On the surface, the numbers don't seem to add up.

America spends nearly $1.7 trillion annually on health care, and we use the most advanced medical diagnostic tools in the world.

Yet the health-care industry continues to rely on paper files, not computers, to manage health records -- a practice that saps efficiency and boosts expenses.

Rising health-care costs are becoming an urgent problem. In February, the Bush administration predicted government would account for half the nation's health-care spending by 2014. Total spending will nearly double to $3.6 trillion by then, and health-care costs will constitute 18.7 percent of the gross domestic product, up from 15.3 percent in 2003.

To curb the trend, the Bush administration is pushing several initiatives aimed at automating the health-care industry. The administration aims to cut annual health-care spending by 10 percent, while improving overall care and making patients' records more secure. To make that happen, the Department of Health and Human Services (HHS) is relying heavily on the private sector to jump-start technology adoption.

But the administration has its work cut out. Several problems hold the industry back, including lack of interoperability and a level playing field among providers, and funding issues.

The Adoption Gap and Other Holes

Despite its size, health care remains highly fragmented. The typical doctor works in a practice with 10 physicians or fewer, and more than 35 percent of this country's practices have three doctors or fewer. This fragmentation is a huge impediment to automation efforts in the industry. Only 15 percent of all primary care physicians have electronic health records (EHRs), barely 6 percent of solo practices use the technology, according to Medical Economics, and only 13 percent of hospitals use them, according to the federal government.

It's not that doctors don't want EHRs -- about 23 percent of physicians plan to acquire EHRs in 2005, according to a Medical Economics survey -- but at $30,000 per physician, the systems aren't cheap.

As a result, physicians, clinics and hospitals still rely largely on paper. Vast sums are spent on data entry and manual workflow systems, while money is wasted on duplicate tests that could be avoided if doctors had access to patients' integrated medical histories. Worse still, fragmented paper records contribute to medical errors, which cause an estimated 45,000 to 98,000 deaths each year.

Adding to the problem, vendors aren't willing to give up their proprietary lock on customers to throw the door open to the larger, yet more fragmented health-care market. A series of initiatives launched in 2004 by the Bush administration is meant to encourage rapid adoption of EHRs and a new nationwide health information network.

"America needs to move much faster to adopt information technology in our health-care system," said former Health and Human Services Secretary Tommy Thompson. "Electronics will provide a quantum leap in patient power, doctor power and effective health care. We can't wait any longer."

Thompson called on the private sector to certify health-care IT products, as well as plan and develop a new nationwide network for health information. At the same time, the president told the federal government's various health-care programs -- including Medicare, Medicaid, Veterans Affairs and the Department of Defense (DoD) -- to report on how they plan to adopt health-care IT.

David J. Brailer is the government's national coordinator for health IT and the administration's point man for transforming health-care automation.

Appointed in April 2004, Brailer has his hands full trying to goad a huge, cumbersome industry into the Information Age. Though progress has been made, the pace is clearly not fast enough for Brailer. Earlier this year, The New York Times reported that Brailer warned the health-care industry to quickly adopt standards for exchanging EHRs among doctors, hospitals and insurers, or face a government mandate to do so.

Tod Newcombe  |  Features Editor