E-Health Records: Financial Bonus May Not Be Enough To Encourage Adoption

Simply giving money to physicians may not be incentive enough to get them to adopt electronic health records.

Although the recently enacted American Recovery and Reinvestment Act sets up a system of financial bonuses and penalties to encourage EHR adoption, "I do not believe that financial incentives and penalties will be sufficient" said Farzad Mostashari, assistant commissioner of the Primary Care Information Project at the New York City Department of Health and Mental Hygiene. PCIP is a program that supports the adoption of EHRs among primary care providers in New York City's underserved communities.

Uptake of EHRs is key in the overall expansion of the nation's health information technology infrastructure, which in turn is positioned to play a significant role in the health care reform debate and is closely tied to the use of information generated from comparative effectiveness research. Policymakers in Washington have such a high regard for the efficiency-generating potential of health IT that ARRA provides $19 billion for health information technology expansion.

During a March 10 Senate Finance Committee hearing to examine the White House's budget outline for fiscal year 2010, Office of Management and Budget Director Peter Orszag noted that in order to move toward a system of evidence-based medicine that will allow doctors to deliver health care more efficiently, the nation needs to advance its use of health IT.

"One of the ... benefits of the health IT system is that not only does it give more information about what works, it also provides a platform for the Institutes of Medicine or other respected bodies to deliver best practice guidelines or guideposts back to practicing physicians," Orszag said.

Cheaper Not To Adopt?

One factor that could hinder EHR adoption is that for some small physician practices it may make more financial sense not to adopt.

An analysis from health care research and consulting firm Avalere Health notes that the Agency for Healthcare Research and Quality estimated the cost of installing and operating an electronic health record system to be $124,000 for the first five years. By contrast, the American Recovery and Reinvestment Act provides a maximum benefit of $44,000 to early adopters, and incentive payments drop for those who wait. Eventually penalties will kick in for those who do not adopt (¹ (Also see "Adoption Of E-Health Records Gets Stimulus Of Medicare Rewards, Penalties" - Pink Sheet, 2 Mar, 2009.), p. 36).

Avalere set the initial startup costs at $35,000 with a $1,500 monthly maintenance expense. ARRA provides for a maximum of $18,000 in the first year of incentive payments, leaving physicians to pick up the $35,000 difference. Once installed, Avalere analysis shows that practices would have to make up the $6,000 difference in the second year, $10,000 in the third, $14,000 in the fourth and $16,000 in the fifth. If practices are not early adopters, they could get as little as three years of incentive payments before ARRA cuts off assistance.

Conversely, the cost of doing nothing seems to be much less. Beginning in 2015, practices not using EHRs will face a 1 percent reduction in Medicare reimbursement, and that penalty increases a percentage point in each of the following years to 3 percent; if there is not a 75 percent penetration rate of EHR use, penalties could reach 5 percent.

Avalere determined the penalty equals a loss of $1,700 in reimbursement for a physician in 2015, $3,400 in 2016, $5,100 in 2017, $6,800 in 2018 and $8,500 in 2019 and beyond. The firm arrived at the numbers based on internal research and assumes that a physician sees eight Medicare patients a day at an average payment of $85 per patient, resulting in $170,000 in annual Medicare receipts.

The maximum reduction in Medicare payments, $8,500, is less than half the $18,000 of maintenance costs that a provider would bear once incentive payments stop. And with the New England Journal of Medicine citing that more than 50 percent of practices consist of one to three doctors, the possibility exists that a large percentage of practices could forgo EHR adoption.

"The propensity to postpone investment increases as the size of the practice gets smaller," said Jon Glaudemans, senior VP at Avalere. "Whether they take the penalty or not, I think, will be an economic decision."

Other barriers exist beyond the financial burden of implementing a system. Glaudemans noted that while the subsidies may not necessarily cover expenses, particularly for small practices, there are three other key considerations that will have an effect on EHR uptake.

"One is the general economic uncertainty of the overall economy," Glaudemans said. "Second is the health care reform uncertainty - independent of these subsidies, what is going to happen to the rest of [the physician] payments; and third is the regulatory uncertainty - how will the eligibility criteria be defined in regulation."

PCIP's Mostashari said other barriers to adoption "have to do with lack of readiness, staffing, confidence and experience for this very significant and typically painful transformation."

Successes Chronicled In Health Affairs

PCIP's experience in implementing an EHR system, along with that of Massachusetts eHealth Collaborative, is chronicled in the March/April issue of Health Affairs. The authors were Mostashari; MAeHC President and CEO Micky Tripathi; and PCIP Director of Operations Mat Kendall.

"These projects subsidize EHR implementation costs, provide central project management and practice consultation, and require participation in the program's public-interest goals in a defined geographic area. Within a short time, these projects have achieved the widespread adoption of EHRs across hospital-owned and multispecialty clinics, community health centers, and solo and small practices," the article says.

The programs are examples of successful adoption programs "because of spirited collaborations between practices, EHR vendors, the project staff, and external stakeholders," the article states.

"These community supports will reduce the psychic costs of EHR adoption and provide project management, troubleshooting, technical assistance" and other support to help ease adoption burdens.

The article identifies a number of lessons learned stemming from the two programs, including noting that a minority of implementation sites will consume the majority of resources.

"A sizable minority of practices will face serious difficulties adapting to the disruption in workflows, social dynamics, and revenue stream," the article states. "These practices will consume the majority of attention and emotional energy from project staff."

To emphasize this point, the article notes that problems may not even be associated with a lack of readiness on the part of the physician's office to accept the technology, but could be the result of "pre-existing management problems, poor business planning, reluctance to make long-term investments, high staff turnover, and low staff morale."

Lessons Learned

The authors offer four suggestions to help EHR program operators move adoption along, including setting the appropriate expectations of the "financial, organizational, and emotional stress" involved in implementation.

Second would be to provide additional support. "Beyond financial help, many practices will need comprehensive support services to assess readiness gaps, redesign workflows, provide additional training, troubleshoot technical issues, and communicate with the vendor when these problems arise," the authors state.

The third suggestion focuses on creating a learning community. "Practices may learn best from each other," the authors write. "Projects should establish mechanisms for community building (such as group training, user groups, and collaborative software). Building community means engaging not just the physicians but the entire clinical and nonclinical staff."

The last suggestion is to know when to give up. "Up to a third of IT implementations fail. In each of our projects, implementation at a few practices has been so troubled that the critical elements of mutual trust were lost." They added that sometimes it is "better to stop the ongoing crisis and mutually agree to sever ties. Although that is a frustrating outcome for all parties, practices with a failed implementation are likely to be more prepared for the challenges on the next try."

Authors also emphasized that vendors need to make scalable solutions, as there is not a one-size-fits-all approach to EHR implementation.

- Gregory Twachtman ([email protected])