June 30, 2005 Thank you, Chairman Ensign, for inviting me to testify today. I would also like to thank Ranking Member Kerry and the other Senators on the Subcommittee for holding and participating in this important hearing on Health Information Technology. My name is Sue Bostrom, Senior Vice President of the Internet Business Solutions Group (IBSG) and Worldwide Government Affairs at Cisco Systems, Inc. I also have the privilege of sitting on the board of directors at Stanford Hospital and Varian Medical Systems, a manufacturer of radiation equipment for cancer treatment. These positions have given me the opportunity to witness first-hand the challenges facing major sectors of the healthcare industry – providers, payers, pharmaceutical and medical device firms, and government agencies.

My goal here today is to share with you what we’ve learned through Cisco’s customers and in our own practice in the area of improving healthcare quality, increasing productivity and driving down costs through technology.

There is one overwhelming challenge faced by all sectors – the spiraling cost of health care. As you well know, healthcare spending in the US has topped $1.6 trillion a year and will reach $2.5 trillion by 2010—that’s more than 15 percent of the Gross Domestic Product.

Meanwhile, healthcare insurance premiums are rising at four to five times the rate of growth in wages and inflation.

Much of these rising costs can be attributed to underlying demographic trends and advances in medical care. The healthcare industry is being asked to offer ever-more sophisticated and expensive treatments for an aging population.

Another major cost driver is the enormous amount of ongoing paperwork, waste, and re-work. For instance, of the 30-billion individual healthcare communications in the United States, more than 90% of them are sent by fax, surface mail, or telephone. A full 30% of the cost of healthcare can be attributed to these poor healthcare practices. In fact, this industry ranks among the bottom five industries in terms of contribution to U.S. productivity, according to a Harvard University study.

If we look at other industries, we see a direct correlation between productivity gains and investment in Information Technology (IT) capital and solutions. These industries, on average, invest about $8,000 per year per employee in IT. In comparison, the healthcare industry invests only $1,100 per worker. But saving money is only one part of the equation. Information Technology can also help reduce medical errors and save thousands of lives each year.

Estimates vary, but experts believe between 44,000 and 98,000 people die in the United States each year from preventable medical errors.

The greatest impact on cost, productivity, and quality can be driven at those points where patients receive care—in the physician’s office and in the hospital.

If healthcare organizations widely adopted just one Information Technology solution -- Electronic Health Records (EHR) – the industry could save close to $78 billion annually.

Taking a quick look at the IT trends in healthcare, we find that deployment of technology has been relatively slow, with implementation of each wave of new applications taking decades rather than the 5 to 10 years it takes in other IT-oriented industries.

The first applications implemented in the late 1980s to early 1990’s were departmental applications – lab automation, pictorial archiving systems, human resources systems, and patient admitting applications – all solutions designed to make specific departments in a healthcare provider more efficient.

The next two waves of applications in healthcare have been broader, including both enterprise solutions -- such as electronic health record systems, clinical decision support systems – and inter-enterprise applications that cross institutional boundaries, such as remote patient monitoring, and automated payment programs that link providers with payors.

Despite the proven value of these applications in specific institutions, less than 5% of healthcare organizations have deployed electronic health records, 10% computerized physician order entry systems (CPOEs), less than 3 percent have adopted Clinical Decision Support and less than 1 percent have instituted support for Tele-Specialty – specifically electronic Intensive Care Units (eICU).

The most challenging roadblocks to adoption overall are: a lack of precise interoperable standards, a misalignment of financial incentives across the industry, and, finally, the inherent reluctance to change – especially when human life could be on the line.

Like many enterprises, we have found at Cisco that IT can play a significant role in improving the quality of care while driving down costs. Cisco Systems provides healthcare benefits for more than 65,000 employees and dependents worldwide. Looking to expand the use of technology to improve the healthcare provided to our employees and dependents, Cisco is now focused on promoting the more rapid adoption of electronic health records, electronic prescribing and secure physician-patient messaging, and will be adopting a pay for performance program in 2006 that supports these objectives with key physician groups serving Cisco employees and dependents.

The advantages of e-prescribing alone are significant, given that 50 percent of calls to physician offices are for prescription issues, and the average physician writes 30 prescriptions a day. The potential impact of e-prescribing includes an increase of 27 percent generic prescribing, a reduction in adverse drug prescribing of 15 percent, and an average per physician savings of $28,000 per year based on existing studies.

Cisco has also had the privilege of participating in a number of IT healthcare deployments that clearly demonstrate the significant role Information Technology (IT) plays in improving healthcare quality, reducing costs, and enhancing industry productivity.

For example, we helped a community healthcare center in Florida deploy an electronic health records solution, which has cut lab turnaround time by 89 percent and is saving the center over $2 million annually.

In Virginia and North Carolina we assisted a healthcare delivery network in establishing a Picture Archive and Communications system (PACs) -- that delivers radiology reports to doctors in minutes instead of days.

And in the Mountain West, we helped a regional medical center set up a Computerized Physician Order Entry system (CPOEs), which reduced antibiotic-related adverse drug events by 70 percent.

I offer these examples to illustrate that health Information Technology is working to fix the major problems facing the healthcare industry today.

Imagine if Electronic Health Records (EHR), Picture Archive and Communication system (PACs) and Physician Computer Order Entry system (CPOE) could be implemented worldwide? Tens of thousands of lives could be spared and billions of dollars saved.

Indeed, study after study demonstrate the impressive impact healthcare IT solutions have on rising costs and quality of care.

With broad adoption of proven technology solutions, the industry could save over $200 billion annually, enough to bring healthcare costs in line with the current rate of inflation or cover all the uninsured according to a variety of studies and presentations from Center for Information Technology Leadership (CITL), and American Health Quality Association (March 2004).

It’s clear that the next revolution in healthcare will use information to drive patient-centric, safe, and efficient care. A fitting term for this model is “Connected Health.”

What is Connected Health?

· Connected Health is the power of technology -- not simply to automate old tasks -- but to facilitate richer and better health care interactions between patients, physicians, and insurers. · Connected Health is the power of technology to place information at the point of care, empowering both providers and patients to make better, more informed decisions. · Connected Health is the power of technology to connect doctors with hospitals, hospitals with pharmacies, pharmacies with insurers, insurers with patients, and finally, patients with doctors so that no one is stranded on their own island of information.

Changing the way information is handled may not seem like a development to rival antibiotics or X-rays, but it has the potential to be every bit as revolutionary.

So what’s the hold up? Why is healthcare among the five lowest ranking industries in Information Technology spending per employee?

For one, the industry has historically underinvested in IT, partly because healthcare spending is decoupled from healthcare funding.

And clearly complexity plays a part. Connected Health systems require significant investment, standards, metrics, effective change management and, above all, a top-down commitment to transformation.

Healthcare organizations can get started by looking at their greatest needs, studying what other institutions have done, and strategically deploying first-strike applications with proven impact.

The challenge is great, but the stakes are higher. .

Healthcare Information Technology has proven its efficacy. All that’s needed now is the willpower and resources to deliver the solution nationwide.

Thank you again, Mr. Chairman, Ranking Member Kerry, and other members on the Subcommittee for inviting me here today. I am happy to answer any questions.