Australia's great e-health vision continues to stall with new research showing that greater use of ICT in the health sector could generate savings worth more than $1.5 billion per annum.

The research sets out the cost of a health care system that operates in disconnected silos, finding that the bulk of ICT investment has been directed at the development of large, closed monolithic systems.

Released by the Australian Centre for Health Research, the report strongly supports the introduction of online information sharing and an e-health network to transform the health care sector.

The report's author, Monash University's Professor Michael Georgeff, said providers operated in disconnected silos that hinder continuity of care.

"The business model we use in health is based on an industrial enterprise where the focus is often on the management of physical resources with very little attention to the management of knowledge," he said.

"In business, high priority communications is handled electronically but in health care it is pen and paper delivered by hand.

"No less than 25 per cent of all Australians suffer from a chronic illness and nearly every one of them would be better off with improved knowledge sharing and more effective management of patients."

For example, Georgeff said over 50 per cent of doctors do not follow best practice guidelines and up to 50 per cent of patients with chronic disease are hospitalised because of inadequate care management.

Moreover, home monitoring of patients can reduce emergency room visits by up to 40 per cent, hospital admissions by 60 per cent and length of stay by up to 60 per cent.

"Instead of the industrial model we need a knowledge enterprise model, the kind that is typical of Google, Amazon and eBay," Georgeff said. "The knowledge enterprise is characterised by networked information, support for autonomy and personalisation, and the use of systems that are open, adaptive and distributed.

"But not many are thinking this way in healthcare. We are still planning, standardising and buying the big systems. These kinds of healthcare systems currently being rolled out in the UK require massive investment - up to 10 per cent of annual health care expenditure."

Georgeff said some states are moving to mandate a limited number of "authorised applications" rather than setting up the infrastructure that would allow for a multitude of interoperable systems.

"It is difficult to think of anything more likely to kill innovation or more antagonistic to the internet revolution than the restriction of an entire industry to a limited number of standard software applications," he said.

Georgeff said the 'electronic health record' is universally seen as the key to better knowledge sharing in health care.

"But it is the connectivity of the players that is the key. Without it, without the connectivity to populate and to access health data - health care will remain a world of disconnected silos of information," he said.

Innovative business models and new technologies, he said, had transformed a range of industries from retail to finance.

But Georgeff said health care is not thinking along innovative lines. Instead, there is a strong move toward centralised systems and control. "There is a strong focus on standards and agreed terminologies, all of which can be positive, but not when used to constrain the development of open networks," he said.

The report identifies three steps to go forward: getting providers connected to one another; tracking health events across the continuum of care; and creating a broadband network of health services such as services for chronic disease management.

"A number of hospitals provide electronic discharge summaries and most pathology results are now delivered electronically. But this should be universal, and should be extended to include referrals, orders, hospital admissions, results and follow-up actions across the entire spectrum of care," he said.

Georgeff believes privacy and security is not a barrier to e-health as solutions already exist to deal with these issues.

To ensure all systems can effectively communicate, the new format will be based on the HL7 family of standards.

Further information about HL7 standards can be found at www.hl7.org.au.