I have personally been involved in providing health care and patient service for eighteen-plus years and have witnessed, along with the rest of the U.S. population, staggering growth and fundamental change with regard to the dollars and resources required to deliver care. Health care accounts for over one-sixth of the U.S. economy and has become its largest sector. The U.S. dedicates an estimated $1 out of every $6 spent on final goods and services to the health sector, and its per-capita health care spending (over $8,000) greatly exceeds that of any other country (Folland & Goodman, 2013). The last six years or so of my career has been devoted to Health IT and, considering the size and scope of health care in the U.S., it comes as no surprise that information management has become such an important facet of this nation’s health care delivery system. The U.S. Government, through its HealthIT.gov website, describes health information technology (health IT) as a means for health care providers to better manage patient care through secure use and sharing of health information (P., A.,2014). Health information is data that has meaning and has been processed or organized in a manner that is useful for decision making. Management of this data involves overseeing patient health information and medical records, administering computer information systems, and coding diagnoses and procedures for health care services provided to patients (Green & Bowie, 2011). The use of health IT has been spurred on by the passage of the Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009, a part of the American Recovery and Reinvestment Act (ARRA). According to Buntin, Burke, Hoaglin, and Blumenthal, “HITECH makes an estimated $14–27 billion in incentive payments available to hospitals and health professionals to adopt certified electronic health records and use them effectively in the course of care” (Buntin, Burke, Hoaglin, & Blumenthal, 2011). The ARRA is an example of fiscal policy, the use of government spending and taxes to manage aggregate demand (Krugman & Wells, 2012). Considering this, it is reasonable to conclude that fiscal policy has, over the last five or so years, had a substantial influence on the economic viability of the health information management industry, specifically.

According to Thomas and Maurice, the six principal variables that influence the quantity demanded of a good or service are the price of the good or service, the incomes of consumers, the prices of related goods and services, the tastes or preference patterns of consumers, the expected price of the product in future periods, and the number of consumers in the market (Thomas & Maurice, 2013). One can question whether the typical economic methods and study apply to health care: are consumers of healthcare rational and do they calculate optimally at the margin? Do consumers question the price of emergency services during a time of need? In terms of consumer choice, there is a perception that patients leave medical decisions up to their providers. However, a considerable amount of decision-making is left up to patients in terms of elective procedures and routine examinations and preventative care, creating opportunities for rational choices to be made. Research by such studies as the RAND Health Insurance Experiment in the 1970’s indicates that people consume more health care as the care becomes less costly in terms of dollars paid out-of-pocket (Folland & Goodman, 2013). The trend toward consumer-driven healthcare has forced consumers to become more cost conscious of what they are spending on both healthcare and health insurance.

Simple economics has contributed to other areas of healthcare, as well. From a health information technology perspective, recent advancements in technology (i.e. semiconductor manufacturing) which have contributed to a decline in the prices of information technology equipment has steadily enhanced the role of IT investment as a source of American economic growth. “Productivity growth in IT-producing industries,” Jorgenson reports, “has gradually risen in importance and a productivity revival is now underway in the rest of the economy” (Jorgenson, 2002). Computers, as well as related digital communication technology, have the power to reduce the costs of coordination, communications, and information processing in the health care industry. “Thus, it is not surprising that the massive reduction in computing and communications costs has engendered a substantial restructuring of the economy. The majority of modern industries are being significantly affected by computerization” (Brynjolfsson & Hitt, 2000, p.24). Adoption and integration of information technology provides potential improvements in health care, but also possibilities of increasing costs.

In my opinion, macroeconomic indicators for both health care and health information technology are similar, however health IT is still a growing sector and there is a level of uncertainty that surrounds the industry. The most relevant indicator for healthcare overall would seem to be the National Health Expenditures Estimates, which represents the amount of health spending in the U.S. monthly and what percentage of GDP the spending represents. As stated earlier, the U.S. devotes by far the largest share of GDP to health care spending. For example, the Bureau of Economic Analysis reported in April, 2014 that expenses for health care rose at a 5.6% annual rate in the fourth quarter of 2013, signaling an upward revision in the government’s estimate of consumer spending overall and accounted for nearly a quarter of the economy’s 2.6% annualized growth in the last three months of 2013 (Davidson, 2014). The Consumer Price Index is another measure of health-related economics which depicts price changes for out-of-pocket expenditures. The CPI for medical care services also includes an indirect measure of price change for health insurance coverage purchased directly by consumers (Seifert, Heffler, & Donham, Winter, 1999). Yet another influential indicator is job openings and labor turnover: a July, 2013 report by Pellegrini, Rodriguez-Monguio, and Qian indicates that the healthcare sector was one of the few sectors of the U.S. economy that created new positions in spite of the recent economic downturn (Pellegrini, Rodriguez-Monguio, & Qian, 2014). More specifically, a 2009, fourth-quarter survey of more than 130 U.S.-based IT organizations conducted by Computer Economics indicated high demand in the healthcare space, particularly for software developers with skills in mobile app development and those with experience in supporting infrastructure virtualization (Monegain, 2012). There are several other lesser-known, industry specific, microeconomic indicators which economists utilize that point toward the condition of the industry. These would include the measure of the contribution of health care to population health, as represented by the elasticity of health with respect to expenditure on health care inputs, or the % change in health / % change in health care expenditures. Others include morbidity rates, capacity utilization, and average cost per patient (Folland & Goodman, 2013).

The health economy merits attention for its sheer size in terms of its large share of GDP and the substantial capital investment it represents. It also maintains a large and growing share of the labor force. It has become clear to me that observing and scrutinizing the well-being of the health care sector allows for perspective on the well-being of the economy as a whole. As such, it’s evident that the new technologies which will grow out of a need to improve health care delivery over the coming years will have a lasting effect on the wealth of this nation. Krugman writes, “as much as possible, you should spend on things of lasting value, things that, like roads and bridges, will make us a richer nation. Upgrade the infrastructure behind the Internet; upgrade the electrical grid; improve information technology in the healthcare sector, a crucial part of any healthcare reform” (Monegain, 2009, January 19).    

Resources:

Buntin, M. B., Burke, M. F., Hoaglin, M. C., & Blumenthal, D. (2011). The benefits of health information technology: a review of the recent literature shows predominantly positive results. Health Affairs, 30(3), 464-471.

Brynjolfsson, E., & Hitt, L. M. (2000). Beyond computation: Information technology, organizational transformation and business performance. The Journal of Economic Perspectives, 23-48.

Brynjolfsson, E. (2011). Wired for innovation: how information technology is reshaping the economy. MIT Press Books, 1.

Davidson, P. (2014, April 1). Health care spending growth hits 10-year high. USA Today. Retrieved April 25, 2014, from http://www.usatoday.com/story/money/business/2014/03/30/health-care-spending/7007987/

Folland, S., & Goodman, A. C. (2013). The economics of health and health care (7th ed.). Upper Saddle River, N.J.: Pearson.

Green, M. A., & Bowie, M. J. (2011). Essentials of health information management: principles and practices. Clifton Park, NY: Delmar Cengage Learning.

Jorgenson, D. W. (2002). Information technology and the US economy. 2002), Economic Policy Issues of the New Economy, 37-80.

Krugman, P., & Wells, R. (2012). Economics. (3rd ed.). Worth Publishers.

Mandl, K. D., & Kohane, I. S. (2009). No small change for the health information economy. New England Journal of Medicine, 360(13), 1278-1281.

Monegain, B. (2009, January 19). Economist calls for healthcare IT as part of reform. Healthcare IT News. Retrieved April 26, 2014, from http://www.healthcareitnews.com/news/economist-calls-healthcare-it-part-reform

Monegain, B. (2012, February 17). IT pros likely to fare better in healthcare. Healthcare IT News. Retrieved April 26, 2014, from http://www.healthcareitnews.com/news/it-pros-likely-fare-better-healthcare

P., A. (2014). ABOUT HealthIT.gov. HealthIT.gov. Retrieved , from http://www.healthit.gov/

Pellegrini, L. C., Rodriguez-Monguio, R., & Qian, J. (2014). The US healthcare workforce and the labor market effect on healthcare spending and health outcomes. International journal of health care finance and economics, 1-15.

Seifert, M., Heffler, S., & Donham, C. (Winter, 1999). Hospital, Employment, and Price Indicators for the Health Care Industry: Second Quarter 1999. HEALTH CARE FINANCING REVIEW, 21, 239-279.

Thomas, C. R., & Maurice, S. C. (2013). Managerial economics: foundations of business analysis and strategy (11th ed.). New York: McGraw-Hill/Irwin.