Electronic Medical Records: Salvation or Sinkhole?

Electronic medical records (EMRs) have been touted as one of the solutions for healthcare’s cost and quality problems. But why haven’t we seen more benefits from EMRs?

Disconnect Between Costs and Benefits
The simple answer is that there is a disconnect between those who have to pay for EMRs and those who benefit from them. For example, many (if not most) national health reform proposals call for investing billions of dollars in EMR systems claiming that EMRs will save the healthcare system lots of money. However, these savings projections hide many important factors related to the timing of any potential savings, and how different stakeholders would be affected. Three specific questions should be asked about investment for any new technology such as EMRs:

  1. What are the direct and indirect costs and savings for the innovation?
  2. What are the expected time-frames for each of these effects?
  3. How do each of these effect different stakeholders?

For EMRs the answers to these questions are:

  • There is a very large upfront costs for hardware, software, training, and converting paper records into an electronic format. Installation costs in outpatient settings have been estimated to be $40,000-50,000 per physician. In addition, clinical specialties that see patients more episodically (like surgeons), may find it easier to convert to EMRs than clinicians whose patients have chronic conditions (like diabetes) where it is important to have their long-term medical information in the EMR.
  • EMRs can increase physicians’ billing revenue by enabling them to provide more accurate and complete information to payers, and thus get paid for more of the services they are actually providing and have fewer claims returned because of insufficient information. (Clinician’s increased revenues would also represent increased costs for payers.)
  • EMRs ability to increase the efficiency of processing payments could reduce the staffing needs for clinicians and payers.
  • EMRs can reduce the need for repeating tests when patient’s medical records cannot be found. This would result in savings for payers and patients, but might also result in lost income for the clinicians that provide those tests and related services.

The table below illustrates how each of these effects of EMRs falls into different types of costs and saving for different stakeholder groups:

Direct & Indirect Costs & Savings by Stakeholder Groups for EMR Adoption

Stakeholder Group Direct Costs Indirect Costs Direct Savings Indirect Savings
Clinicians and
Training CostsLoss of Revenue
from Repeat
Testing and
Reduced Staffing
Increased Billing
Payers Subsidies for
Increased Payments Due To Better Billing Reduced Staffing
Payments for
Repeat Testing
and Services
Ability to Profile
Providers and
Costs Reducing/
Quality Improving
Patients Probably Small Additional
Co-Payments for
More Accurate
Co-Payments for
Repeat Testing
and Services
Less Time Spent
Managing Paperwork
and Going to Repeat
Tests etc.

One of the significant challenges of EMR systems is convincing people (particularly physicians and payers) that they will have real benefits that are worth the costs. Two articles have questioned the size and scope of benefits EMRs can produce: Linder et. al. in the Archives of Internal Medicine from July 2007 found that EMRs didn’t correlate with better quality indicators based upon a national survey of ambulatory care sites. The other was a April 2008 perspectives piece by Hartzband and Groopman in the New England Journal of Medicine. They noted that EMRs can “force doctors to give “standard” rather than “customized” care,” and concluded that, “We need to make this technology work for us, rather than allowing ourselves to work for it.”

Recent EMR Adoption Initiatives
Recognizing these potential pitfalls of EMRs, two recent initiatives to increase EMR use in doctors’ offices are taking different approaches – one in the State of Massachusetts and the other by Medicare:

The Massachusetts program is funded primarily by $50 million from Blue Cross and Blue Shield of Massachusetts to a non-profit third party organization (Massachusetts eHealth Collaborative) that is providing direct funding and technical assistance to three pilot areas in the state. The Massachusetts pilots are also being evaluated as they are implemented. (More about that below.)

In contrast, Medicare’s demonstration program will pay physician practices for installing EMR systems based upon the number of Medicare patient they see, and it also ties future year payments to reporting of quality information (year 2) and then being able to demonstrate actual quality improvements (years 3, 4, and 5). Medicare has called these additional requirements as “Pay for Reporting” for year 2, and “Pay for Performance” for years 3, 4, and 5.

The challenge for Medicare’s demonstrations is about money. With estimates of more than $40,000 per physicians for installation and training for a new EMR system, physicians may take a Missourian “show me” attitude – or maybe it’s more Jerry Maguire “show me the money” attitude. However, the Medicare demonstration projects are not guaranteed money and the payments are made retroactively. According to Medicare’s Acting Administrator in April:

“…the total potential payment over the five year course of the demonstration is up to $58,000 per physician, up to $290,000 per practice. And again the degree to which a practice scores on the Clinical Quality Measures and scores higher on the Office Systems Survey will determine the level of incentive that they get. Also I want to point out that, again, payments are retrospective and practices can, again, use the funds as they feel appropriate for their practice.”

Part of the reason Medicare is structuring it’s demonstration this way is because under Federal law it must be budget neutral so that the demonstration’s costs will be offset by savings to the Medicare program.

Before looking at how the value of EMRs are being evaluated, it is worth mentioning the EMR system used by the Veterans Administration’s health program. The VA’s VistA System is reported to be clinically useful , but it does not support billing which is a big problem for non-VA users. That is the primary reason why although the VistA system is free, it hasn’t been adopted by non-VA users.

Evaluating the Value of EMR Adoption
Massachusetts’ EMR initiative was started based upon the widespread belief that EMRs can produce overall clinical and economic value. However, as noted above, there have been some analytical and academic questions raised about this general premise. To demonstrate the clinical and economic effects of the EMR pilots in Massachusetts, their initiative has at least six components to evaluate the economic and clinical value by measuring both quantitative and qualitative outcomes. These are being rolled out in a logical fashion, and are summarized below:

Evaluations of Massachusetts EMR Pilot Projects

Evaluation Stakeholder Group Value of Outcomes
Survey of Office Staff Physicians Offices
  • Perceived improvements in efficiency for physicians and staff
  • Perceived improvements in quality
Patient Experience Survey Patients
  • Perceived improvements in quality
  • Perceived improvements in efficiency
Economic Claims Analysis Physicians Offices
  • Demonstrates financial value via improved operating efficiency and/or increased billing revenue
  • Demonstrates financial value from more accurate claims information and less need for claims reviews
Utilization Analysis of EMR and HIE* Benefits Payers
  • Demonstrates value of EMR/HIE to avoid repeat costs of repeat testing, etc.
  • Demonstrates value of EMR/HIE to avoid repeat hassle and costs of repeat testing, etc.
Physicians Offices
  • Demonstrates value of EMR/HIE for improving office’s efficiency
Quality Data Analysis:

  • Analysis of Actual Clinical Practices
  • Longitudinal Analysis of Community’s Health Status
  • Providing actual assessment of improvements in clinical process and outcome measures
Physicians Offices
  • Same as for patients – may be useful in negotiating with payers
  • Ability to demonstrate value to employers and other stakeholders to justify further investments in EMR and similar technologies

* HIE: Health Information Exchange – a system being implemented in coordination with the EMR pilots to enable physician offices to have access to all of a patients’ medical information from all clinicians within the community.
Source: Conversation with Micky Tripathi, President and CEO of Mass eHealth Collaborative, and Mass eHealth Collaborative Spring 2008 Newsletter

Conclusions: (Sorry about the very long posting)
Electronic medical records systems have the potential to improve quality and reduce costs, but there are significant barriers to their adoption by independent and small groups of physicians. The results of Massachusetts’ evaluations and the success (or “lessons learned”) of Medicare’s demonstration program will be important for guiding future Federal, State or private sector efforts to promote (or require) the use of EMRs in the US.

Any other thoughts about EMRs?

14 thoughts on “Electronic Medical Records: Salvation or Sinkhole?

  1. Pingback: Global Healthcare and the Internet | Health Policy and Communications

  2. Electronic medical records system has the potential to eliminate life threatening record keeping errors, but there are also potential dangers associated with this system. However, there are advantages of electronic medical records include the ability to catch medication errors, check for adverse drug interactions, track test results and improve the quality and accuracy of medical-record documentation.

  3. Thanks for Great information.Yes i agree the disconnect between costs and benefits.
    If anyone interested for choosing best EMR Training Software and to improve Patient’s care, this is a great Resource.

  4. yes I agree but you can get great information on many things on electronic medical records though it has disconnect between costs and benefits

  5. >Why hasn’t anyone asked patients how much they would really pay extra for an electronic medical record? Aren’t they really the beneficiaries?

    This, in fact, is the key question.

    Let us suppose that I make and sell cars, and that the technology exists to equip the car with, say, a navigation system. I would be happy to make and sell cars if the amount extra customers are willing to pay for the navigation system is greater than the additional cost of including a navigation system. If customers are willing to pay $0, I will make 0 cars with navigation systems.

    So we need to put the consumer in the game and find out what an EMR is worth to the customer. Pay $X to go to Doc Smith, who doesn’t use an EMR or pay $1.25(X) to see Doc Jones, who does use an EMR.

    I strongly suspect that when push comes to shove patients aren’t really willing to pay much for an EMR. This is like if consumers were willing to pay $5 for a navigation system, there would be very few car makers foolish enough to include them.

    And I see little reason for docs to use capital to purchase equipment like an EMR that does not add to revenue when the same capital could be used to add diagnostic equipment that will add to revenue.

    Further, I see little reason for docs to agree to spend uncompensated resources to enter data into some database. Where is the ROI?

    Just about anything is available for a price. The problem with healthcare IT is that lots of people want docs to do a bunch of extra stuff, but nobody wants to pay them to do it. That flies in the face of economic reality and is thus a fool’s errand.

  6. Thanks for the great stuff.Yes, i agree with that there is some disconnect between costs and benefits.The answer is that there is a disconnect between those who have to pay for Electronic Medical Records and those who benefit from them.

  7. Alan & Ben – Thanks for the great real-world comments. I talked with an old friend recently whose mid-sized group practice is part of a demonstration project for implementing EMRs. He noted that while they got the hardware and software for free (state grant), their cost has been huge in terms of time and lost productivity – and they haven’t seen gains in quality or better billing revenue. He also told me that the local efforts to link medical records into a information database/warehouse type of operation was off to a very poor start – it turns out that the warehoused data is all being captured from billing information from the EMR, rather than actual clinical data – so if anyone looks at it for real clinical purposes they likely will get a skewed understanding a the patients actual medical problems, etc.

    While everyone agrees that EMRs (and other HIT applications) have great potential – but they still have very, very large barriers in the form of financial investment and implementation/training time. I think the hope is that as the technology improves, the costs and ease of use will make it more attractive, and that the ability to use the systems for wider clinical care and quality improvement will also improve. Only time will tell.

  8. As a medical administrator for a small practice, I find the challenges of an EMR daunting. From a cost perspective, they make little sense for single site facilities with fewer 1-3 doctors. Why would we spend $10-20,000 for licensing with recurring fees of $2000-5000 per year (plus thousands in conversion fees) when we can make capital investments in equipment which will reap definitive financial rewards and will also increase pt. quality? Capital infusion is scarce and most of the proponents of EMR systems do not realize how much capital this uses up without demonstrating real returns. When a doctor offers new services or enhances existing services with newer and better equipment, doesn’t this too add to pt. quality? The biggest hurdle for these systems is that they are simply too expensive for small practices to bear and the benefits are still too small. Until the cost is picked up by the true beneficiaries (large insurers, Medicare, patients?), the technology is made simpler and is truly standardized, and the benefits are demonstrated convincingly (or the practice is at a competitive disadvantage), there will be little penetration in smaller practices.
    Why hasn’t anyone asked patients how much they would really pay extra for an electronic medical record? Aren’t they really the beneficiaries? Why isn’t there a surcharge on insurance premiums to fund these “necessary” services? In theory, we all support this initiative because it makes sense from a macro-economic perspective; however, on a micro-economic level it often fails miserably. If someone can bridge the gap, I am all ears!

  9. I have been in the records management business for 25 years and have participated in automating records systems for every major industry. In the financial field records systems are ubiquitous. In manufacturing they are necessary for competitive advantage. It is amazing to me that the US medical profession is so far behind. The President’s advisory board and the medical associations are trying to make this a very complicated and expensive proposition. Even a small practice can justify the expense of an EMR system. The argument that different EMR’s can’t share information is antiquated. In other industries we integrate these types of systems all the time. If the federal government would define what constitutes the information to be collected in an EMR, then sharing that information would become a simple matter. A standard EMR would allow technology companies to package software and hardware which would be affordable and convenient to install and use. The biggest cost will be the conversion of old paper files to electronic. The easiest and least expensive approach is a “day forward” EMR system for new patients establishing a practice of scanning old files each time they are removed and used. In this way the practitioner will have a complete system in a short period of time. The software and hardware can be provided on a lease to purchase basis for 3 -5 years. Just the elimination of paper file space and coping costs will pay for the system many time over.

  10. Great thoughts Gary. Here in the US, the term people are using is “Health Information Exchanges” or HIEs, rather than NMD. Local HIEs are being set up as part of the Massachusetts pilot projects. Other states and localities have HIE initiatives – some have been successful, but others have folded. The major challenges for HIEs are 1) the ability of the HIE to accept, integrate, and distribute patient information when the individual clinicians and hospitals have different electronic records systems; 2) Clinicians being willing to participate in these systems, and 3) Patients authorizing their information to be included in the HIE system. In close-knit communities (like Northwestern Massachusetts) these challenges are being met, but in other areas of the country it is harder to make this happen. Some have proposed the single system requirement where there would only be one EMR platform (as they have in the UK and with the VA), but I don’t think that is realistic here in the US – nor do I think it is a good thing.

  11. A national medical database (NMD) will revolutionize medical care in the United States. There is no excuse for delay. In the UK, there is a general practitioner medical database that contains records on over 13 million patients, and it is a tremendous resource for clinical information. It has been in use for 14 years. Other nations are building NMDs.

    Doctors need to be able to submit records to an NMD and retrieve records relevant to the patient they are treating. This will be most valuable to doctors who serve patients in primary care and various medical specialists (nephrology, rheumatology, oncology), emergeny medicine, hospitalists and least helpful to certain procedure-oriented specialties such as gastroenterology, cardiology, dermatology, plastic surgery, opthalmology and orthopedics. The net effect on an NMD will be to synthesize a patient’s records over a lifetime into one coherent whole, from which doctors will access and contribute to information. Better health care at lower cost will result.

    We will have a hard time explaining to the children of the next generation how it was that computer technology was pioneered in the US in the 1980s, that credit scores and automobile vehicle repair histories were available with several keystrokes in the 1990s and it was not until decades later until a national medical database revolutionized health care and accelerated the evolution of useful clinical knowledge regarding the effectiveness of tests and therapies. Medical care prior to a NMD will look like the dark ages of medicine by comparison.

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