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Winners and Losers of HIT Stimulus Funds

Carrie Vaughan, for HealthLeaders Media, April 21, 2009

The federal government's $36 billion incentive package to install electronic health records has created a lot of excitement in the industry. It has also generated a call to action.

Healthcare CIOs and industry experts all seem to agree that if providers want to collect the maximum reimbursement available to them, they had better start (if they haven't already) forming an IT strategy, choosing vendors, and ensuring they have the IT expertise required to meet the 2011 deadline. No one wants to leave one penny of this money on the table.

Unfortunately, no one seems to offering much in the way of strategy on how hospitals and physicians can actually accomplish this goal in a depressed economy, either. For months, healthcare organizations have been laying off employees, putting IT projects and purchases on hold, and postponing or canceling renovations, physical plant upgrades, and expansion projects.

Two-thirds (66%) of CIOs say they expect to be asked to make further cuts in IT spending before the end of 2009, according to a recent survey of 100 hospital CIOs that was conducted by PricewaterhouseCoopers LLP Health Research Institute. And 82% of hospital CIOs have already cut IT spending budgets in 2009 by an average of 10%, with one in 10 making more drastic cuts of greater than 30%, the report says.

Add to that the general consensus among IT experts that the $36 billion slated for interoperable EHRs is just a fraction of the costs that will be required to implement a nationwide system. The stimulus law also doesn't provide incentive payments upfront to help organizations implement the technology. Instead healthcare organizations and physicians need to meet the requirements of "meaningful use" before they can collect one dime from the government.

A recent report in the New England Journal of Medicine examining the use of electronic medical records in U.S. hospitals found that only 1.5% of U.S. hospitals have a comprehensive EMR system (present in all clinical units), and an additional 7.6% had a basic system (present in at least one clinical unit). In addition, computerized provider-order entry systems had been implemented in only 17% of hospitals.

The most commonly cited barriers to adoption among hospitals without EMR systems were:

  • Inadequate capital for purchase (74%)
  • Concerns about maintenance costs (44%)
  • Resistance on the part of physicians (36%)
  • Unclear return on investment (32%)
  • Lack of available staff with adequate experience in information technology (30%)

The stimulus package hasn't eradicated these concerns. So the question remains: How will organizations make this work? What health IT projects will be put on the back burner? How will organizations find the manpower to achieve these goals in the current timeline? I have a feeling we will see a wider gap between organizations that have resources and those that don't. Many of the larger healthcare systems or academic medical centers that already have fairly extensive EMR systems will likely meet this goal and receive some of the cash.

Whereas, the smaller community hospitals or independently owned organizations that are struggling right now just to keep the doors open will fall farther behind. In fact, some of these organizations probably won't even attempt to meet the 2011 deadline. Their main concern is having these systems up before they are penalized by reduced Medicare reimbursements if they don't have it.

"Business right now is under stress," says Daniel Garrett, managing director of PricewaterhouseCoopers' health industries technology practice. The survey has shown that CIOs have already cut out the low hanging fruit like consolidating data centers, he says. The cuts CIOs have to make now are much more difficult, for example, simplifying core business processes or restructuring how care is consumed and delivered.

"Your institution better understand the cuts must make minimal impact on the EHR," says Garrett. "You as CIO and your peers, CEO, CFO, have to make cuts in other areas like administrative simplification—areas that won't affect quality."


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Carrie Vaughan is a senior editor with HealthLeaders magazine. She can be reached at cvaughan@healthleadersmedia.com.

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