An interesting article on Lancet Digital Health, by Kazem Rahimi, reflects on the elusive search for the savings that digital health should allow.

Digital health advocates argue that the digital future will be one of more precise interventions, improved health outcomes, increased efficiency, and ultimately reduced health-care expenditure. But how realistic is the promise of reduced costs, while also seeing improved health, or at least no diminishing of it?

The author admits that the field is at too early a stage to reach a definitive conclusion on this issue, not least because of the need for more empirical evidence. However, in the interim, given the importance of this issue to current national and international policies, the argument of digital cost reduction seems worthy of scrutiny.

The author states that “despite the substantial contributions of technological progress to improvement in health outcomes, examples of cost-cutting effects are a rarity. On the contrary, technological progress is widely seen as the most important driver of the rise in health-care spending. For instance, magnetic resonance imaging will inevitably be more expensive than its alternative, which is usually either no test at all or a cheaper, but less accurate, diagnostic technique.”

However, the author highlights the differences in digital health. Digital technologies often include innovative software solutions and algorithms that could be substantially cheaper than devices or drugs. In addition, these technologies tend to focus on solutions to the notoriously inefficient delivery systems of health care globally, as opposed to the development of new treatments. Given that the alternative to digital technologies would potentially be a more labour-intensive model of care, one might expect their adoption to replace costly health-care professional time or hospital services.

Rahimi does not question the fact that the use of well designed and tested technological solutions will eventually lead to improved matching of resources with the complexity of tasks and, thus, achieve increased productivity or (technical) efficiency. The author makes for example the case of a machine learning algorithm that is able to make diagnoses faster or better than most doctors could be expected to lead to substantial reductions in the price of that particular service. Provided that there is sufficient empirical evidence, one could then directly compare the prevailing approach (doctor diagnosis) with the new digital approach (algorithm plus or minus doctor diagnosis) and conclude that the new intervention will get the same job done at a much lower cost.

But why is such a cost-saving intervention still likely to increase health-care expenditure? This apparent paradox can be explained by the common confusion between microeconomic effects of individual health-care interventions or programmes, and effects on the whole health-care market. Although a microeconomic study might conclude that substituting old with new might lead to net savings, the typical models in such studies assume that health-care utilisation of the service or treatment under investigation remains unchanged and that the two approaches differ only in their costs and health consequences. Thus, an intervention that is of lower price, even without causing a change in health outcomes compared with the alternative, would be expected to result in cost savings.

However, as the author points out, health-care markets tend to be in disequilibrium when demand continues to exceed supply and use. In such a setting, reducing the price of a particular service will invariably lead to an increase in the quantity demanded. Given that total expenditure equals the quantity demanded multiplied by its price, introduction of low-price technologies might lead to an overall rise in expenditure. In other words, medical uses of the new treatment are increased through addressing an unmet demand, and this expansion in use leads to a net rise in expenditure.

The article makes further reflections that I invite you to read here. They are an interesting point of view on a subject that is too often addressed in a dogmatic and simplistic way.