Electronic Medical Record Implementation: Costs and Benefits

Electronic Medical Record Implementation: Costs and Benefits Sheryl L. Venola Assignment 3 (24 July 2011) NURS 517 Intro to Health Care Financing Saint Xavier University Professor: Dr. Roger Green, DNP, MSN, BSN Abstract This paper discusses the adoption of an electronic medical record system purchased by Howard Regional Health System in Kokomo, Indiana; the rationale behind its timing and choice in expenditure; the ramifications of not implementing the system (e. g. recent health care legislation requirements); the benefits to the organization as well as to the patients it serves, and a cost effectiveness analysis.

Additionally, the American Recovery and Reinvestment Act of 2009 is discussed including compliance mandates that will require eligible providers and health care institutions to meet electronic health technology implementation deadlines or face no compensation for their implementation as well as reductions in Medicare and Medicare reimbursements. Also included are discussions of the “meaningful use” guidelines established by the Centers for Medicare and Medicaid and the differences between electronic medical records and electronic health records. Finally, the advantages and disadvantages of electronic medical records are detailed.

In response to the to changes in the health care delivery system as a result of the Affordable Care Act (ACA) signed into law in March of 2010, Howard Regional Health System (HRHS) has recently purchased the Cerner electronic medical record (EMR) system at a cost of $22,000,000. According to chief executive officer, James Alender, accountable care is the focus of this change in addition to stimulus money for electronic health record (EHR) system implementation, which could offset their initial expenditure by approximately $3,100,000 based on the volume of Medicare business the organization had in 2008 (Munsey, 2011).

This monetary investment comes in the wake of health information technology implementation requirements set forth in the American Recovery and Reinvestment Act of 2009 (ARRA). The Recovery Act specifies that eligible providers and hospitals with a fixed Medicare and Medicaid patient populations must adopt EHR systems by 2015 or face reduction in their compensation under these programs (Department of Health & Human Services [DHHS], 2009).

Additionally, the act assigned funds to the Centers for Medicare and Medicaid Services (CMS) to assess existing EHR systems and to provide incentives for eligible providers and hospitals in implementing such systems. With continued funding and legislative measures affecting the organization’s financial future, the adoption of the Cerner system seems to be one of the most important steps in ensuring its financial security in the years to come.

If hospital executives and the Board of Trustees were to ignore the requirements set forth in the AARA and ACA legislation, the institution would be in serious jeopardy of losing not only is share of federal funding, but its ability to participate in health care delivery on any level at all. This would signal their demise and would certainly affect the surrounding community as it is one of two hospitals in Kokomo, Indiana, and is the only health care organization of its size in this region of the state.

The patients Howard Regional serves will benefit from electronic recording of their health and medical information in many ways. Alender states that Kokomo’s “snowbirds” should have access to their records so they can be as mobile as they are, suggesting that this will reduce health care costs by reducing duplication of tests, if treatment is obtained away from home. He goes on to assert that digital records will allow more efficient movement of patients through the system allowing seriously ill patients to move more quickly through the emergency department, and other acute care departments within the system.

Additionally, if that same patient requires further care away from HRHS, the treating hospital would have access to the previous records so that work already completed is not repeated (Munsey, 2011). Their medical information could be updated with each visit rather than their having to “provide the same information over and over again (Gurley, 2003). ” Gurley also agrees that because patients and providers are better informed through electronic record-keeping, there is less duplication of testing as well as enhanced treatment coordination among health care providers.

Along with the patients, the hospital reaps many tangible and intangible benefits from EMR as well. The information in the electronic record is easily accessible to multiple clinicians at multiple locations at the same time, with nearly immediate retrieval time. For this reason, it is updated frequently and is available for access at any workstation whenever the information is required making time spent with patients more efficient (Gurley, 2003). According to Shi and Singh (2003, p. 65), one of the most important aspects of electronic records is the integration of specific patient profiles with clinical decision making tools built into the software which provide evidence-based practice reminders and guidelines for effective, efficient treatment. This type of alert system can result in reduction of medication errors and in appropriate treatment options, saving both the patient and the clinician from harm. The data analysis capability of the EMR can also be used to identify developments among patient populations allowing for early intervention when indicated.

It can also be utilized to identify areas in which the organization may need to expand or scale back depending on the trends the data indicates (Dolan, 2011). Having used the Cerner system in the past, this RN noted that with the clinical record being streamlined in such a way that narrative documentation was necessary only by exception, completing it required less time, which left more time for bedside care along with completion of educational requirements, which were also mostly computerized.

Hence, the savings could be significant and provide for increased nurse satisfaction related to the ability to provide more actual patient care as well as complete proficiencies without having to stay after a shift or come in on a day off. As mentioned above, EMR can reduce duplication of services, assist in fast-tracking acutely ill patients, reduce the duplication of tests and services that aren’t medically necessary (e. g. the patient’s condition has not changed substantially), allow clinicians to spend less time on documentation possibly reducing overtime, each of which can result in cost savings for the institution.

According to Randall T. Huling Jr. , MD, president of Olive Branch Family Medical Center in Olive Branch, Mississippi, since switching over to EMR in January of 2010, they have increased revenue by an estimated $650,000 with an annual cost reduction of more than $85,000. Additionally, they have been able to raise provider productivity by 10,000 visits, raise their fee collection percentage from 68 to 72 percent, and increase the charges per patient from $157 to $172 (Byers, 2010).

Wang et al (2003) performed a five-year cost-benefit analysis using primary data from several internal medicine clinics, using their own internally developed EMR system, utilizing a health care organization perspective framework and a conventional paper-based medical record as the reference point. Costs of implementation were approximated to be $3,400 per provider in the first year and included redesign of workflow processes, extraction of data from paper charts, and training.

Yearly maintenance cost, including system and network administration and additional technical support personnel, were estimated to be $1,500 per provider annually. The temporary loss of productivity resulting from the transition to an electronic from a paper system, was interpreted using a decreasing loss rate of 20% in month one, 10% in the second month, and 5% in the third, returning to baseline in the following months. With annual averages for provider revenues, this cost amounted to $11,200 in the first year.

Although their five-year net benefit per provider was $86,400 and the “net financial return to a health care organization from using an ambulatory medical record system is positive across a wide range of assumptions (Wang, et al, 2003, p. 401),” the authors cautioned that several variables could affect the net revenues organizations could expect. The patient mix can affect revenues depending on the number of capitated versus fee-for-service patients served by the health care organization. With capitated arrangements, savings to the patient resulting from decreased use of utilization of services, revenues accrue to the provider.

However, less utilization of services in fee-for service arrangements result in loss of revenue to the provider, but the payer (i. e. the insurer) saves in expenses. They did postulate that these insurers might provide incentives to providers using EHR realizing that their profits could be increased with more providers utilizing these systems, The study evaluated cost savings from drug suggestions and warnings provided by the EMR software, which aided in prescribing of formulary drugs and prevention of adverse drug events.

However, the study was not able to evaluate the intangible cost savings from averted malpractice claims, injury to patients, or reduced quality of life of clients. Additional tangible and intangible savings that were not included due to unavailability of sufficient data were reductions in malpractice premium costs, decreased staffing needs, less paper charting-related storage and supply costs, increased provider productivity, generic drug substitutions, enhanced reimbursement resulting from proper coding, and reduced denials related to insufficient documentation of medical necessity (Wang et al, 3003 p. 402).

Limitations of the study cited by the authors included the fact that the research model was centered on primary data from their institution, published literature estimates, and an expert opinion panel which they convened. They also conceded that EMR implementation might produce other costs, including greater system integration expense for larger institutions dependant on the complexity of the various system interfaces involved. Additionally, although effectiveness of electronic medical record interventions has been well-established in inpatient settings, there is less certainty of their effects in the outpatient environment.

Other costs could be related to decreased or lost productivity during unexpected network or computer system downtime, reassignment of clinical staff, or redesign of the workflow process (Wang et al, 2003, p. 402). Obviously the above results are based on one study utilizing results from a group of ambulatory clinics making it difficult to extrapolate data to a hospital setting even when that hospital has significant outpatient programs. Indeed, Thompson and Fleming (2008) pose questions regarding the uality and quantity of data found in existing literature, suggesting that health care institutions be cautious in their information sources in order to be better informed in the EMR decision-making process. The authors state that amount of comprehensive studies are lacking requiring hospitals to obtain more sources containing information they are seeking and rigorously compare data so that they can better extrapolate the results to their individual organizations (Thompson & Fleming, 2008). They also caution using staff time savings as a factor unless that variable is given a value and that it is used to actually cut costs.

For example, if an average of 30 minutes per staff member is realized in utilization of the EMR, how will that impact staffing? Will staffing needs be reduced allowing for fewer staff members per shift, resulting in actual cost reductions? If staff are able to complete other duties that would have required use of overtime or coming in on days off, this would also decrease expenditures. However, the authors point out that staff members are often allowed to perform other tasks that don’t result in salary reductions, although this is implicit when staff time saving related to EMR is discussed (Thompson & Fleming, 2008).

It is obvious that the decision to adopt an electronic medical record is not an easy one to make given all the variables discussed previously, but the information presented thus far has not taken into account the more recent changes produced by health care reform. These changes are discussed in the following paragraphs. The American Reinvestment and Recovery Act provides incentives for eligible providers (EP) and health care organizations (i. e. those who serve a defined percentage of Medicare and Medicaid recipients) for the implementation of EHR.

The use on EMR and EHR are have often been used interchangeably, but they are not the same. An electronic medical record is the legal record of the care a patient receives from a health care provider or institution during their encounter with either entity. The electronic health record belongs to the patient and encompasses the entirety of their care across all providers within a community, region or state (Garets & Davis, 2006, pp. 2-3). For the purposes of reimbursement, however, providers must use a certified EHR (EHR Incentives, p. ). The recovery Act has appropriated $140,000,000 for each of fiscal years 2009 through 2015, with an additional $65,000,000 for 2016 to be used for administrative funding. Funds are to be made available until completely utilized. “In coordination with the Office of the National Coordinator (ONC) for Health Information Technology, CMS will develop the policies, such as the definition of ‘meaningful use,’ needed to implement the incentive program (DHHS, 2009). In addition, it will be necessary to provide education to eligible participants to facilitate their understanding of all the conditions and guidelines regarding their eligibility, the selection of Medicare or Medicaid incentive programs, the incentive payments, and the demonstration of “meaningful use. ” Recovery Act reporting compliance will require guidance to individual states, which will involve Federal and State staff time and require modification of accounting and payment data reporting systems (DHHS, 2009).

When the aforementioned requirements were set forth by the DHHS in 2009, the meaningful use guidelines had not yet been established. Following is a link to the summary overview for meaningful use objectives of EHR* (Blumenthal & Tavenner, 2010) as it currently stands, which outlines the steps individual providers and health care institutions (hospitals, ambulatory care centers, clinics, et al) must take in order to receive stimulus funds for the costs associated with implementing electronic health systems (EHR).

The initial payments will be made beginning in 2011 depending on each state’s timing in adoption of the Medicare and Medicaid programs. For hospitals, the calculation is based on the volume of Medicare and or Medicaid patients served, but the baseline payment is $2,000,000. Each program is separate, but EPs and institutions can apply for one or both programs, however if they choose only one program, they cannot later add the other, so it benefits them to choose both at the outset since they can drop out of either one at any time (EHR Incentives). Given the stakes of not participating, providers should work diligently to eet all the requirements set forth in order to maximize the return on investment they should obtain in simply adopting EHR. The incentives offered will merely help them realize those return sooner rather than later. Finally, given the state of internet security and the government’s desire to push providers toward electronic data capture, it is only natural that there would be concerns regarding EMR and EHR technology. Advantages of EHR over paper records include an expansive storage capability, availability of the data from many access points at the same time, and nearly immediate retrieval time (Gurley, 2003).

The paper record is fragmented and depending on the charts used (e. g. some tend to fly open when dropped, causing paper to be scattered), pieces of the record can be lost. Additionally, when a patient is hospitalized more than once, their old chart must be retrieved in order to provide continuity of care. Electronic systems bypass this and allow clinicians to obtain information from previous visits much more quickly allowing the patient to have a streamlined entry to and exit from the system.

Electronic health records also have built-in medical alerts and reminders allowing providers to be notified of abnormal lab results, potential drug interactions, and timing of tests required for monitoring blood levels associated with certain conditions or as a side effect of medications. It can also provide evidence-based practice plans for certain diseases and disorders facilitating the provider’s choices in judging the right path in caring for each patient. The electronic software allows the clinician to capture information enabling them to provide payers with the outcome based criteria they require in reimbursing the physician.

Finally, EHR provides a major step in ensuring patient safety by clearly written order entry by physicians avoiding the mistakes that can occur with handwritten orders when those entries are illegible (Gurley, 2003). The major disadvantage of EHR adoption appears to be the costs associated with implementing them. According to Kent Gale, start-up costs could range from between four and five million dollars for a smaller (200-bed) hospital to $100,000,000 for an organization with three hospitals. He went on to tate that a typical 400-bed facility with a more extensive EHR would likely spend between $20,000,000 and $30,000,000 (Byers 2010). Also, unless one is technologically-savvy, there can be considerable learning needs on the part of physicians and staff. In these cases, it is much better to have systems that are more intuitive and user-friendly in order to get everyone onboard. As previously mentioned, privacy concerns are at the forefront in people’s minds where electronic documentation is concerned.

Security measures must be ever-evolving in order to meet the challenge and audits of access to medical data must be done to ascertain the appropriateness of information access. Paper records have also had the potential for unauthorized access without the knowledge of the patient or provider and these invasions of privacy are much harder to detect (Gurley, 2003). Essentially, the electronic record has its advantages and disadvantages, but with all the benefits they can provide to patients, providers, insurance companies, as well as the government in collection of statistics, it appears to be the best choice for all concerned.

With a great deal of effort and constant vigilance, electronic health records can provide for safer, more cost efficient care, and conserve resources for use in other areas that are currently lacking. I believe that in the end, Howard Regional’s decision to adopt EHR will result in huge savings and increased revenues that will benefit not only the organization, but the communities they serve. References Blumenthal, D. , & Tavenner, M. (2010, August 5). The “Meaningful Use” Regulation for Electronic Health Records. New England Journal of Medicine, 363, 501-504. Retrieved from http://ww. nejm. rg/doi/full/10. 1056/NEJMp1006114? ssource=hcrc Byers, J. (2010, November). EMR implementation: One day at a time. CMIO: Information, Evidence & Effectiveness in Medicine, Digital. CMIO. net, 10-12. Retrieved from http://d27vj430nutdmd. cloudfront. net/5165/51383/51383. pdf Department of Health and Human Services Report (2009). Centers for Medicare & Medicaid Services: Medicare and Medicaid Incentives and Administrative Funding. Retrieved from http://www. hhs. gov/recovery/reports/plans/hit_implementation. pdf Dolan, P. L. (2011, May 2). Electronic medical records: What your data can tell you.

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Electronic Medical Records vs. Electronic Health Records: Yes there is a difference [White Paper]. Retrieved from A HIMSS AnalyticsTM website: http://www. himssanalytics. org/ Gurley L. (2003). Advantages and Disadvantages of the Electronic Medical Record. American Academy of Medical Administrators, 2004. Retrieved from http://www. aameda. org/MemberServices/Exec/Articles/spg04/Gurley%20article. pdf Munsey, P. (2011, March 26). Howard Regional up to the challenge. Kokomo Perspective. com. Retrieved from http://www. kokomoperspective. com Shi, L, & Singh, D. A. (2008).

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