Getting to the Bottom (Line) of Ambulatory EMRs
EMRs have the potential to provide significant financial benefits, and while that potential is easy to realize with a hospital EMR, the numbers are a bit more nebulous regarding EMR implementation in the ambulatory setting.
In the current state of healthcare economics, providers are under constant pressure to increase productivity while improving the quality of the care they provide. The ever-present political wrangling over budgets and healthcare reimbursement are amplifying that pressure to reduce costs and maximize productivity.
Health IT could save the day for small physician practices. While much ink has been spilled over the benefits of EMRs in the hospital environment, less attention has been paid to the benefits of the ambulatory EMR in the physician practice or outpatient clinic setting.
Fortunately, several studies offer encouragement that implementing an EMR can help the bottom line. In general, the addition of an EMR is a good business decision even as you leave the hospital and head into the ambulatory environment—so long as a practice can get over the hurdle of the initial installation costs.
Breaking down those costs, the software alone represented approximately one-third of the overall cost, with hardware costs averaging $13,000 per FTE provider and revenue losses during training and implementation averaging $7,473 per FTE provider.
Different practices faced different challenges, but the average practice was able to pay for its EMR costs in two and a half years, according to Miller et al.
After installation, the rewards can be significant. A separate cost-benefit study, conducted by David W. Bates, MD, MSc, from the division of general internal medicine at Brigham and Women's Hospital in Boston, and colleagues estimated the net benefit from using an EMR at $86,400 per provider over a five-year period (Am J Med 2003;114:397-403). These results were dependent on a number of factors, most significantly the proportion of a practice's patients whose care was capitated, with some practices seeing a net benefit of more than $140,000.
However, not every practice saw such huge gains; the net financial benefit of an EMR can vary, says Bates. "It's reasonably clear that they are [a good business decision] for larger practices, but it becomes more complicated for practices that include only one or a few physicians, because there are economies of scale that small practices can't realize."
"Most of the benefits—89 percent based on a study done by the Center for IT Leadership—accrue to the payors and the purchasers," he says. "There really is a misalignment from the business side."
However, adoption rates do appear to be on the rise, and part of that may be due to the promise of meaningful use incentives. Through the Health IT for Economic and Clinical Health (HITECH) Act, physicians will be eligible for $40,000 to $65,000 of financial incentives through Medicare and Medicaid if they show they are meaningfully using an EMR.
In addition to meaningful use incentives, subsidies are coming from all over to help cover those initial costs, says Mary P. Griskewicz, MS, senior director of health information systems for HIMSS. Hospitals and payors are offering them to physicians, as are some vendors. Health information exchanges, while still immature, are coming out with bundled programs as well, says Griskewicz.
The subsidies were triggered by the federal government's relaxation of the Stark statutes and anti-kickback regulations that had previously prohibited hospitals from funding IT purchases for affiliated physicians. Now, a hospital can fund up to 85 percent of the cost of an EMR for a private physician practice, though this exception is scheduled to expire at the end of 2013 through meaningful use.
Even with the subsidies, Griskewicz says physicians should still be aware of some hidden costs. Even a subsidized EMR has down-the-line costs of due diligence, training and implementation time.
"In some instances, some costs will shift," she says. "You may not be transcribing as much, leading to the decrease of transcription costs, but you may be shifting costs to reorganizing the practice to better manage the data."
That practice reorganization may be another deterrent for physicians who might not want to change the way they work, says James Gaddis, MBA, practice director and partner with HIMformatics, a health IT consulting firm based in Atlanta. He says the fact that many physicians are reluctant despite the easing of the Stark statute shows that for some it's about more than the capital costs.
For physicians who are considering an EMR, Gaddis created the Ambulatory EMR ROI Calculator for HIMSS. Members can log in for free and get a high-level view of the financial impact of implementing an EMR. Designed as a first step toward a more formal cost-benefit analysis, says Gaddis, the calculator bases its model on input factors such as the number of FTE providers, percent of patients on capitated contracts, current levels of technology and transcription usage.
"Get trained on the EMR before it goes live," says Gaddis. "Some physicians will skip all the training and then complain that it doesn't work correctly. They need to go get trained because that's the key to success."
Bates recommends that practices invest in an EMR that has the capabilities that deliver the best healthcare value, and decision support is a key differentiator. Many benefits of an EMR come from clinical decision support tools, and a "light" EMR with less decision support functionality may be cheaper at the outset, but will be far less cost effective in the long run.
After installation and training, the full scope of the investment comes into focus. The addition of an EMR is more than just an IT project, says Griskewicz. The decision to add an EMR is about devoting the time and energy to changing the direction of a practice to provide better care. "It's about taking the opportunity to re-engineer your practice to meet the needs of your patients."
In the current state of healthcare economics, providers are under constant pressure to increase productivity while improving the quality of the care they provide. The ever-present political wrangling over budgets and healthcare reimbursement are amplifying that pressure to reduce costs and maximize productivity.
Health IT could save the day for small physician practices. While much ink has been spilled over the benefits of EMRs in the hospital environment, less attention has been paid to the benefits of the ambulatory EMR in the physician practice or outpatient clinic setting.
Fortunately, several studies offer encouragement that implementing an EMR can help the bottom line. In general, the addition of an EMR is a good business decision even as you leave the hospital and head into the ambulatory environment—so long as a practice can get over the hurdle of the initial installation costs.
A cost deep-dive
A 2005 study in Health Affairs broke down some of those initial costs. Miller et al conducted an assessment of 14 solo or small group primary care practices and found that initial EMR costs averaged $44,000 per full-time equivalent (FTE) provider, with ongoing costs averaging $8,500 per provider per year (24:1127-1137).Breaking down those costs, the software alone represented approximately one-third of the overall cost, with hardware costs averaging $13,000 per FTE provider and revenue losses during training and implementation averaging $7,473 per FTE provider.
Different practices faced different challenges, but the average practice was able to pay for its EMR costs in two and a half years, according to Miller et al.
After installation, the rewards can be significant. A separate cost-benefit study, conducted by David W. Bates, MD, MSc, from the division of general internal medicine at Brigham and Women's Hospital in Boston, and colleagues estimated the net benefit from using an EMR at $86,400 per provider over a five-year period (Am J Med 2003;114:397-403). These results were dependent on a number of factors, most significantly the proportion of a practice's patients whose care was capitated, with some practices seeing a net benefit of more than $140,000.
However, not every practice saw such huge gains; the net financial benefit of an EMR can vary, says Bates. "It's reasonably clear that they are [a good business decision] for larger practices, but it becomes more complicated for practices that include only one or a few physicians, because there are economies of scale that small practices can't realize."
Utilization rate drags
Despite the potential gains, there remains a relatively low rate of utilization for ambulatory EMRs. A 2010 report from management consulting company Accenture put the rate of EMR use in small physician practices at just 15 percent. Bates says that while the large initial costs are covered by the practice, many of the benefits are spread around."Most of the benefits—89 percent based on a study done by the Center for IT Leadership—accrue to the payors and the purchasers," he says. "There really is a misalignment from the business side."
However, adoption rates do appear to be on the rise, and part of that may be due to the promise of meaningful use incentives. Through the Health IT for Economic and Clinical Health (HITECH) Act, physicians will be eligible for $40,000 to $65,000 of financial incentives through Medicare and Medicaid if they show they are meaningfully using an EMR.
In addition to meaningful use incentives, subsidies are coming from all over to help cover those initial costs, says Mary P. Griskewicz, MS, senior director of health information systems for HIMSS. Hospitals and payors are offering them to physicians, as are some vendors. Health information exchanges, while still immature, are coming out with bundled programs as well, says Griskewicz.
The subsidies were triggered by the federal government's relaxation of the Stark statutes and anti-kickback regulations that had previously prohibited hospitals from funding IT purchases for affiliated physicians. Now, a hospital can fund up to 85 percent of the cost of an EMR for a private physician practice, though this exception is scheduled to expire at the end of 2013 through meaningful use.
Even with the subsidies, Griskewicz says physicians should still be aware of some hidden costs. Even a subsidized EMR has down-the-line costs of due diligence, training and implementation time.
"In some instances, some costs will shift," she says. "You may not be transcribing as much, leading to the decrease of transcription costs, but you may be shifting costs to reorganizing the practice to better manage the data."
That practice reorganization may be another deterrent for physicians who might not want to change the way they work, says James Gaddis, MBA, practice director and partner with HIMformatics, a health IT consulting firm based in Atlanta. He says the fact that many physicians are reluctant despite the easing of the Stark statute shows that for some it's about more than the capital costs.
For physicians who are considering an EMR, Gaddis created the Ambulatory EMR ROI Calculator for HIMSS. Members can log in for free and get a high-level view of the financial impact of implementing an EMR. Designed as a first step toward a more formal cost-benefit analysis, says Gaddis, the calculator bases its model on input factors such as the number of FTE providers, percent of patients on capitated contracts, current levels of technology and transcription usage.
Word to the wise
Once a practice makes the decision to invest in an EMR, Gaddis recommends that physicians budget for a productivity decrease right after implementation while the system fully settles in to the practice workflow. It's also important at the early stages to go to all the training sessions."Get trained on the EMR before it goes live," says Gaddis. "Some physicians will skip all the training and then complain that it doesn't work correctly. They need to go get trained because that's the key to success."
Bates recommends that practices invest in an EMR that has the capabilities that deliver the best healthcare value, and decision support is a key differentiator. Many benefits of an EMR come from clinical decision support tools, and a "light" EMR with less decision support functionality may be cheaper at the outset, but will be far less cost effective in the long run.
After installation and training, the full scope of the investment comes into focus. The addition of an EMR is more than just an IT project, says Griskewicz. The decision to add an EMR is about devoting the time and energy to changing the direction of a practice to provide better care. "It's about taking the opportunity to re-engineer your practice to meet the needs of your patients."
Evan Godt, Writer
Evan joined TriMed in 2011, writing primarily for Health Imaging. Prior to diving into medical journalism, Evan worked for the Nine Network of Public Media in St. Louis. He also has worked in public relations and education. Evan studied journalism at the University of Missouri, with an emphasis on broadcast media.