Monday, October 27, 2008

The Return on Investment of EHRs

An experienced clinician recently emailed me, lamenting that Electronic Health Records do not have a return on investment i.e. doctors buy them, lose productivity, and do not get paid incrementally to justify the acquisition and use of EHRs.

This is indeed a complex issue. My answer to this clinician is below. I thought you'd find it interesting:

"The challenge is how to calculate Return on Investment i.e. who spends and who gets the return.

The literature suggests the e-prescribing reduces costs for pharmacies, payers, and providers (by reducing the burden on administrative staff to process renewals)

Decision support in an EHR results in better coordinated, appropriate, and less redundant care. However, it may be that the clinician pays for the decision support but the payer benefits from it through reduced claims.

To me, the Healthcare system (payers, providers, patients, employers, labs, pharmacies) achieves a substantial ROI through the use of EHRs which keep patients healthy and thus reduce costs.

To make the equation work, payers, hospitals, pharmacies and other beneficiaries of savings have to gainshare i.e. share the ROI with the providers. At BIDMC, I'm paying 85% of the implementation costs of EHRs for community physicians to better align incentives i.e. doctors do the work, the healthcare system benefits from care coordination and hospitals as one of those beneficiaries can subsidize costs.

Hopefully Medicare will start subsidizing EHRs so that the ROI is better aligned as I suggested in my letter to the President.

Soon, we'll have the outcome from the analysis of the Massachusetts eHealth Collaborative Project, the $50 million dollar BCBS pilot to implement medical records in 3 cities. I anticipate that it will conclude EHRs should be implemented to control costs, however the economics of how to pay for EHRs and encourage their ongoing use may require a novel scheme to 'redistribute the wealth'."


Unknown said...

Perhaps another consideration for the clinician is consumer demand. I left a large and reputable pediatric practice because waiting for the pediatrician to shuffle through the paper folders and notes to find the record of a call that I made to an outside nurseline and the notes from the last physician that saw my son seemed ridiculous.

Consumers will become used to the efficiency of electronic health records, which (should) allow the clinician to quickly see any recent events and to discuss a patient's care in context of these, rather than just the current episode. Additionally, I believe that consumers will begin to demand ownership of their records through PHRs and the sharing of records through RHIOs and NHIN. It will be consumer demand, not the federal government that finally pushes these projects to completion.

ROI is not the only consideration for EHRs; keeping your current customers by providing them with the level of service that can be achieved with technology must also be taken into account.

Unknown said...

I have worked in many private offices on IT projects. The majority of the physisicans I asked about their intentions for installing an EMR/EHR system responded with "we do not get reimbursed for the system" so they were not going to do it unless absolutley pushed to do so.

This is an example of a sad case where money and medicine should not mix. The benefits of the systems are enourmous.

AK said...

Another perspective on this issue is to assume investment in EHRs as the cost of doing business and then seek both hard and soft ROI. Once viewed as a sunk cost, incremental benefit is much more clearly recognized.

I'm working on a paper on exactly this topic with Weill Cornell Medical Center. I will keep you updated on my findings.

Unknown said...

There are also open source alternatives such as OpenVista or Clear-health that could be used in place of some of the more expensive EMRs. There are subscription alternatives similar to and it is more affordable for smaller practices. I don't know if subsidizing the cost of the EMR is a good idea. I think insurers should change reimbursement rates to a higher value if a practices uses an EMR.

jack said...

I agree with you and there is a big shock for all people of IT that the shares invested in lehmann brothers also in a big loss. Hope the
economy will soon become normal with risk of Mr.Obama

Jack roberts