Measuring the true costs of an EHR


We routinely respond to readers who question our opinions on the value of electronic health records. Many have suggested that we have become so biased in favor of Health IT that we fail to acknowledge its shortcomings. With those we respectfully disagree. In several previous columns, we have discussed the implementation challenges, legal pitfalls, and productivity losses associated with EHRs (these are indisputable facts of life for so many practitioners). But to satisfy our harshest critics, in this column, we’ll try to count the true financial cost of an EHR and assess the impact of that cost on physicians, while balancing this with the very real promise of improved patient care (a very tall order for one column!).

Cause for doubt?

EHR vendors and Health IT evangelists often cite studies that point to the incredible financial benefits of purchasing and using an electronic record. We, too, have propagated this notion, but acknowledge that the data to support this have been quite meager. In addition to the financial incentive, the advent of the meaningful use program brought an acknowledgement of the very real costs and challenges associated with electronic documentation, and many people – both inside and outside health care – are starting to take notice.

A recent survey analysis by Adler-Milstein, et al., published in the March 2013 issue of Health Affairs, prospectively evaluated the costs associated with EHR implementation and usage in a pilot program known as the Massachusetts eHealth Collaborative. "With more than eighty ambulatory care practices in three diverse communities agreeing to adopt EHR systems simultaneously, the pilot offered a unique opportunity to study the long-term financial impact of adoption on a heterogeneous group of practices," according to the authors. The results challenge the conventional wisdom and certainly warrant close examination (Health Affairs 2013;32:1-9).

As a primary conclusion, the authors note that "current meaningful use incentives alone may not ensure that most practices, particularly smaller ones, achieve a positive return on investment from EHR adoption." To break this down further, their analysis shows that across practices of all sizes and specialty, only 41% would see a positive return on investment – even after factoring in the meaningful use incentive payments of $44,000/provider. Productivity losses, software and equipment costs, and ongoing support and maintenance factored among the financial burdens. In addition, 22% of practices reported that physicians were spending more time at work after implementation. Clearly, these results threaten to tarnish our erudite reasoning on the benefits of EHRs – and might even bring a sense of joy and vindication to our detractors! But the data analysis doesn’t end there.

The devil in the details

In spite of their overall conclusion that electronic records typically lead to a net loss in revenue, the authors discovered several scenarios wherein implementing an EHR actually might make financial sense. A few are particularly worth noting here. First, when factoring in the meaningful use incentive dollars, they predict that 56% of primary care practices would realize a positive 5-year return on investment. Larger practices would also see benefit, with 75% achieving true gains in revenue. The survey team went on to comment that successful practices found ways to use the electronic record to their financial advantage and reaped incredible returns, averaging more than $100,000 in additional revenue per physician over 5 years. This was apparently done through improved efficiency (equating to more patient visits per day), better charge capture, and elimination of ancillary services such as dictation and billing.

Also noteworthy was the observation that smaller practices do not fare well in the financial equation. This, presumably, is in part due to their inability to take advantage of the economies of scale. While the expense of most EHRs is tied directly to the number of providers using it, the amount of equipment and support required is not a linear correlation at all. A solo provider requires almost as much support staff as a group of two or three, and the additional providers greatly offset the productivity loss incurred when switching to an electronic system.

Finally, because the EHR incentive program did not begin reimbursing physicians until 2011, the authors made projections based on the expected payment of $44,000/doctor over 5 years. They did not, however, factor in the penalties involved in not adopting an EHR by 2014. This reduced Medicare reimbursement of 1% per year is potentially significant and should be considered in a total cost/benefit analysis.

We still believe!

In spite of the unforgiving data presented in this survey, we continue to feel positive about the future of connected medicine and see reason to be encouraged by the success of the practices that fully "embraced" their EHR. We also are unwilling to accept that the benefits of EHRs are only financial; there are intangible rewards that cannot be appreciated on a ledger sheet. Even the authors of the survey acknowledge there are advantages that "may accrue to other stakeholders – such as patients – which could be significant." We’ve enumerated these in previous columns, but a few worth highlighting are improved access to patient information, better care coordination, and point-of-care decision support. None of these advantages can be realized if they are not implemented well, but if done right, there is no question that in the future the value of electronic health records will be measured in better outcomes, not lower costs.


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