Studies Show Electronic Medical Records Make Financial Sense

By Stacy Lawrence  |  Posted 09-14-2005
Instituting electronic health records is an expensive proposition, especially for small physician practices. And few of these practices are adopting EMRs, hindered by costs and concerns about the technology.

But one of a series of new studies in the September/October issue of the journal Health Affairs addressing the adoption of health information technology suggests that although adoption is slow and risky, it can pay off for small practices. And if enough health care providers implement electronic health record technology, the payoff in savings for national health care in the United States could be significant, according to another study in the same journal.

Only 12 percent of practices with five or fewer full-time physicians reported having functional electronic health record systems, according to a nationally representative sample of physician practices on their use of information technology. Overall, including larger practices, about 18 percent are using electronic health records. But that figure has remained almost unchanged since 2001. However, 34 percent of practices surveyed said that they planned to implement EMRs within the next two years.

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Larger practices and those owned by HMOs are significantly more likely to have adopted EMRs. The source of payer, be it insurance, Medicare or Medicaid, showed no significant effect on usage of EMRs. Pressure for adoption from these agencies has come only recently.

Practices are hindered by the process of choosing and implementing EMR technology, which was more difficult for many than expected. This finding caused the authors of one study to conclude that group practices, particularly smaller ones, need more support for EMR adoption.

One study of 14 small physician practices found that electronic medical records cost an average of $44,000 per full-time provider for initial setup and an additional $8,500 annually per provider to maintain. On average, these practices recouped the cost of their EMR system in two and a half years and thereafter profited to the tune of about $23,000 per provider a year via improved efficiency. But three of the 14 practices actually suffered from serious financial problems in the wake of their EMR implementation.

And although some providers achieved modest improvement in quality of care through their EMR systems, the study researchers found that, overall, concerted efforts to improve health care quality were limited. Most practices failed to establish quality improvement systems and goals even once their EMR systems were in place.

"The current reimbursement system does not reward primary care physicians for providing better care or for taking the initiative to systematically improve care," said the lead author of this study, Robert Miller, professor of health economics at the University of California, San Francisco.

But if there were widespread adoption of electronic medical records and other health information technology, there could be savings of $162 billion a year through improving the way medical care is managed, reducing preventable medical errors, lowering death rates from chronic disease, and reducing employee sick days.

This is based on a computer model that assumes widespread, effective and interconnected use of electronic medical records in another study by the non-profit Rand Corp. in the same issue of Health Affairs.

The primary barriers to health information technology adoption identified by this study are high initial acquisition and implementation costs, slow and uncertain financial payoffs for health care providers, disruptive effects on physician practices during implementation, and payment systems that result in most HIT-enabled savings going to insurers and patients, while most adoption and care improvement costs are borne by providers.

"The potential savings from HIT is mind-boggling, but it isn't going to happen overnight," says lead author Richard Hillestad, Rand senior management scientist.

"The federal government will need to step in to speed the diffusion of HIT and remove some major barriers if we are going to reap the tremendous benefits it could have on improving quality, managing diseases and extending people's lives," he says.