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Brother, Can You Fund an EHR?

John Commins, for HealthLeaders Magazine, April 9, 2009
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The American Recovery and Reinvestment Act allocates billions for electronic health records. So much for the cost excuse, right? Think again.

The $787 billion stimulus plan signed into law in February by President Obama includes in its $147 billion healthcare allotment a well-publicized $19 billion to support healthcare information technology adoption by providers. The American Hospital Association, the American Medical Association, and a number of healthcare advocacy groups and observers believe the windfall will help remove what has been the largest roadblock for the adoption of electronic health records: cost.

Any money the American Recovery and Reinvestment Act provides for EHRs, however, will be doled out not as a front-end grant but as a reimbursement. It also won't arrive before 2011, and even then, only after healthcare providers can show they're using EHRs in a "meaningful" way. Such stipulations raise the question: Can provider organizations with slim operating margins and few if any reserves acquire up-front financing for these projects in the middle of a deep recession that has already dried up many credit lines?

"The first issue that needs to be resolved is the credit crunch—credit needs to be loosened up. It's doable because a lot of hospitals have already done it," says Ron Piechowski, senior associate director for policy at the AHA. "But a lot of smaller organizations don't always have that kind of cash flow available. And recently with the credit situation we are seeing that has an effect on the kinds of projects people plan. That's across the board—not just hospitals, but every business sector."

In fact, a recent nationwide survey of 439 hospitals by Thomson Reuters' Center for Healthcare Improvement confirmed that many hospitals are in no position to tackle a major IT implementation. Among the findings:

  • Hospitals' total margins are at historically unprecedented lows; the median total margin among the 439 hospitals was 0%.
  • Approximately 50% of hospitals are now operating in the red.
  • Reimbursement growth rates from Medicare, Medicaid, and private insurance showed year-over-year declines through the fourth quarter of 2008, and hospital days cash on hand has declined to as low as 57 days for the lowest quartile of hospitals in the study; the highest quartile had 203 days cash on hand.

"Hospitals are under unprecedented financial stress in terms of their total profit margins. They've never been lower, to our knowledge, since data has been collected on that," says Gary Pickens, chief research officer at Thomson Reuters' Center for Healthcare Improvement, which compiled the survey. "If hospitals have to make investments out of any reserves to implement those IT initiatives, it's going to be tough."

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