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EHR Spending Continues, But Jury Still Out on ROI

Scott Mace, for HealthLeaders Media, March 13, 2014

As healthcare leaders continue to pour money into electronic health record systems, many (but not all) find that their return on investment remains elusive.

This article appears in the January/February 2014 issue of HealthLeaders magazine.

Of all the capital investments made by healthcare leaders, none appears more unproved than the move from paper to electronic health records. In the past decade, billions in public and private money, boosted by nearly $20 billion in federal incentives over the past three years, have been poured into EHRs. What has that money bought?

On Capitol Hill last summer, with healthcare's cost curve just barely starting to bend, patience was in short supply. Concerns about lack of interoperability among purchased EHRs mounted. Lawmakers grilled providers and vendors, seeking hard numbers on EHR return on investment—numbers that remain in short supply.

For their part, most healthcare leaders maintain the investment is worth it, pointing to a vast array of anecdotes and scattered studies showing the value of the EHR. In a few relatively isolated cases, they say, tangible ROI is achievable within five years. And yet others caution that true ROI requires even more patience and say the bulk of the rewards can take up to 10 years to achieve.

Still, disagreement persists on how the healthcare industry is going about the move to EHRs. Critics say the existing generation of EHRs, built for billing in a fee-for-service world, is ill-suited to delivering value-based coordination across the continuum of care. Patients, newly empowered by a plethora of apps that help them manage their own care, still struggle to access their EHR-based records, stymied by technological limitations and the same lack of interoperability that frustrates clinicians. And the federal government, just now deploying stage 2 of meaningful use, must still craft guidelines that move from basic interoperability to measures that truly impact patient outcomes.

Thus, instead of the nation reaching a goal next year—first set out by President George W. Bush in 2004—of every American having an interoperable electronic health record, it could take as long as another decade before healthcare can hang its mission accomplished banner on the EHR.

"If you asked me the question in 2007, as we were installing an electronic medical record and starting a health information exchange, 'How long do you think before you will have a functional, smooth health information system?' I might have been bold enough to say, 'Well, 2012,' " says William Park, MD, senior general surgeon and former chief medical officer at North Hawaii Community Hospital, a 20-staffed-bed rural hospital in Waimea. The facility, which reported 2012 net patient service revenue of $47 million, is a participant in the Hawai'i Island Beacon Community, one of 17 such nationwide programs developing advanced health information technology through federal funding.

"But at this point I would say I'm skeptical about 2014, and certainly not courageous enough to say 2016," Park says. "I think it's going to take a decade before we have a truly intelligent, connected system that will benefit patient healthcare. We have bits and pieces of success. I think we have little silos of effort. There seems to be some general understanding about where we need to get to, but it varies depending on who you speak to."

A big obstacle for Park and others is the lack of a national health information exchange infrastructure. This project is being worked on actively through a variety of public and private efforts. But for now, the biggest EHR success stories usually involve the efforts of individual providers, and of those, only a few have already crossed the chasm between older fee-for-service payment models and newer value-based-care payment models.

Hunting for real ROI

One such provider is Sentara Healthcare, the Norfolk, Va.–based system of 11 acute care hospitals that reported 2012 net patient service revenue of $2.8 billion. From the outset of its efforts to implement its eCare EHR at seven hospitals in the Hampton Roads area of Virginia from 2008 to 2010, Sentara leaders have had return on investment in mind.

The key to ROI is to start with a baseline and "redesign your thought system and processes to leverage the value of electronic records, or any IT solution," says Howard Kern, president and chief operating officer of Sentara.

Kern draws inspiration from information systems first used more than a decade ago to improve manufacturing and business processes in the auto industry. An oft-cited 1990 Harvard Business Review article, "Don't Automate, Obliterate," described how Ford first implemented information systems and ended up with an accounts payable department head count reduction of 20%, but when it redesigned the department's processes around IT it was able to reduce head count by 75%.

"Ford simply overlaid the IT system on top of their existing process and automated an inefficient process," Kern says.

Thus, when Sentara began its electronic record work with Epic Systems in 2007, it started 18 process redesign teams, focusing on everything from clinical delivery to medical records.

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2 comments on "EHR Spending Continues, But Jury Still Out on ROI"


D.P. Smith, MD (3/17/2014 at 10:10 PM)
It appears to me that our smart medical leaders have been hoodwinked by the IT industry into adopting EHR's without outcome studies to prove their effectiveness(in saving money and improving health care outcomes). A great example of government/industry collusion in order to extract more tax dollars for the IT industry and govt. bureaucrats. DP Smith, MD

Ann Monroe (3/15/2014 at 10:59 AM)
2 thoughts: I wonder what the ROI calculation was when telephones were first installed in healthcare organizations... Also, the true benefit and ROI on coordinated care will only happen when the primary care offices are fully linked in. The Iora example shows the true potential, but as long as this movement is hospital centric, it will fall short of cost and quality benefit to patients, payers and providers alike.