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EHR Spending Continues, But Jury Still Out on ROI

Scott Mace, for HealthLeaders Media, March 13, 2014

Redesigning EHRs

Skeptics continue to point fingers at inadequate EHR software. One notable physician practice startup recently decided to write its own EHR instead.

"With our system, I can drill down and see if one doc is doing better than the other," says Rushika Fernandopulle, MD, CEO of Iora Health, a Cambridge, Mass.–based primary care practice that manages 7,000 patients in six locations around the United States. The same is true for patients, he says. For instance, Iora's EHR software can also quickly identify patients whose hypertension is under control. Clinical averages are around the 50% mark in the United States, while good practices achieve 60% or 70%, he says. At Iora Health, 90% control is achievable.

The net result at Iora Health's clinics, within a one-year time frame: "We've seen [a] 50% drop in emergency room visits, 40% drop in hospitalization, 25% drop in specialty visits," and a 10% total drop in healthcare spending, Fernandopulle says.

"The big caveat is very few if any of the EHRs out there in the market do any of what I just talked about because they're so focused on this coding and billing stuff," Fernandopulle says. "We've had to build our own, which does things from a completely different point of view."

Iora Health's experience highlights the fact that the definition of ROI is different for fee-for-service systems than for value-based healthcare. In fee-for-service, an EHR that bills most effectively is the one with the greatest ROI, while just the opposite can be true in accountable care.

In Iora Health's business model, insurers such as the Culinary Health Fund of Las Vegas pay a flat per-member, per-month fee to Iora Health. "We don't have to ever submit a claim or a bill," Fernandopulle says. The payer power of the Health Fund is such that Las Vegas hospitals are compelled to report hospitalizations of Iora Health patients to the clinic, thus helping engage primary care physicians in controlling hospitalization costs and reducing readmissions.

Fernandopulle's belief that the better ROI lies in discarding existing EHR software entirely is definitely a minority opinion. The vast majority of healthcare leaders continue to emphasize the greater importance of process redesign.

"We often talk about how important it is to redesign workflows and improve your processes before you automate them," says Gary S. Kaplan, MD, chairman and CEO of Virginia Mason Medical Center, a Seattle-based integrated health system with 2012 net patient service revenue of $875 million, a 336-bed acute care hospital, a multispecialty group practice of more than 450 employed physicians, and a network of regional clinics. "In fact, we jokingly say that if you don't do that, you're really just moving garbage at the speed of light, and you're magnifying inefficiency and accelerating it in some respects."

At Virginia Mason, though, a thorough evaluation of the ROI of EHR technology is simply not a priority, Kaplan says. "We view our investment in the technology as really a cost of doing business," he says.

"In general, we don't use ROI for a lot of our capital expenditures," adds Suzanne Anderson, executive vice president, chief information officer, and chief financial officer at Virginia Mason.

"We have a much larger capital appetite than we can afford, as most healthcare providers do, and so being good stewards of our resources, we need to really evaluate what it's going to do for our business in general, and not just what the economic return is," Anderson says.

And yet Kaplan regards the Virginia Mason Production System, in conjunction with Cerner EHR software, as contributing to higher-quality care that is both safer and more efficient, such as providing timely diagnosis of a curable colon cancer. A key enabler is Cerner's health maintenance module, the EHR screen that greets primary care physicians and call center operators.

"They can actually use that technology to help ensure that our patients have appropriate previsit testing, are up to date, and compliant with all of the recommended screening guidelines," Kaplan says. "We think of this entire wired system as a way of facilitating integrative, coordinated, seamless, appropriate care."

"One of the things that we say here is that our IT projects are really only 20% technical, and the other 80% is adaptive change and integrating the operational systems with the technology," Anderson says. "We spend much more time on that operational technology integration, so that when we go live, it's just a seamless part of our system."

An example occurred when Virginia Mason implemented bar code medication administration. Up to 18 months of preparation ensured that nearly all medications could be scanned by bar code readers that compared the codes to previously entered physician orders stored in the EHR, she says.

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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.