10 Problems Electronic Health Records Can Help Solve

My old dentist had a clipboard, pen, and slip of paper with a diagram of a generic set of chompers. He'd scratch little illegible notes on the diagram and shove it in my file next to years' worth of x-rays. My new dentist dictated his notes into my electronic record, pulled up an instant electronic version of my x-ray, and scheduled my next appointment himself right in the same file, sans receptionist or back-office staff.

This kind of revolution in health care, where electronic health records (EHRs) improve outcomes, convenience, and cost, is taking place in small practices and hospitals alike. As the adoption of EHRs continues, the medical community will have a new tool to attack 10 big problems in health care.

1. Cost
Healthcare reform has been one of the most divisive political issues in this decade. EHRs provide an apolitical tool to help curve health care spending, which is expected to grow at 5.8% until 2022. According to a study cited at healthit.gov, a single hospital system can save between $37-$59 million over a 5 year period by implementing EHRs. That's money passed down to consumers through decreased billed expenses, decreased insurance premiums, and decreased government spending on public health programs like Medicare. It's also a massive market opportunity for EHR retailers like Epic Systems, Cerner (NASDAQ: CERN  ) and athenahealth (NASDAQ: ATHN  ) to take a cut of those savings as revenue.

2. Healthy living
Diabetes and obesity are buzzwords in the medical community as their prevalence reaches epidemic proportions. Central to the treatment and prevention of these conditions will be a renewed focus on preventative care and the proliferation of wearable technology and telehealth. Apple (NASDAQ: AAPL  ) has been late to the wearables party on the hardware front, but its new HealthKit interface in iOS8 will make it an early mover in the effort to link these devices to EHRs. Its deal with Epic will allow data from wearable technology to be synced with a patient's medical records, promoting a focus on healthy living away from the doctor's office. These kinds of partnerships will unlock a world of opportunity, from wellness management to insurance rebates motivated by healthy living.

3. Personalized care
Wearable technology won't be the only source of new health care data. Between an explosion in gene sequencing and a growing focus on personalized diagnostics, patients would need volumes of paper files to compile all of that data. EHRs present a digital alternative to fragmented paper files, and provide a consolidated editable, sortable, and most importantly, shareable, method of tracking medical history. Doctors can have a more complete picture of their patient and more effectively coordinate care with other doctors to formulate cohesive personalized treatment plans.

4. Empowering patients
It's remarkable how little control patients have as consumers of health care. While an estimated 17% of lifetime income is spent on health care, patients are often bystanders to the most important financial transactions they can make. EHRs help to lift the veil of secrecy shrouding health care treatment and spending, improving patient engagement and allowing them to more seamlessly move between providers that better suit their needs. 

5. Empowering doctors
According to a study from The Commonwealth Fund, patients in the US wait longer for medical appointments than in 7 of the 10 nations surveyed. The wait is longest for services provided by primary care practitioners. EHRs empower doctors to focus more on patient care and efficient workflow, while focusing less on paperwork and red tape. athenahealth's cloud-based offerings, for example, allow smaller practices to exploit the niche market for efficient primary care without relying on hospital-sized economies of scale. The flexibility of its cloud model has allowed 95.4% of athena's customers, mostly small practices, to keep up to date with Medicare and Medicaid's Meaningful Use standards, comprising more than half of all qualifying practices nationwide.

6. Crowdsourcing Care
Imagine a start-up of highly specialized radiologists with no overhead costs except the cost of an Internet connection. EHRs would allow small practices to outsource X-ray analysis for a fraction of the cost of employing an in-house radiologist, and the service would have resources to double and triple check its work to providing better care.

Now imagine that the EHR was exported to and analyzed by the world's smartest computer. If IBM (NYSE: IBM  ) has its way, Watson will play an integral role in outsourcing diagnostic medicine. In collaboration with Memorial Sloan Kettering, supercomputer Watson is quite literally learning to treat cancer and guiding evidence based medicine from EHR data.

7. Population health
Thanks to EHRs, populationwide health data is more accessible than ever before, and companies like Cerner are transforming the new medical Big Data into meaningful treatment information. With its cloud-based HealtheIntent platform, Cerner makes it possible for providers to manage the health of their local population. That includes assessing regional health trends, stratifying patients, tracking treatment success rates, and determining best practices for patient outreach and workflow. All of those features enable better, cheaper care.

8. Epidemiology
According to a study conducted at Harvard Medical School, the cholera epidemic that spread through Haiti in 2010 could be retrospectively tracked via Twitter a full two weeks before official reports from health care authorities. A fully functional, integrated EHR system could provide the same real time data for epidemiological analysis and detect early warning signs of an outbreak in a more formal setting.

9. Drug Development
New drugs take nearly 10 years to move from initial conception through FDA consideration and onto shelves. A major hurdle that slows that process is clinical trial design and data collection. As a matter of statistical reliability, trials often take place in several treatment centers across the country, and sometimes globally. That makes just recruiting patients a tall task. Mining EHR databases for potential trial candidates could drastically improve trial design.

EHRs also provide a useful tool for tracking drug safety and efficacy, both during trials and following FDA approval. That's the rational behind Medidata Solutions' (NASDAQ: MDSO  ) Rave. Rave allows clinicians to easily input relevant trial data, improving data collection and detecting potential safety red flags. The prospect of faster trials with more reliable data is catching on, and sales of Medidata's subscription offerings grew 32% in 2013.

10. Innovation
Paper records have existed for thousands of years. Healthcare has lagged behind in the transition away from paper and into the electronic age. The broad acceptance of EHRs will bring the benefits listed above, but will also open the doors to untold innovation built on the flexibility of an interconnected health care industry.  

Foolish bottom line
Be it an interest in personalized medicine, wearable tech, or drug development, there are multiple places that investors can find returns as the medical community makes the leap into the electronic age. In fact, this shift will be so transformative that diversifying over a basket of health care and health care IT stocks could prove to be a very successful investment strategy.

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