Running head: TECHNOLOGY IN HEALTH CARE 1
The Effects of Technology on Cost Containment in Health Care
BUSI 511-B02
03/02/2024
TECHNOLOGY IN HEALTHCARE 2
Abstract
The costs of health care in the United States higher than any other nation in the world,
and the challenge of finding ways to contain costs remain a prominent topic of
discussion. Among the many possible solutions for addressing this problem, the
implementation of technology has emerged as a possible source of contribution to aiding
with this issue. The purpose of this paper was to first understand the extent to which the
cost of health care was in issue in the United States, as well as how it effects both patients
and providers. Then, to further evaluate several applications of technology in the forms of
telemedicine, patient portals, and electronic health records to discover whether or not
they are effective in helping contain costs associated with health care. Ultimately, it is
shown that, while the cost to implement technological applications are noteworthy, the
benefits achieved in cost containment and improved quality of care are significant and
provide positive results in both the patient and provider populations. Particularly as it
relates to utilization of resources and reducing waste, technology can have a significant
positive impact on cost containment in the delivery of health care.
TECHNOLOGY IN HEALTHCARE 3
The Effects of Technology on Cost Containment in Health Care
Introduction
One of the greatest challenges currently facing the health care delivery system in
the United States is addressing how to reign in the sky-high costs. While the United
States is fortunate to have access to some of the most advanced and cutting-edge medical
technology in the world, there also comes with it the higher cost of being able to produce
and operate it. Not only that, but there is also the advanced training and specializations
which many healthcare professionals now obtain which require higher rates of
reimbursement (Shi & Singh, 2023). Ultimately, there seems to be a tradeoff between
having an elite level of care and the cost to afford it. One promising area of cost
containment can be found in the form of technology. As new developments continue to
be made in this field, new applications emerge for which the implementation of
technology can be a useful tool in containing some of the costs associated with health
care. In order to access this claim, however, it is necessary to first understand how the
high costs of health care is an issue in the United States, as well as who it affects. Then, a
closer look can be taken into what ways technology can be applied to help reduce health
care costs, particularly through the use of telemedicine, patient portals, and electronic
health records. Finally, the question must also be asked of whether there are negatives to
consider with technology in regard to health care costs, as this will be an important factor
in considering the overall effectiveness.
TECHNOLOGY IN HEALTHCARE 4
How is the Cost of Health Care an Issue in the United States?
To gain a better appreciation for how technology can contribute to efforts in
health care cost containment, it is good to first analyze the current state of things in the
United States as it relates to health care costs. By doing so, it can reveal what individuals
or groups are affected most and make it easier to see how the implementation of
technology will be able to help those identified.
Health Care Cost in the United States
A quick look at past numbers reveals some startling figures on costs associated
with health care in the United States. To begin with, the United States has spent a
significantly higher proportion of its gross domestic product on health care as a
percentage when compared to other high-income nations (Papanicolas et al., 2018). The
United States averages around 17% in health care costs as a percentage of its gross
domestic product, while other high-income nations have averaged between 9.5%-12.5%,
leaving a sizable gap between the U.S. percentage and those of the upper limits in foreign
nations (Papanicolas et al., 2018). This becomes even more astounding when considering
that the United States has the highest gross domestic product in the world. To put it into
perspective, the United States spent 17.7% of its $21.5 trillion GDP on health care in
2019, equating to around $3.8 trillion or $11,582 per person (Shi & Singh, 2023). This
means that the United States was able to produce $21.5 trillion in total market value as
entire nation in one year, and still managed to spend nearly 18% of that figure on health
care alone in the same time period. When U.S. health care costs are examined relative to
GDP, it is not only obvious of the sheer amount of money that is spent on health care, but
also how much of the nation’s total market value is dedicated to it. This brings into
TECHNOLOGY IN HEALTHCARE 5
question what exactly it is within the health care system that all of these expenditures are
going toward. Many like to critique the health care system in the United States and argue
that it lacks adequate social programs for underserved populations, while others suggest
that the U.S. health care system is too reactive and approaches care in an episodic
fashion, relying on a fee-for-service strategy (Shi & Singh, 2023). These critics argue that
because there are inadequate social programs and the care is not preventive, that the
results are poorer health outcomes and a higher demand for emergency
department/inpatient utilization which drive up costs. While there may be some truth to
both of these critiques, the Unites States does have several social programs in place for its
citizens and has been making significant efforts to be more preventive and focused on
quality of outcomes in its care (Shi & Singh, 2023). In addition, research has also found
these factors to not be major drivers in the United States’ high costs of health care
(Papanicolas et al., 2018). Instead, what research has actually revealed to be the money
holes for health care in the United States are the premium prices for services rendered by
highly trained physicians in addition to the diagnostic testing provided with state-of-the-
art equipment, with cost of pharmaceuticals also playing a significant role (Papanicolas et
al., 2018). Therefore, these are some of the primary areas that the implementation of
technology will have to address to successfully contain costs.
The Burden on Patients
One of the most obvious effects of the high cost of health care in the Untied States
is the burden it brings upon the patients seeking care. This is particularly concerning
given the fact that the primary object of any health care delivery system is to ensure its
citizens have access to high quality health care and that the care is cost effective (Shi &
TECHNOLOGY IN HEALTHCARE 6
Singh, 2023). While the United Sates certainly performs well at providing quality care
given their highly trained health professionals and use of state-of-the-art equipment, there
seems to be impediments on access to this care centered around the lack of cost
effectiveness. Indeed, 27% of those questioned in one survey identified affordability as
the most urgent health problem in the United States, while 57% say they worry a great
deal about matters surrounding the availability and affordability of care, with over a
quarter of individuals admitting to postponing care due to costs (Emmanuel et al., 2017).
To fully illustrate how significant a cost burden health care is on American families,
researchers from one study analyzed the mean cost of employee sponsored health
insurance premiums and the median household income of families in the United States.
By combining these two figures, researchers were able to develop an affordability index.
The results from the study produced an affordability index in the United Sates of 30.7%,
indicating that the mean cost of employee sponsored health insurance premiums equate to
30.7% of the median income for entire households in the United States (Emmanuel et al.,
2017). This means that, for an individual, almost a third of what the average household in
the United States generates in income is what would be needed to finance their health
care under the average plan. More concerning still is the fact that, when plotted over time,
the affordability index as continued to increase, more than doubling since the turn of the
century (Emmanual et al., 2017). This would seem to indicate that unless acted upon, the
rise in costs for health care, and subsequent burden upon U.S. families will only continue
to increase. As a result, the implementation of technology must be able to offer solutions
in reducing the overall cost of care delivered or reduce the need for patients to seek out
costly medical services.
TECHNOLOGY IN HEALTHCARE 7
The Burden on Providers
While the burden on patients due to cost is often more readily identifiable and
receives a lot of buzz, the burden placed upon those who provide the health care should
also not be left unmentioned. As stated previously, the United States spends an equivalent
to around 17% of its GDP on health care expenditures, demonstrating a clear need for
control on costs (Shi & Singh, 2023). One of the greatest burdens on providers as it
relates to health care costs is the price of utilization (Tong et al., 2018). The price to treat
patients can be substantial, especially when patients are admitted for hospitalization. In
these cases, costs can accumulate at a rapid rate for treating an individual patient and
become burdensome to providers. To demonstrate this, researchers in one study evaluated
the cost of utilization associated with patients suffering from pneumonia who received
treatment at outpatient offices, emergency departments/urgent care, and those who
received hospitalization. The results revealed a clear contrast in costs, showing the mean
cost per pneumonia episode to be $428.10 at outpatient offices, $1,126.90 at emergency
departments/urgent care, and $10,962.50 for inpatient hospitalization (Tong et al., 2018).
This a major reason why there has been such a great shift away from inpatient toward
outpatient treatment in the United States, as more hospitals offer these services in an
effort to reduce costs (Shi & Singh, 2023). It will also be key in utilizing technology as a
cost saving measure in health care to reduce hospital admission rates and utilization of
inpatient/emergency services.
How Can Technology Be Applied to Help Reduce Health Care Costs?
Now that the issue of high health care costs in the United States has been
evaluated, along with who it impacts, a closer look can be taken at how the
TECHNOLOGY IN HEALTHCARE 8
implementation of technology could be used to address these issues. It is important to
identify specifically how technology can aid in cost containment primarily because
technology has also contributed to the escalation seen in health care cost as well (Shi &
Singh, 2023). Therefore, knowing the proper application of these technologies is vital in
order to avoid further increases in cost. For the purpose of this research, there are three
areas of technology in particular that will be examined in the forms of telemedicine,
patient portals, and electronic health records.
Telemedicine
The use of telemedicine is one area of technology that has potential to reduce the
cost of health care by enabling physicians or other health care professionals to “conduct
two-way, interactive video consultations or transmit digital images, such as x-rays and
magnetic resonance imaging results, to other sites” (Shi & Singh, 2023, p. 329).
Telemedicine is useful for reducing health care costs for both patients and providers
primarily through addressing the issue of utilization. As discussed previously, utilization
increases costs for patients through the obvious reason of having to receive medical care,
while utilization increases costs for providers in the form of requiring the use of
expensive resources, especially within the inpatient setting. To examine how
telemedicine can help address utilization and subsequently reduce the overall cost of
health care, numerous studies offer valuable insight. For instance, a team of researchers
in a 2018 study evaluated the effectiveness of telemedicine when used by adults with
type-2 diabetes. The results of the study revealed a mean cost savings of $2,756 when
compared to a control group without telemedicine (Warren et al., 2018). Furthermore, the
researchers also found that even given the cost associated with the initial implementation
TECHNOLOGY IN HEALTHCARE 9
of telemedicine technology, the net mean cost-savings was still $881 in the telemedicine
group. The researchers ultimately attributed these savings to a decrease in utilization,
noting that the “overall healthcare utilization cost was lower in the intervention group
than in the control group due to fewer visits to GPs, referrals to specialists, and hospital
admissions in the intervention group” (Warren et al., 2018, p. 592). Similarly, a different
team of researchers also evaluating telemedicine use for diabetic patients found data
supporting the same correlation between telemedicine and utilization costs. These
researchers stated that the implementation of the telemedicine technology resulted in less
hospital utilization and “reduced emergency department costs by 51.4% and inpatient
costs by 96%” (McLendon et al., 2019, p. 310). Each of these studies represents
substantial cost-savings for patients and especially for providers by limiting the need for
utilization of resources among chronically ill patients. But the use of telemedicine for
reducing utilization costs is not only limited to chronically ill patients. One study
demonstrates utilization savings of up to 66% of the average total cost without
technological intervention for patients following total joint arthroplasties (Bitsaki et al.,
2017). And while the reduction in utilization of resources is one way telemedicine can
help contain costs, it can also contain cost in additional ways for patients while also
improving outcomes. This is because telemedicine encounters are typically less
expensive than in-person office visits, with the average telemedicine visit ranging
between $40-$50 while in-person visits can cost in excess of $170 per visit (Appuswamy
& Disomone, 2020). The benefits do not stop there, however. Because telemedicine is
carried out remotely, it allows patients who were previously underserved be able obtain
access to medical care that might not have been obtainable beforehand, whether it was
TECHNOLOGY IN HEALTHCARE 10
due to their geographic location, lack of transportation, or immobility. By addressing
these disparities, telemedicine not only aids with cost containment, but it also provides
access to care for underserved populations (Xu et al., 2018).
Patient Portals
Another type of technological implementation that offers a potential for cost
containment is the use of patient portals. With patient portals, patients are able to use a
secure internet portal to gain access to their own medical records, usually through a
hospital supported app that also allows for patient-provider messaging (Shi & Singh,
2023). This has greatly enabled patients by helping to make them active participants in
their own care and by allowing them to be informed and able to have direct
communication with providers. Many patient portals also offer educational resources as
well to further enhance the enabling of patients. The reasoning behind why patient portals
can serve as useful technological tool in containing health care costs is that the more
informed and empowered patients are with regard to their own health, the less reliant they
will be on medical services, which will result in lower utilization of those services.
Evidence for this reasoning exists from studies which have been done to examine the
effects patient portal use has on medical utilization. For example, a study following the
rate of presentations to the emergency department and unscheduled office visits in post-
operative endourology patients found that patients not utilizing a patient portal were over
4.5 times more likely to make an unscheduled office visit and almost 2 times more likely
to present to the emergency department (Kachroo et al., 2020). This level of reduction in
healthcare utilization, as similarly seen with telemedicine, represents significant cost
savings for both patient and provider. Management of care for chronically ill patients is
TECHNOLOGY IN HEALTHCARE 11
another area where patient portals can be used effectively as well, with patient portals
having been shown to be cost effective over long-term time horizons in patients who are
chronically ill (Gilmer et al., 2019). This is because management of chronic conditions
with the use of patient portals helps patients stay well informed regarding their health and
facilitates better communication with providers. This was illustrated in one study
following patients with chronic conditions who utilized patient portals as part of their
care management. In it, the researchers found a significant reduction in emergency room
visits as well as preventable hospitalizations and noted that the rate of outpatient visits
increased (Reed et al., 2019). Interestingly, patient portals resulting in more outpatient
visits is actually a cost saving occurrence because, as pointed out previously, outpatient
services cost less for both patient and providers and serve as preventive care, which
researchers noted would “address unmet clinical needs, and reduce downstream health
events that lead to emergency and hospital care,” which are much more costly (Reed et
al., 2019, p. 2). Of the three types of technological implementations discussed, patient
portals could possibly be the most valuable from the patient perspective because it not
only has been shown to indirectly reduce costs by directly reducing the need for costly
medical utilization, but it also enables and informs the patient. This ultimately provides
patients with a valuable sense of both independence and control with regard to the
management of their health, which unlocks a whole other realm of possibilities in terms
of the benefits this type of technology provides.
Electronic Health Records
The final application of technology in the delivery of health care to be evaluated
is the use of electronic health records. This type of medical technology is different from
TECHNOLOGY IN HEALTHCARE 12
telemedicine and patient portals in that patients are not involved in the utilization of
them. Instead, electronic health records (EHR) are “digitally formatted health records that
provide real-time patient medical information for authorized personnel” (Shi & Singh,
2023, p. 263). One of the biggest areas in which EHR has the potential to address is the
issue of waste within the health care system. In one study analyzing waste in the United
States, waste was estimated to range from $760 to $935 billion, which equates to around
25% of the country’s total health care spending (Shrank et al., 2019). When broken down
and analyzed, certain categories of this wasted spending emerge as areas where the
implementation and utilization of EHR could be used as a solution to reduce those costs.
For example, one category of waste the researchers identified was failure of coordination,
which accounted for an estimated $72.8 billion. EHR is perfectly suited to address this
due to its focus on interoperability, which refers to “the ability to share and access patient
information by various users” (Shi & Singh, 2023, p. 104). Using EHR, providers and
other health care professionals are able to access a complete history of the patient’s health
care with everything included from previous physicians’ evaluations to prior testing and
procedures. Thus, facilitating better coordination between care givers due to better access
to comprehensive patient information. Similar to failure of coordination, the same
researchers also identified overtreatment as an area of waste that accounted for an
estimated $75.7 to $101.2 billion. Overtreatment often occurs when patients receive
testing that they don’t actually need or have already been given, mistakes which could
have been avoided had providers had access to a complete comprehensive history of the
patient’s treatment history through a resource such as EHR. In previous studies, EHR has
been found to reduce repeated imaging by a range of 44% to 67% in patients who visited
TECHNOLOGY IN HEALTHCARE 13
emergency departments that shared information via EHR (Atasoy et al., 2018). In
addition to this, it was demonstrated that the cost containment impact of EHR also has
spillover effects onto neighboring hospitals as well since most hospitals in the same
region share many of the same patients. Thus, prompting researchers to suggest that this
finding “provides evidence supporting the effectiveness of EHR adoption on reducing
societal healthcare costs” (Atasoy et al., 2018, p. 2533). Ultimately, there is evidence
available to support the cost containment effectiveness of EHR, however, in order for
these effects to be maximized, more health care facilities must adopt EHR systems to
allow for greater levels of interoperability among them.
Can Technology Have Negative Effects on Health Care Costs?
With a better understanding of how the implementation of technology can
contribute with health care cost containment efforts, it is also important to then consider
if there are also negative effects on cost as well. After all, any cost containment achieved
through technology that is offset by some other associated cost will have a significant
impact on the overall effectiveness and usefulness of technology. As a result, this is one
area that also requires analysis.
Even though evaluation of various applications of technology reveals significant
positive cost containment results, there is also the high cost of implementing these forms
of technology which must be accounted for as well. As technology rapidly develops and
becomes more advanced by the day, the price tag also continues to advance as well (Shi
& Singh, 2023). To illustrate this, the typical installation cost for an EHR system is $3
million for a 250-bed hospital and up to $7.9 million for a 300-bed hospital, with upkeep
and maintenance costs ranging from $700,000 to $1.35 million per year (Atasoy et al.,
TECHNOLOGY IN HEALTHCARE 14
2018). This is a significant investment for any health care organization to make, and the
impact is not limited to only the provider side. Patients can also experience the negative
cost effects of technology as well because their care will typically cost more when
facilities use more advanced technology (Shi & Singh, 2023). One team of researchers
found that the cost of services has increased due to advanced technology adoption by
63% in the area of diagnostics and 51% in the area of monitoring (Okpala, 2018).
However, the same study also found that patients positively perceived the effects of the
implemented technology at an even higher rate, with an 83% positive perception of
diagnostics and 84% positive perception of monitoring. These findings seemingly suggest
that many Americans place a high value on advanced technology in health care and are
willing to pay more for it (Shi & Singh, 2023). It is also important to note that while the
implementation of technology can be especially costly, researchers predict that “with
time, the cost of technologies will drop as more cost-effective technologies are
developed” (Okpala, 2018, p. 354). Additionally, thoughtful consideration should be
given to the type of population the technology is implemented into. To exemplify this,
one study evaluating telehealth performance in chronic heart failure patients observed a
cost savings range of $2832 to $5499 per year among intermediate and high-risk patients,
while costs increased at a rate of $2502 per year in low-risk patients (Liu et al., 2016).
Therefore, health organizations should be selective in the technology they choose and the
populations they implement it in, with the understanding that it is a significant
investment. They should also seek out the technology currently available that is cost-
effective and provides value to both the provider and patient.
TECHNOLOGY IN HEALTHCARE 15
Conclusion
Health care costs in the United States are unprecedently high when evaluated
relative to other nations. The Untied States spends a significant percentage of its GDP on
health care alone, with much of this being lost to waste and overutilization of resources.
These high costs are burdensome to providers who are faced with the high cost of
resources to treat patients, particularly within emergency departments and inpatient
settings. The costs are also burdensome to patients who must be able to afford these
costly services and are given little relief due to substantial insurance premiums. In spite
of this, the implementation of technology offers a resource for cost containment when
applied in certain areas. Most notably, telemedicine provides a way for patients to receive
care remotely in a manner that is more affordable than in-person office visits and that has
also been shown to significantly reduce the frequency of costly emergency department
visits and in-patient hospitalizations. All while also enabling care for underserved
populations who were previously at a disparity. In a similar fashion, patient portals
empower patients in the management of their care while also significantly reducing costs
due to the utilization of health care resources. And with EHR, providers and other health
professionals can easily access a comprehensive history of the care each patient has
received, allowing them to make more informed decisions and reduce the amount of
waste spent due to overtreatment and lack of coordination between care givers.
Thoughtful consideration should also be given regarding the cost to implement these
technological applications as well, as it can be costly. A strategic analysis should always
be performed to select the best type of technology to implement. Future research might
also be useful in examining ways to reduce implementation costs, as this would allow
TECHNOLOGY IN HEALTHCARE 16
technology to be utilized more easily by care givers and be provided to patients at a price
more reasonable. Ultimately, the implementation of technology can indeed help to
contain costs in certain areas, even though initial costs may be significant. More
importantly, while the implementation of technology can help contain costs, it can also
increase patient satisfaction, increase access, and address certain disparities. This, in turn,
provides an overall improvement in quality of life, which is the ultimate goal of health
care.
TECHNOLOGY IN HEALTHCARE 17
References
Appuswamy, A. V., & Desimone, M. E. (2020). Managing diabetes in hard to reach
populations: A review of telehealth interventions. Current Diabetes Reports,
20(7), 28-28. https://doi.org/10.1007/s11892-020-01310-2
Atasoy, H., Chen, P., & Ganju, K. (2018). The spillover effects of health IT investments
on regional healthcare costs.Management Science,64(6), 2515-
2534.Jhttps://doi.org/10.1287/mnsc.2017.2750
Bitsaki, M., Koutras, G., Heep, H., & Koutras, C. (2017). Cost-effective mobile-based
healthcare system for managing total joint arthroplasty follow-up.Healthcare
Informatics Research,23(1), 67-73.Jhttps://doi.org/10.4258/hir.2017.23.1.67
Emanuel, E. J., Glickman, A., & Johnson, D. (2017). Measuring the burden of health care
costs on US families: The affordability index.JAMA : The Journal of the
American Medical Association,318(19), 1863-
1864.Jhttps://doi.org/10.1001/jama.2017.15686
Gilmer, T., Burgos, J. L., Anzaldo-Campos, M. C., & Vargas-Ojeda, A. (2019). Cost-
effectiveness of a technology-enhanced diabetes care management program in
mexico.Value in Health Regional Issues,20, 41-
46.Jhttps://doi.org/10.1016/j.vhri.2018.12.006
Kachroo, N., Fedrigon, D., Li, J., & Sivalingam, S. (2020). Does "MyChart" benefit "my"
surgery-A look at the impact of electronic patient portals on patient
experience.The Journal of Urology,204(4), 101097JU0000000000001090-
768.Jhttps://doi.org/10.1097/JU.0000000000001090
TECHNOLOGY IN HEALTHCARE 18
Liu, S. X., Xiang, R., Lagor, C., Liu, N., & Sullivan, K. (2016). Economic modeling of
heart failure telehealth programs: When do they become cost
saving?International Journal of Telemedicine and Applications,2016, 3289628-
9.Jhttps://doi.org/10.1155/2016/3289628
McLendon, S. F., Wood, F. G., & Stanley, N. (2019). Enhancing diabetes care through
care coordination, telemedicine, and education: Evaluation of a rural pilot
program.Public Health Nursing (Boston, Mass.),36(3), 310-
320.Jhttps://doi.org/10.1111/phn.12601
Okpala, P. (2018). Assessment of the influence of technology on the cost of healthcare
service and patient's satisfaction.International Journal of Healthcare
Management,11(4), 351-355.Jhttps://doi.org/10.1080/20479700.2017.1337623
Papanicolas, I., Woskie, L. R., & Jha, A. K. (2018). Health care spending in the united
states and other high-income countries.JAMA : The Journal of the American
Medical Association,319(10), 1024-
1039.Jhttps://doi.org/10.1001/jama.2018.1150
Reed, M. E., Huang, J., Brand, R. J., Neugebauer, R., Graetz, I., Hsu, J., Ballard, D. W.,
& Grant, R. (2019). Patients with complex chronic conditions: Health care use
and clinical events associated with access to a patient portal.PloS One,14(6),
e0217636-e0217636.Jhttps://doi.org/10.1371/journal.pone.0217636
Shi, L. & Singh, D.A. (2023).JEssentials of the U.S. Health Care System.(6thJed). Jones
& Barlett Learning
TECHNOLOGY IN HEALTHCARE 19
Shrank, W. H., Rogstad, T. L., & Parekh, N. (2019). Waste in the US health care system:
Estimated costs and potential for savings.JAMA : The Journal of the American
Medical Association,322(15), 1501-
1509.Jhttps://doi.org/10.1001/jama.2019.13978
Tong, S., Amand, C., Kieffer, A., & Kyaw, M. H. (2018). Trends in healthcare utilization
and costs associated with pneumonia in the united states during 2008-2014.BMC
Health Services Research,18(1), 715-715.Jhttps://doi.org/10.1186/s12913-018-
3529-4
Warren, R., Carlisle, K., Mihala, G., & Scuffham, P. A. (2018). Effects of telemonitoring
on glycaemic control and healthcare costs in type 2 diabetes: A randomised
controlled trial.Journal of Telemedicine and Telecare,24(9), 586-
595.Jhttps://doi.org/10.1177/1357633X17723943
Xu, T., Pujara, S., Sutton, S., & Rhee, M. (2018). Telemedicine in the management of
type 1 diabetes.Preventing Chronic Disease,15, E13-
E13.Jhttps://doi.org/10.5888/pcd15.170168
