patients. Ultimately, neither problem could be overcome.

“It utterly failed,” said John Halamka an emergency room physician who heads the NEHEN project.

A few years later, an obscure federal law induced the health care companies to try again.

The Health Insurance Portability and Accountability Act was passed in 1996 to guarantee that workers who switch jobs can keep their insurance if they have a preexisting condition. It gave health care providers and payers until October 2002 to adopt a common set of codes to describe medical procedures when they communicate electronically.

That mandate became an important catalyst for NEHEN and helped focus the organization on a single, clearly defined strategy--a critical issue for keeping complex technology projects on track.

With a standard in place, health care providers and insurers could create a computer network that was far simpler than the ones built a decade earlier. They formed NEHEN in 1997.

The key to the new network was that it didn’t force any of the hospitals, insurers or doctor groups to make big changes to the computer systems they had spent years building and using.

NEHEN doesn’t involve an expensive central database. Instead, network members make their patient data accessible to each other directly from their own computers.

Just like banks use different computer systems but still share a network of automated teller machines, each NEHEN hospital, clinic, doctor’s office and insurance company runs the software of its choice and then employs a data translator so all their systems can speak the lingua franca of the new federal standard.

The network’s simple architecture eliminated the trouble and expense of a new centralized database. It also rendered moot the security and privacy concerns that would have accompanied a new repository of patient information.

“It’s very simple and elegant,” said Louis Gutierrez, chief information officer for Harvard Pilgrim Health Care, New England’s largest nonprofit managed health care organization. “It’s not rocket science.”

NEHEN members send each other requests for information over the Internet using their Web browsers. The answers are sent back on a private network. That way, everyone retains complete control of their own patient data.

“It’s kind of like the Napster of health care,” said Computer Sciences’ DeBor. “It’s peer-to-peer, with everyone communicating directly among themselves.”

The more the network is used, the more money it saves. NEHEN is handling half a million transactions a month. Automating the process has reduced the average cost per transaction from $2.62 to 10 cents, Halamka said.

Instead of pouring millions of dollars into a new database system, CareGroup HealthCare Systems spent just $250,000 on the translation software needed to participate in NEHEN. The savings so far total $10 million, said Halamka, who is also CareGroup’s chief information officer.

Two of Boston’s biggest hospitals--Massachusetts General Hospital and Brigham and Women’s Hospital--saved about $8 million last year due to NEHEN, according to John Glaser, chief information officer for Partners HealthCare Systems, which owns the hospitals.

In their step-by-step approach, NEHEN members and their partners from Computer Sciences identified about half a dozen tasks that could be done more efficiently on the network. Then they tackled them one at a time.

The first, begun in April 1998, was to improve the process doctors and hospitals use to make sure they will get paid for treating patients.

Insurance companies frequently reject claims if the patient information provided by a doctor doesn’t match the information in their own records. For instance, if a patient signs in as “Mike” but his insurance company knows him as “Michael,” payment might withheld. Such mistakes can take weeks or months to straighten out, costing health care providers millions.

Using NEHEN, the doctor’s office can request a patient’s identifying information directly from the payer’s computers, thus insuring an exact match and ushering along a speedy payment to the provider.

Next, NEHEN started handling the referrals that primary care doctors must order when they want to send a patient to a specialist. Before the network was in place, each referral could cost as much as $75 to process manually, DeBor said.

Then, in January, NEHEN began allowing providers to check on the status of payments from insurers.

“It’s like tracking your UPS parcel to see where it is,” said Glaser of Partners HealthCare.

Still to come are modules that will allow health care providers to ask insurers how much they will pay for specific services and then send bills through the network. NEHEN members also will be able to check on the status of referrals.

NEHEN is so efficient that several members are considering reductions in their administrative staff. Clerical jobs at Harvard Pilgrim are being eliminated through layoffs and attrition. Gutierrez, the company’s chief information officer, doesn’t apologize for the cuts.

“The social good we should aim for is redeploying people into activities that really make an impact on health care,” he said. “The more premiums we can put to medical care and the less to truly administrative activities, we think we’re serving our members better.”