E-Medical Records: What Seems to be the Problem?

Show Me the Money

The lack of consistent standards and the plethora of proprietary vendor offerings contribute to the problem, but those issues are slowly being resolved. Improving interoperability will make building an EMR infrastructure and EHR exchanges easier and cheaper, but it won't solve the incentive problem.

First, there are the upfront costs for getting all practices on EMR systems. Leavitt says the typical cost of such a system ranges from $15,000 to $50,000 per doctor. "Smaller practices can't amortize it," he says.

"Doctors are not going to do this on their own," says Halamka. "Hospitals have to pay for them to acquire it, and payers have to provide incentives for them to use it."

He says thanks to a 2004 reinterpretation of the Stark Law -- federal legislation that prohibits doctors from receiving subsidies from institutions to which they refer patients -- hospitals can subsidize up to 85% of nonhardware implementation costs for private practices. By using a software-as-a-service model for delivering EHR systems, those practices can reduce upfront hardware costs. "Software as a service is cheaper because of economies of scale achieved through central hosting and procurement," Halamka says.

But although Beth Israel Deaconess has made it a policy to offer EHRs to nonemployee doctors, many hospitals, faced with tight budgets, are unlikely to fund such programs without an economic incentive to do so.

There are secondary costs as well. Staffers must learn a new EMR system and often must change their business practices to accommodate the way it works. In some cases, the implementation of a system can take four to six months and cut back the number of patient visits by as much as 50%, says Grannis. "That's a big barrier to face. And they're not computer scientists, so it's a strange new world," he says. While practices do see some savings by reducing costs in areas such as filing, "none of these value propositions are home runs," says Grannis.

HL7's Jaffe says that if the market isn't providing incentives to doctors to make the transition, the government should do so in order to improve public heath. "In the U.S., [the government] has budgeted $75 million for health care IT. In England, it's £1 billion. It's disheartening," he says.

The U.S. Department of Health and Human Services does have one small program under way. In what project officer Jodi Blatt calls a "pay for performance demonstration," the Centers for Medicare & Medicaid Services are in the process of recruiting 2,400 practices in 12 locations this year to participate in a study. Physicians can earn up to $58,000 -- group practices up to $290,000 -- in incentives over the course of the five-year program by demonstrating improvements in patient care as a result of having implemented EMR systems. "We believe the incentives are substantial enough to reduce the barriers to practices," she says.

However, there are 921,904 physicians, 723,118 practices and 5,756 hospitals in the U.S., according to the American Medical Association and the American Hospital Association. Given those numbers, it's not clear that the incentive program will enable the industry to meet President Bush's stated goal that it provide most Americans with interoperable EHRs by 2014.

Brokered Solution

If all hospitals and physicians used EMR systems and met the standards for interoperability, more regional exchanges -- and even national information exchanges -- could start to develop. "A hospital in Miami could contact a hospital in San Diego and do some sort of exchange. That's in the ideal world," says Blatt.

But who will pay for that remains unresolved. Grannis says Regenstrief is working to find a sustainable economic model for health information exchanges by providing value-added services beyond basic health-record sharing. For example, the institute has received separate, ongoing funding for a service that uses data in the EHR exchange to quickly identify disease outbreaks (see "Seven Years And Counting: National Disease-Tracking System Still Unfinished"). But today, Grannis acknowledges, the exchange still depends on "a patchwork of funding."

He says he thinks that efforts by Microsoft Corp., Google Inc. and others to build personal health record repositories -- Web-based services where individuals can aggregate health records from multiple providers and add their own data -- will put pressure on the industry to embrace EMRs. But it will be too complicated and costly for providers to establish bidirectional transfers with every other provider. Local exchanges such as the one in Indianapolis will be required, and to assuage competitive concerns, neutral third parties will need to step in to manage those exchanges, Grannis says.

That's the tack taken with the nonprofit Massachusetts Health Data Consortium's MA-SHARE program. It enables the exchange of clinical document summaries and e-prescribing data among 17 hospitals, using Web services protocols. But even in Massachusetts, with its many advanced teaching hospitals, 50% of doctors still don't use EMRs, and Halamka's nirvana of consolidated EHRs that follow the patient remains a distant vision.

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