Why Putting Capital Into EMR is a Smart Move

Rene Letourneau, for HealthLeaders Media , June 11, 2013

Most healthcare providers believe enhancing their collection and use of patient data is the only way to move forward in the pursuit of better care delivery.

This article appears in the May issue of HealthLeaders magazine.

Despite concerns over the sluggish economy and changing payment models, hospitals and health systems are making big investments in electronic medical records, earmarking significant portions of their capital spending dollars to implement these expensive systems in the hope of improving their ability to manage population health.

The irony is not lost on providers, who are well aware that they are investing vast amounts of money in an IT project that will allow them to provide better coordinated care for which the government and commercial payers intend to pay less. Yet most believe enhancing their collection and use of patient data is the only way to move forward in the pursuit of better care delivery.

Investing in an EMR is also a smart move in light of Medicare's shifting reimbursement structure. Hospital executives believe the return on investment in an EMR will come from better care coordination, more streamlined clinical processes, improved patient satisfaction, and lower readmission rates—all of which will result in healthier Medicare payments.

 "We're in the process of implementing a new computer system—electronic medical record—it's our biggest single expenditure," says John Heye, senior vice president for finance and CFO at Maine Medical Center, a 600-bed hospital in Portland and the largest entity in the MaineHealth integrated health system. "All told, we'll spend $61 million."

Heye says Maine Medical Center plans to pay for the EMR out of capital equity but will also consider other options. "This year we are starting to reevaluate our strategy and see where the rates are."

The strategic thinking behind the EMR implementation is to "focus more on accountable care and population health management," says Heye, noting that the EMR will allow the health system to transfer information quickly and efficiently between providers once the technology is up and running throughout MaineHealth, which covers 11 counties in Maine. Heye expects the rollout process to take up to 24 months.

"It's very expensive for everyone to be using an EMR, but it's the right thing to do," says Susan Doliner, Maine Medical Center's vice president for development. "The EMR is the most significant advancement we have ever made. This will change the way care is delivered. … It will make a huge difference in efficiency, confidentiality, and safety."

The leadership team at Maine Medical Center will track patient satisfaction surveys and will look for less duplication of testing, fewer medical errors, improved patient safety, more efficiency, and process workflow improvement to determine if the EMR is a success. "All of these areas will be measured for continuous improvement," Doliner says.

Doliner notes that Maine Medical Center is making a considerable capital investment in the EMR to improve the care it delivers while simultaneously dealing with a shifting reimbursement model that will result in less revenue. "It's like having one foot in two canoes," she says. "We are all going to be reimbursed less for what we are doing. … As you look to the future, to the way hospitals will be reimbursed, it will depend on how healthy their community is."

"In moving toward accountable care and population health management, the reimbursement system still has not evolved to reimburse well for these kinds of activities," Heye echoes. "Until we craft a better way to get hospitals reimbursed for preventable care and avoiding hospital admissions, it's going to make things more difficult."

According to Heye, Maine Medical Center's decision to implement the EMR was not motivated by CMS' meaningful use incentives, which can amount to millions of dollars for eligible hospitals that use EMR technology to reach certain CMS-defined benchmarks to improve the quality of patient care.

"At Maine Medical Center, we didn't budget for meaningful use in funding the EMR project. It's better to go ahead and do this for the right reasons, and if we happen to get some money back from the federal government, then that will be quite fortuitous," says Heye, who acknowledges that the medical center expects to receive "a substantial amount of MU dollars."

Maine Medical Center is not alone in its capital spending focus. In the November 2012 HealthLeaders Media Capital Funding Buzz Survey, 68% of respondents indicated that healthcare information systems (including EMR) and IT infrastructure will be a top-three priority for capital investments in the next 12–18 months, surpassing the No. 2 priority (upgrading existing facilities) by 21 percentage points.

Peter Markell, executive vice president for administration and finance, CFO, and treasurer at Partners HealthCare, a Boston-based health system with $9 billion in revenue, says his organization is also focusing its capital investment dollars on IT projects. Partners is working on the development and implementation of a new EMR that is expected to take 10 years to complete and represents a capital investment of at least $600 million–$700 million.

"More of our dollars are going toward IT and network development than we've done historically, and less is going into brick and mortar," says Markell. "Having a focus on population health management, data access, and network development has become critical to meeting the needs of patients at the right site at the right time."

Partners cut its capital spending in 2008 and 2009 because of the economic downturn but has since returned to normal spend levels. "We have weathered one set of storms. Now what we are worried about is weathering another set of storms in the form of government payments that are going to get worse and worse and be lower than costs," Markell says.

Like Maine Medical Center, Partners' decision to invest in an EMR was based on a strategic plan to improve its ability to use data to manage and improve population health, Markell says. Senior leadership believes moving in this direction will allow for better coordination of care across accountable care organizations and within the framework of new payment models.

The goals are to improve coordination, reduce duplicate tests, and decrease unnecessary treatments and procedures. Successful implementation of the EMR will enhance Partners' ability to collect, manage, and report clinical data throughout the system and will allow for a greater focus on population health management.

"To be real honest, the meaningful use money is a factor, but a small factor in our decision-making," he says. "The real driver of the IT expenditure is that we just believe data is going to be one of the real keys to the future success of the delivery of medicine."

Markell says allowing clinicians to have access to patient information across all care units is critical to improving care and lowering costs. He gives the example of a patient who presents in the emergency department instead of a physician's office for a nonemergent health concern. Rather than the ED doing an expensive workup of the patient, the EMR alerts the physician's office and the patient is moved to the right care setting.

"It's really about workflow, care coordination, and that the information be available to every clinician who is involved along the way," says Markell. "We need the data and information to follow patients to every part of their care. … All of that has to be there to effectively deliver well-coordinated care."

Whether or not hospitals are motivated by meaningful use dollars, they most certainly want to avoid the financial penalties that are on the horizon for those who don't get on board. The carrot will give way to the stick when Medicare payment reductions begin in 2015 for providers who are eligible but choose not to implement an EMR.

The level of concern healthcare leaders feel over declining reimbursements is hard to overstate. In the HealthLeaders Media Industry Survey 2013: Strategic Imperatives for an Evolving Industry, a whopping 92% of respondents indicated that they consider reduced reimbursements to be a threat to their organization, well ahead of the physician shortage, which ranked second with 76% of respondents identifying it as a threat.

In the same survey, 24% of respondents rated coordination across the continuum of care as the single greatest challenge for their organization with regard to clinical quality improvements, and 14% indicated that population health management is the biggest challenge—both of which can be helped greatly by the successful use of an EMR.

One provider who is ahead of the curve with its EMR implementation and can attest to the benefits of going digital is Sharp HealthCare, a San Diego–based integrated health system with FY2012 net revenue of $2.7 billion.

Sharp spent $45 million to introduce EMR systems (using two vendors) to both the hospital and ambulatory sides of its business, says Ann Pumpian, Sharp's senior vice president and CFO.

The EMR has made it possible for clinicians to access patient records from anywhere in the health system, Pumpian says.

"The days of searching for the patient chart are over, and the clinician is able to view a more complete picture of the patient's condition, treatment, and progress," she says. "Imaging exams can be displayed online, as well—wherever the physician is working. Utilization of standard order sets based on best practice medicine ensures that our patients receive the best possible care. Physician productivity is enhanced, as they no longer spend hours in chart rooms signing off on records, as this has occurred during the care process."

Although Sharp has not specifically measured the ROI, it is able to identify financial gains anecdotally, she says.

"Several million dollars in HITECH incentive dollars have been received as we demonstrated meaningful use," Pumpian says. "Staff time transporting charts has been reduced significantly. Chart storage space has been recovered and repurposed for direct patient care. Transcription costs have been reduced considerably and will decline further as we complete our clinical documentation improvement initiative."

The cost savings, clinical advancements, and improved population health management capabilities Sharp has experienced since deploying its new systems are exactly the results healthcare executives at hospitals all over the country are hoping for as they invest big money on their own EMR strategies.

Reprint HLR0513-8

This article appears in the May issue of HealthLeaders magazine.

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