The Monetary and Other Benefits of Implementing Electronic Health Record

This article is centered on two items: One, an advertising from Dell Computers (http://www.dell.com/downloads/global/solutions/perot/electronic-health-record-implementation-costs-benefits.pdf?c=us&cs=RC968571&l=en&s=hea), which enumerates the benefits of transitioning to an Electronic Health Record system by citing the studies conducted by Washington DC’s Congressional Budget Office and by the Healthcare Information and Management Systems Society; and two, by the encyclopedia of medical professionals, the American Journal of Medicine (AJM http://www.amjmed.com/article/PIIS0002934303000573/fulltext.  From my own experience at Kaiser, where doctors and nurses make use of their Dell computers from the moment I check in for a  check-up, to the nurses’ station for vitals and by the attending physician who inputs his findings and the required medicines in the system, the use and benefits of EHR are very obvious: It saves time; reduces billing errors and redundancy of medical procedures and other costly errors; avoidance if not elimination of unnecessary lab tests; creates a better system of identifying what procedures to charge for reimbursements and applying them correctly; and most importantly, it lowers the cost of medicines and other costs for the patient. The end result, a win-win-win situation for the provider, the insurer and the patient.

The AJM study says that by saving $5 (the average chart pull cost) on every patient and by reducing transcription costs, implementing an electronic health record system may result in more than $17,000 in extra revenues for the provider in any given year. Over a five-year period, the study states that the “estimated net benefit” of an EHR system is $86,400 for the provider, a third chunk of which comes from drug expenditure savings, while more than half comes “radiology utilization (17%), decreased billing errors (15%), and improvements in charge capture (15%):” (Consensus, 2003). While we are still recovering from the Greatest Recession, this amount of money far outweigh the cost of actually procuring the equipment needed for an EHR implementation and the training necessary to apply these capital that in the end may help stave off rising health care costs. The study says if all hospitals and all other health providers in the U.S. participate, the nation may save $80 billion from the burgeoning health care cost of about $2 trillion annually. (Dell Services, 2010)

Even for capitated health plans, where providers serve patients at fixed rates regardless of the number and types of care given, the savings is also an enormous $86,400 per provider. For some, this goes high to as much as $140,100, even if a provider serves a low number of capitated patients with high discounts (“the net benefit range was as low as $3000 per provider”) (Consensus, 2003).  The same AJM study also cites other revenues, such as “capturing of in-office procedures that were performed but not documented (Consensus, 2003)” and as Dell says, it helps “reduce the duplication of diagnostic tests ,” provides for better security and safety of patients caused by “illegible” prescriptions and medical orders, and “prevents harmful drug interactions.” (Dell Services, 2010). Although not a friend of the labor unions, the use of technology means enhanced workflow, less manpower means reduced human errors, thus less malpractice lawsuits. Besides, as technology advances, the world moves forward and soon all will be implementing an EHR system. Europe for sure is on its way, the U.S. has to catch up.

Capital Costs and Return on Investments (ROI)

In spite of earning the title as the leading country in computer technology, the U.S. sadly lags in the use of EHR compared to other developed countries.  The AJM study says only 7% of U.S. healthcare providers use the technology, a far cry from across the Atlantic where countries are 50-90 percent EHR capable.  Reasons cited could be that of U.S. providers’ hard-to-change habits, the most likely unknown expense involved in purchasing the hardware and software components, and the reality of reduced productivity in retraining the staff.  Worse, some may be worried about the painful decision of actually firing loyal employees who may be slow in adopting to the new EHR environment. While it may be easy for some to just procure and the equipment and train their staff, it may be difficult for bigger health organizations that the AJM study recognizes. There could a staggering amount in “system integration costs depending on the complexity of system interfaces, the change in workflow design and the realities of power outages” (Consensus, 2003) affecting operations, specifically in areas where storms have caused disruption to power, which may compromise the safety and health status of inpatients.  Not to mention that security breach has affected even the biggest companies in the U.S.  People may be able to get back their stolen money from credit card, but no one wants their medical record compromised.

The AJM says that when implemented (their study was based on one provider – Partners HealtCare  – however) transitioning to EHR is just a measly $1,600 in software costs; $6,600 in hardware (for three computers, a printer and network installation that’s good for at least three years); $3,400 more for redesigning work process; and at least $1,500 more for employing technical expertise and other maintenance costs (B. Middleton, 1998).  All told, costs may reach a total of about $11,200 in “revenue loss” in the first year – not a staggering amount considering the return on investment as cited by the AJM study, especially when all things considered, all the costs in purchasing the equipment and services would be paid for in just after a year of EHR implementation (B. Middleton, 1998).  According to AJM, “the most pessimistic savings…when the most pessimistic assumptions were made, the model showed a net cost of $2,300 per provider.” When the most optimistic assumptions were used, this analysis yielded a net benefit of $330,900 per provider. Moreover, the same study says, “Savings due to prevention of adverse drug events in the model did not include costs of malpractice settlements, injury to patients, or decreased quality of life for patients, so the actual savings may be higher.”  AJM also “underestimated future cost savings because the model did not account for the annual growth rate of expenditures, which may outpace inflation in some categories, such as in drug and radiology costs” (Consensus, 2003). Incidentally, dollar figures used in the AJM study were all based in 2002 .

The Dell ad, however, tells a different picture. It says that based on a study by the CBO, costs that may be incurred by physician groups may range from $25,000-$45,000 “per physician” in addition to $3,000-$9,000 more in operating licensing and maintenance costs – amounts that are considerably high. It adds that the CBO also found out that EHR implementation costs for hospitals averages to about “$14,500 per bed” while annual operating costs may reach as much as “$2,700 per bed per year.” Despite that, however, the Dell ad includes many benefits gained, and cites at least one facility – Cincinnati Children’s – where there has been “a 52 percent decrease in time spent on the medication cycle entering and receiving orders, shortening the care process for patients and staff,” along with more orders signed by physicians (down to 10% from a high of unsigned orders of 40%) that improves reimbursements; less verbal orders for controlled substances; and better compliance in assessing pain protocols.

Be that as it may, saving $80 billion from the biggest deficit-causing industry in the national budget, according to Dell, is a huge amount.  The federal government is the biggest payer of healthcare.  Hospitals and healthcare providers may be in the business of saving lives and taking care of people's health.  But any Dr. Tom, Dr. Dick and Dr. Harry will know that providing this type of service requires a great deal of money, investment and wise financial decision.

Bibliography

(n.d.).

B. Middleton, M. M. (1998). Table 1. Costs of Electronic Medical Record System Used in the Model (Per Provider in 2002 U.S. Dollars).

Consensus, E. P. (2003). A cost-benefit analysis of electronic medical records in primary care. The American Journal of Medicine , 114 (5), 397-403.

Dell Services. (2010). Electronic Health Record Implementation: Cost and Benefits. Retrieved March 6, 2014, from Dell Computer Services: http://www.dell.com/downloads/global/solutions/perot/electronic-health-record-implementation-costs-benefits.pdf?c=us&cs=RC968571&l=en&s=hea

Samuel J. Wang, M. B. (2002). Table 2. Annual Expenditures Per Provider (in 2002 U.S. Dollars) before Electronic Medical Record System Implementation and Expected Savings after Implementation. Boston: Department of Finance, Brigham and Women’s Hospital, Partners HealthCare System.