The Access Card Could be Really Expensive, Costly and Delayed!

In the last few weeks a general theme that has been emerging in E-Health Commentary, both here and overseas, has been the increasingly clear recognition that very large national IT projects have a habit of running well over time and budget, sometimes to quite amazing levels, and that, conversely locally driven and managed projects seem to be able to deliver increasingly successfully.

Witness the problems in the UN NHS Connecting for Health Programme which have come to light recently both in the choice of both lead contractor (Accenture) and key software provider (iSoft). It seems both these organisations have yet to fully disclose just how bad the losses and outcomes will be for the UK.

Hard on this news we now find another major project in a different country is similarly apparently running off the rails. The following release from Ovum (The Global ICT advisor) says it all.

“http://www.ovum.com/news/euronews.asp?id=4907

Update on the German electronic health card: more costs, more delays...

Hot on the heels of further delays to the introduction of the electronic health card, comes news of much higher costs than previously expected. An independent cost-benefit analysis produced by Booz Allen Hamilton and commissioned by Gematik, the company in charge of the implementation and the running of the project, concluded that costs are likely to be around €3.9bn rather than €1.4bn previously expected, and could be as high as €7bn. And this sum doesn't include the €585m cost of issuing of the cards.

Taking into account the five-year introduction phase, overall cost is estimated at €5.2bn, which will exceed expected savings of €4.4bn by €800m.

Comment: Gematik's management board is still digesting Booz Allen Hamilton's analysis and is not ready to comment on its results. However, it is certain that the e-health card will go ahead, since its introduction is integral to the German code of social law.

However, the question arises: why is Gematik commissioning a cost-benefit analysis now, in the middle of the project? Before the project began, an initial study determined costs of around 1.4bn versus annual savings of €1.7bn, which sounded promising.

The German government's plans are regarded as the most ambitious telematics project in Europe currently under way. Though other countries such as the UK, France, and Italy are engaged in related projects, their scale in terms of functionality and number of users are smaller. The high complexity of the e-health card, involving 80 million insured citizens, 123,000 general practitioners, 65,000 dentists, 2,200 hospitals, 21,000 pharmacies and 270 health insurance companies, makes it a very large challenge. And the communication, or rather the lack of it, between the involved parties is causing delays in the execution of the project.

We are still a couple of years away before all 80 million insurants are due to have their e-health cards. Gematik has been issuing specifications of the necessary equipment and is testing its market suitability. No tests with patient have started yet, but they will begin in two states this autumn and will be extended to six other sates in 2007. In every step of this long-drawn process, specifications will be altered and adapted to arising problems.

This is a prestigious undertaking for the German government. Its success is not only important for its own standing, but would act as a showpiece for the German IT industry and help it win similar projects in other countries which are currently looking at introducing such a system. Every time one breaks new ground, unforeseen difficulties can arise. But given the many challenges that this project has had to face so far, this news will give more ammunition to its critics.”

The scale and reach of this project obviously has some parallels to the planned Joe Hockey Access Card, indeed while Germany is obviously a larger country, the scope of the Australian project appears to be broader.

A few points deserve to be especially highlighted.

First, even at the half way point, it seems the project will cost rather than save money. Over five years the net loss is presently estimated to be $A1.36 Billion (at today’s exchange rate. It leaves one to wonder just how credible the huge benefits identified in the KPMG report actually are. ($A3.0 Billion in benefits over ten years seems just a trifle optimistic!)

Second the total cost of the project must certainly give some pause for thought!. The current planned cost of the German card is estimated at €5.2 Billion ($A8.84 Billion). Given, on a population basis Germany is about four times the size of Australia this suggests a realistic cost for the Australian Access card (not assuming the Germans get any economies of scale) is $A2.2 Billion. The suggested budget of $A1.1 Billion would look to be a good deal short of what will finally be needed.

Third it seems clear the current Access Card time frame (System implemented by 2008 or 2009 at the latest) seems very, very ambitious indeed based on the German experience.

Fourth it is very clear that the Access Card implementation needs to be very carefully phased and piloted so that all the technical, change management and privacy issues are fully understood and solved on a small scale before a large scale rollout is attempted.

One is forced to the conclude that unless the Australian Access Card team are much smarter than the Germans (unlikely since this is their second generation health card implementation) or we are at serious risk of having a very under-funded, delayed and loss making Access Card implementation which carries all the risks of a very large and very complex IT implementation in the public sector.

It might be a very good idea to have Booze Allen Hamilton (who reviewed the German implementation) review thoroughly the Australian plans, and assure all concerned that all the known issues have been addressed, before we get stuck with a real loser.

David.