EMR Stimulus

Healthcare Electronic Records Technology and Government Funding: Improving Patient Care?

By Sue Hildreth

Consistent Processes, Performance Metrics and Quantifiable Patient Benefits are Long-Term Goals

Many in healthcare and government want to see the wide gap in IT capabilities closed and more providers moved to adopt electronic health records (EHR) systems in order to improve the healthcare industry’s ability to transmit, share and access critical patient data when and where it is needed.

EHR applications range from simple electronic patient charts with demographic data, problem lists and medication lists, to integrated intra-hospital networks with access to diagnostic images, e-prescribing, physician notes, and decision support tools to alert physicians and nurses to potential errors or omissions, and to advise them on the best practices.

Proponents claim EHR not only improves patient safety but can save hospitals – and potentially the U.S. healthcare system – millions of dollars.

Skeptics claim EHR benefits are overrated, and point to the high cost of EHRs, which typically run in the millions of dollars, and to past implementation failures – such as LA’s Cedars-Sinai Medical Center and its failed attempt to get its physicians to adopt a computerized physician order entry system in 2003 – as proof that EHRs may not be right for all healthcare providers.

To be sure, EHR isn’t a cure-all for the healthcare industry’s ills, and the up-front costs of adoption are significant. Neither is the risk of failure miniscule. But that can be said of all major enterprise software projects. The adoption of electronic healthcare records does have the potential to significantly reduce paperwork and administrative overhead, reduce the cost of housing massive paper archives, and improve the speed and accuracy of medical care.

Table 1: Examples of EHR’s ROI by Annual Cost Reduction

Why Healthcare Needs the American Recovery and Reinvestment Act and EHR

The American Hospital Association reported in November that hospitals responding to a DATABANK survey were, on average, $831.5 million in the red in the third quarter of 2008. Cost cutting measures they were making included reducing administrative costs, laying off staff, and reducing services.

EHRs can help improve efficiency of operations and capture more of the patient services that doctors and nurses provide, thus enabling more complete billing (or overcharging, depending on who is arguing the issue).

Government has been looking at ways to encourage the adoption of e-prescribing and other electronic systems by healthcare providers for several years already. The Obama administration’s signing of the American Recovery and Reinvestment Act (ARRA), with its $19 billion in stimulus funds for healthcare IT, is the most expansive effort to date. It includes a menu of grants to states, Medicare and Medicaid incentives for hospitals and physician practices, and a timetable for imposing penalties for non-adopters of EHR after 2015.

Barriers and Obstacles to Adoption

The cost of software and implementation services is by far the biggest obstacle to adoption for both hospitals and physicians’ clinics. A small hospital might pay $3 million for an EHR system, while physicians’ electronic records software costs, on average, $35,000 to $50,000 per physician. So a ten-physician clinic is looking at a half million dollar investment. That is a significant investment at a time when providers are feeling squeezed financially at both ends – by the insurance payers, both private and Medicare/Medicaid, and by rising operating costs such as malpractice insurance and billing and administrative costs.

Physician reluctance to adopt IT – both in their own practices and in hospitals – is another major factor. Doctors who do take the plunge may wind up frustrated by poorly designed user interfaces or applications that lack the features they most need. Both hospitals and physicians are often handicapped by a lack of knowledge of EHR and may not know how to evaluate products or adequately map out all of the factors in the implementation.

Access to financing, as well as an investment in outside consulting help in selecting an EHR and mapping out the migration, increase the odds of a successful outcome.

Moving From EHR to HIE

Because healthcare providers rarely have the same EHR system, integration between providers in a state or region is being addressed by healthcare information exchanges (HIEs). At the end of 2008, there were 42 operational healthcare information exchanges and another 36 in the process of implementation. If most of those 36 became operational this year, there are now over 75 exchanges in the U.S., with dozens more in the planning. A few have also closed up shop, typically due to lack of financial support and interest on the part of participating hospitals.

Patient safety is one motivation for regional hospitals to collaborate on an exchange, and gaining efficiencies in their operations is another. Given that the typical patient today may see a dozen different providers of healthcare services – laboratories, diagnostic centers, nursing centers, mental health clinics, specialists, and physical therapy clinics, to name a few – integration across such a diverse group would be prohibitively costly and time consuming if done with point-to-point integration. An exchange that provides one or more standard methods for integrating with it means that a provider needs to integrate just once, to the exchange, rather than dozens of times.

Physician clinics and hospitals which obtain test results via an exchange save themselves the time and administrative costs of waiting for a fax or courier, and routing the documents to the appropriate department or physician. With electronic delivery of results and patient data from outside providers, caregivers can more quickly, effectively and efficiently care for patients.

For hospitals, exchanges also help ease integration between them and their affiliated physicians. Some hospitals have offered free EHRs to their doctors, in an attempt to improve information flow. Not all doctors opt to use the hospital’s system, however, and an HIE alleviates the need to construct point-to-point integrations between hospital EHRs, physicians’ electronic records applications.

Our Assessment

A basic EHR application that meets federal certification requirements will be a necessary investment for all hospitals. However, hospitals should resist the rush to purchase and implement EHR in order to meet federal deadlines and take the time needed to carefully evaluate, test and implement the best application for the needs of the medical staff. Even with the clock ticking on the Medicare incentives, a precipitous purchase of the wrong EHR would wind up being a much more costly move then missing a year of incentives.

At the same time, the government has made it clear that all but the most cash-strapped rural hospitals and clinics will be expected to be using EHR within the next few years or face real financial penalties – up to a 3% reduction in Medicare payments. While these penalties may wind up being delayed, there is no good reason for most healthcare providers not to be evaluating EHR products with an eye to adoption in 2010 or 2011 at the latest.

While the Medicare and Medicaid incentive payments won’t provide for the initial cost of an EHR implementation, AARA does include monies for state loan programs, and other federal and state grants and loans are available for healthcare IT adoption. Also, more EHR vendors are likely to be willing to provide low-interest loans or payment plans for healthcare providers, so that their customers can use the ARRA incentives to pay them back in the future. Healthcare providers which already have an EHR system will qualify for incentives, but only if those systems meet the government’s requirements. So this is the time to begin evaluating upgrade possibilities to ensure the system is compliant.

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September 10, 2009   No Comments