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EHR a Money-Loser for Most Physicians

 |  By John Commins  
   March 05, 2013

Adopting electronic health records appears to be a money-losing proposition for most physicians, especially specialists and those in smaller physician groups.

The average physician would lose $43,743 over five years after adopting EHRs and only 27% of physicians would profit through the transition away from paper records without federal financial aid. And even when the $44,000 in meaningful use incentives are added to the pot, only 41% of physicians would be in the black, according to the study published this month in Health Affairs.

The study examined data gleaned from 49 community practices of varying sizes and specialties that were part of the Massachusetts eHealth Collaborative, an EHR pilot project. Meaningful use incentives were not in place for the period examined by the study. However, the study authors added the value of the meaningful use incentives on top of their initial projections.

"We knew the literature said that in general practices tend to be able to recoup the cost of the EHR investment in a relatively short period of time and this was the first opportunity to study a wide and more diverse group," study coauthor Julia Adler-Milstein of the University of Michigan School of Information and School of Public Health said in an phone interview.

"What we had heard from practices was how hard it is to make the transitions from paper to electronic health records. These are your typical practices. A lot of them are very small and they don't have the organizational capabilities to support a major organizational change. We continued to be reminded as we worked with these practices and collected this financial data how they are trying to run a small business and this is a very challenging experience to go through."

Primary care practices with six or more physicians generally were more likely to see a profit with their EHRs than were smaller physician groups or specialists. This was more likely when the new technology was used to add more patients to the daily schedule and to improve billing processes so that accurate codes were used and fewer claims were rejected.

"It seemed like with primary care there was more opportunity to reduce costs," Adler-Milstein says. "There were more of them that saw savings in dictation compared with specialty practices. It may suggest that dictation is in wider use in primary care and there could be more potential savings in practices are able to eliminate dictation costs."

About 55% of the practices saw a reduction in the cost of paper medical records. However, nearly half of the practices saw no savings there because they continued to use paper records even after switching to EHR.  

"As we were in these practices collecting data, some said that for malpractice protection they perceived that they needed to keep paper-based documentation," Adler-Milstein says.

"Oftentimes they would create things in the electronic system but also print them out and store them. They were oftentimes documenting on paper or they weren't able to make the full switchover and become completely paperless. You say EHR and the assumption is paperless, but the reality is there are a lot of things that are still hard to do in EHR."

Adler-Milstein says the study suggests that federal meaningful use incentives alone are not adequate to ensure that the vast majority of practices don't lose money on EHR.

"You are going to have to make a lot of other changes to figure out how to realize cost savings. That is a clear message for practices: You have to figure out other opportunities to save money if you want to come out ahead," she says.

"The other key finding is the value of the incentives looks really different depending upon whether you are a small or a large practice. These economies of scale go really far in large practices and in small practices they don't go very far," she says. "When you are in a one- or two-man shop it is hard to find the person who can step back and say ‘what do we need to do differently?'"

"The other big things in the small practices are the types of changes you need to make. A lot of them are around reducing staff. In these practices it is often someone's husband or wife who is the front desk person or they have a person who's been with the practice for 20 years. Just because you have EHR you are not going to cut their work hours by half or one-third because on a personal level it is so hard."

"I can understand why there was a one-size-fits-all incentive, but this data suggests that the economics of the EHR adoption look different in different practices. If I am a policy maker I am going to be concerned about the impact this is going to have on small practices."

Even though small practices face a significantly higher hurdle to successfully use EHR, Adler-Milstein says she still believes adoption is worth the hassles.

"We need to move to EHR forward for a number of reasons, but if I am a small practice I am going to really think about a few things," she says. "One is how to decrease the cost of adoption and the cost of the system itself. To the extent you can reduce the upfront cost that is going to help bring down the amount you have to figure out how to make up elsewhere. Increasingly there are new models taking this into account for small practices to decrease the big upfront costs."

She says small practices should look for help from their regional IT extension centers, or even consider some sort of joint venture or cooperative with a larger healthcare entity.

"To the extent that that is palatable to a practice there is a lot of advantage to working with a larger organization that can bring down the cost and help with a lot of the other changes that need to go along with EHR adoption to make it easier on small practices," she says. "This is not to say it is not doable for small practices. But it's a much harder road and going into it with that awareness and taking the time to figure out the best approach is what I would spend my time doing."

While she considers herself an advocate for EHR, Adler-Milstein says she is fearful that the findings in the study will be used by critics to call the movement a failure.

"The real struggle we are in now is around how these systems were sold—as a magic wand and not as a tool," she says. "They are not a magic wand. You don't put them in and the next day you see higher-quality lower-cost care. The reality is there is a lot of hard work that has to go into seeing the benefits. In small practices they need help and support to do that hard work."

"For me it's nice to have evidence to point to what we need to do differently to realize the benefits. And I hope that is the attitude that others will share—which is we need to figure out how to do this right."

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John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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