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The Economic Impact of Electronic Health Record Implementation and Its Future Implications Maggie Zhang Tulane University Bachelor of Science, Public Health Bachelor of Arts, Economics Class of 2017 Completed in partial fulfillment of the summer 2016 intern program of the Institute for e-Health Policy (An educational entity of the HIMSS Foundation) “The opinions in this paper are those of the author and not HIMSS or the Institute for e-Health Policy/HIMSS Foundation.”

Economic Impact of EHR Implementation

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Page 1: Economic Impact of EHR Implementation

The Economic Impact of Electronic Health Record Implementation and Its Future

Implications

Maggie ZhangTulane University

Bachelor of Science, Public HealthBachelor of Arts, Economics

Class of 2017

Completed in partial fulfillment of the summer 2016 intern program of the Institute for e-Health Policy (An educational entity of the HIMSS Foundation)

“The opinions in this paper are those of the author and not HIMSS or the Institute for e-Health Policy/HIMSS Foundation.”

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BackgroundElectronic Health Record (EHR) is defined as the “digital version of a patient’s paper chart” (US Department of Health and Human Services [HHS], 2013). A number of initiatives have already been in place to encourage implementation of EHR systems across health care facilities. Specifically, the Health Information Technology for Economic and Clinical Health (HITECH) Act was passed in 2009 as a part of the American Recovery and Reinvestment Act in order to “promote the adoption and meaningful use of health information technology” (HHS, n.d.). Meaningful use is defined as the “[use] of certified EHR technology to 1) improve quality, safety, efficiency, and reduce health disparities 2) engage patients and family 3) improve care coordination, and population and public health and 4) maintain privacy and security of patient health information (HHS, 2015a). The Centers for Medicare and Medicaid Services (CMS) have put in place specific objectives for providers and hospitals to engage in meaningful use in order to qualify for its incentive program payments. These incentives along with widespread attention the health IT have encouraged many organizations to implement EHR systems. In 2014, 74.1 percent of office-based physicians had a certified EHR system (Jamoon, Yang, & Hing, 2016).

Five years after the passage of the HITECH Act, the more pressing question is whether EHR implementation has had its intended economic effect. The implementation of EHR technology is based on the assumption that through the implementation of EHR, there will be reduced healthcare costs and increased economic benefits. The Congressional Budget Office (CBO) found that the initial analysis done by both the RAND Corporation and the Center for Information Technology Leadership indicated an annual net savings of $80 billion in the healthcare sector (Congressional Budget Office, 2008). The key question now becomes whether these benefits have actually been realized or not. Through an evaluation of available data, peer-reviewed research studies, and case studies, this report aims to illustrate the economic impact of EHR technology on both the provider level and industry level.

Initial FindingsSimilar to other health care innovations and programs, there have been mixed reviews regarding the economic and financial impacts of EHR implementation. Given that many EHR systems have already been implemented, many research studies have been able to pull some initial data and create some projections regarding its impact. One study projected a negative five-year return on investment for many practices that have implement EHRs (Adler-Milstein, Green, & Bates, 2013a). Using survey data collected from 49 community practices in the Massachusetts eHealth Collaborative, the study projected that the average physician would lose $43,743 over the course of five years and that only 27 percent of practices would have a positive return on investment (Adler-Milstein et al., 2013a). The study’s survey used financial data from fiscal year 2005 (before the adoption of EHRs) to fiscal year 2008 (after the adoption of EHRs) in order to make the projections. The study did take into account of meaningful use incentives by adding the maximum amount of $44,000 to all physician practices. However, there are several limitations to this study. The study mentioned that it could not account for the degree to which the practices

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used their EHRs to transform the delivery of care. Furthermore, the data used for the projections was obtained prior to the HITECH Act. There could be a multiplier effect from the increased attention to health IT through HITECH so many organizations may have propelled organizations to use EHRs in more innovative ways to increase ROIs in later years.

Another study also surveyed community practices in the Massachusetts eHealth Collaborative and focused on ambulatory costs. The study collected monthly standardized health care costs from commercial claims data in areas like total cost, inpatient costs, and ambulatory costs. While the study predicted that there will be no significant economic impact in total ambulatory costs, there will be a slowing in the growth of ambulatory costs (Adler-Milstein, Salzberg, Franz, Orav, Newhouse, & Bates, 2013b). The study illustrated a slowing of ambulatory costs in the practices that implemented EHR compared to the control group and made a projection of $4.69 per member per month (PMPM) in ambulatory cost savings (Adler-Milstein et al., 2013b). The study also has some limitations in that the practices were not randomly chosen and the practices had implementation support. However, it is important to note the slowing of ambulatory cost growth considering the data was collected in a short period of time. If these savings were sustained over a long period of time, larger savings can be realized. Both of these studies gave projections of what the economic impact of EHR implementation is. Now, there is a multitude of data available to illustrate the actual impact on both the provider and national level.

The Economic Case for EHR AdoptionProvider LevelOn the individual provider level, there have been many instances of economic success with the investment in EHR technology. HIMSS (Healthcare Information and Management System Society) Analytics has provided a EHR adoption model called EMRAM (Electronic Medical Records Adoption Model)1 to identify the progress of a healthcare organization. There are 8 stages ranging from 0 to 7, where Stage 7 indicates the hospital has completed EHR adoption and uses data analytics to improve care. Many hospitals have achieved a Stage 7 designation by HIMSS such as Texas Health Resources (THR) and MetroHealth System (MHS). These organizations have demonstrated its economic success with EHR implementation.

Texas Health Resources is a large faith-based, non-profit healthcare delivery system that includes 25 acute-care and short-stay hospitals serving the North Texas area. Between 2006 and 2011, THR was able to integrate EHR into 13 of their hospitals. Initially, THR actually saw a decrease in productivity by approximately 20% in part due to the increased time and cost in documentation. However, staff members were able to adapt to the system and productivity improved to above pre-implementation levels. According to THR, EHR implementation was able to “reduce medical errors, provide medication alerts and other decision support, make available timely and appropriate treatment information, and encourage collaborative information sharing and common practices” (Texas Health Resources, 2013). THR reported cost benefits between

1 EMR stands for electronic medical record, which is used interchangeably with EHR

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2005 and 2010 in multiple areas. THR saw a total cost benefit of $68,847,907 which includes a $1,951,573 reduction in forms cost, an increase of $63,800,000 on meaningful use incentives, a reduction of unit clerk chart activities by $1,302,554. The organization approached EHR implementation with an aim to incorporate business and clinical strategies within the patient environment along with harnessing the advantages of using technology, which allowed it it see the positive returns on investment for EHR.

Another EMRAM Stage 7 organization is MetroHealth System (MHS) in Cleveland, Ohio. MHS is a safety-net and essential health care system affiliated with Case Western Reserve University School of Medicine. MHS installed Epic’s EHR system in the mid-1990s for its ambulatory clinics and by 2009, it was able to fully deploy its EHR system through all of its ambulatory clinics, inpatient areas, and emergency departments (HIMSS Davies Committee, 2016). MHS transition from a 0 to 100% paperless setting allowed for it to realize tangible benefits of EHR implementation. MHS found that “digitizing the clinics allowed for more efficient and effective administrative, clinical and operational processes” (MetroHealth, 2015). EHR implementation allowed for more efficient creation of charges, more availability and legibility of clinical notes, and MHS no longer needed a team to move paper records from clinic to clinic and to and from the medical records department (MetroHealth, 2015). Actual financial benefits were seen in four major areas including medical record staff savings, transcription savings, professional revenue enhancement, and technical revenue enhancement. The elimination of transcription cost resulted in annual savings of over $1 million. MHS saw a positive return on investment of an average $20 million per year between 2010 and 2014.

National LevelFurthermore, a study on the cost savings of having advanced EHRs in hospitals indicated the economic benefits of EHRs on a national level. The study pulled data from the National Inpatient Survey (NIHS) and HIMSS Annual Survey in 2009 to look at the total cost of hospital admission per patient-billed hospitalization. In total, there were 5,047,089 individual patient cases and 1,509,610 or 29.9% of these patients were in hospitals that had EHR systems in place. Considering that the data was obtained in 2009, there were relatively few hospitals that had advanced EHR systems. However, the results still indicated a strong association between lowered cost and the presence of EHR. The mean cost per patient admission for hospitals without advanced EHRs was $7938 while the mean cost per patient admission for hospitals with advanced EHRs was only $7207 (Kazley, Simpson, Simpson, & Teufel, 2014). After controlling for patient and hospital characteristics, the study concluded that patients who were treated in a hospital with EHRs had cost $731 less or 9.66% less than patients who were treated in a hospital that did not have an advanced EHR system. This multi-state study can be representative of the trends that the US will continue to see with more and more healthcare organizations opting to implement EHRs.

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Similarly, other data on a national level have illustrated a positive economic results for EHR implementation. The Dorenfest Institute for Health Information Technology Research and Education database provides information regarding health IT use in hospitals and integrated healthcare delivery networks.2 The database is updated annually with historical data from 1986 up to 2014 and has information from over 5,000 hospitals. Figure 1 presents the average net operating revenue for hospitals at different percentages of EHR adoption in its facilities. The percentage represents the percent range of the hospital's current medical record that is electronic (includes digital and/or scanned data). The average net operating revenue is highest among hospitals that have between 76 to 100 percent adoption rate of EHRs at a little less than $250,000,000 in 2012 and 2013. This data indicates the economic benefits of EHR implementation with increasing average net operating revenue as percentage of EHR adoption increases. Considering the sample contains over 5000 hospitals each year and there are 5,627 registered hospitals in the US (American Hospital Association, 2016), the data can help reflect a national trend. Thus from an economic perspective, the national trend on EHR adoption for hospitals can be interpreted as positive.

Figure 1: Bar graph illustrating hospital average net operating revenue at different percentages of EHR adoption using data from the Dorenfest Institute.

However, the interesting component of this data is the large decreases in net operating revenue in 2014 in comparison to previous years. Even though there is still an increasing trend in net operating revenue for higher adoption of EHR, the significant drop from 2013 to 2014 raises concerns. This could be partially due to data reporting error considering that there were fewer hospitals that provided their net operating revenue. It could also be that the hospitals saw decreases in patients or may have suffered an economic setback. More research needs to be done in order to address the discrepancy.

2 http://apps.himss.org/foundation/histdata.asp

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Next Steps - Towards InteroperabilityWhile the implementation of EHRs can yield some positive economic benefits, there is more than can be done to realize the full extent of benefits of investing in EHRs and in health IT. For example, the focus on health information exchanges (HIE) and interoperability after EHR implementation will be key to harnessing not only the economic value but also the clinical value of EHRs. HIEs “allows doctors, nurses, pharmacists, other health care providers and patients to appropriately access and securely share a patient’s vital medical information electronically - improving the speed, quality, safety and cost of patient care” (HHS, 2014). Interoperability is defined as “the ability of systems to exchange and use electronic health information from other systems without special effort on the part of the user” (HHS, 2015b). By having EHRs in place, it will allow for the successful facilitation of HIEs and will further help different systems interoperate with each other. One study on the value of HIEs and interoperability estimates that a fully standardized system could yield a net value of $77.8 billion annually (Walker, Pan, Johnston, Adler-Milstein, Bates, & Middleton, 2005). It will be pertinent to start realizing the value of investing in EHRs and pushing the health system towards interoperability.

Conclusions: Electronic Health Records are only just the beginning of transforming the healthcare arena. It has proved to be a key aspect of not only improving clinical value but also increasing economic benefits. On the provider level, there are many organizations like Texas Health Resources and MetroHealth Systems that have begun to fully realize the actual economic value of EHRs. Similarly, data on the national level have illustrated that a positive economic trend with the investment of EHRs. Though the savings may not be as extensive as previous projections have indicated, it is clear that the move towards an electronic health system is the right direction to go. To maximize savings and enhance quality, investment and work towards health information exchanges and interoperability will be essential.

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References:Adler-Milstein, J., Green, C. E., & Bates, D. W. (2013a). A Survey Analysis Suggests That

Electronic Health Records Will Yield Revenue Gains For Some Practices And Losses For Many. Health Affairs, 32(3), 562-570. doi:10.1377/hlthaff.2012.0306

Adler-Milstein, J., Salzberg, C., Franz, C., Orav, E. J., Newhouse, J. P., & Bates, D. W. (2013b). Effect of Electronic Health Records on Health Care Costs: Longitudinal Comparative Evidence From Community Practices. Annals of Internal Medicine, 159(2), 97-104. doi:10.7326/0003-4819-159-2-201307160-00004

American Hospital Association. (2016). Fast Facts on US Hospitals. Retrieved from http://www.aha.org/research/rc/stat-studies/fast-facts.shtml

Congressional Budget Office. (2008). Evidence on the Costs and Benefits of Health Information Technology. Retrived from https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/reports/05-20-healthit.pdf

HIMSS Davies Committee. (2016). The MetroHealth of Cleveland - Davies Enterprise Award. Retrieved from http://www.himss.org/metrohealth-cleveland-davies-enterprise-award

Jamoom, E.W., Yang, N., & Hing, E. (2016). Adoption of certified electronic health record systems and electronic information sharing in physician offices: United States, 2013 and 2014. NCHS Data Brief, No 236. Hyattsville, MD: National Center for Health Statistics.

Kazley, A. S., Simpson, A. N., Simpson, K. N., & Teufel, R. (2014). Association of Electronic Health Records With Cost Savings in a National Sample. The American Journal of Managed Care, 20(6), e183-e190.

MetroHealth System. (2015). MetroHealth Core Case Study: Return on Investment. Retrieved from http://www.himss.org/metrohealth-cleveland-davies-enterprise-award

Texas Health Resources. (2013). HIMSS 2013 Davies Enterprise Award Application. Retrieved from http://www.himss.org/texas-health-resources-davies-enterpriseorganizational-award

U.S. Department of Health and Human Services. Office for Civil Rights. (n.d.). HITECH Act Enforcement Interim Final Rule. Retrieved from http://www.hhs.gov/hipaa/for-professionals/special-topics/HITECH-act-enforcement-interim-final-rule/index.html

U.S. Department of Health and Human Services. Office of the National Coordinator for Health

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Information Technology (ONC). (2013). What is an electronic health record (EHR)? Retrieved from https://www.healthit.gov/providers-professionals/faqs/what-electronic-health-record-ehr

U.S. Department of Health and Human Services. Office of the National Coordinator for Health Information Technology (ONC). (2014). What is HIE (Health Information Exchange)? Retrieved from https://www.healthit.gov/providers-professionals/health-information-exchange/what-hie

U.S. Department of Health and Human Services. Office of the National Coordinator for Health Information Technology (ONC). (2015a). Meaningful Use Definition & Objectives. Retrieved from https://www.healthit.gov/providers-professionals/meaningful-use-definition-objectives

U.S. Department of Health and Human Services. Office of the National Coordinator for Health Information Technology (ONC). (2015b). A Shared Nationwide Interoperability Roadmap version 1.0. Retrieved fromhttps://www.healthit.gov/policy-researchers-implementers/interoperability

Walker, J., Pan, E., Johnston, D., Adler-Milstein, J., Bates, D., & Middleton, B. (2005). The Value Of Health Care Information Exchange And Interoperability. Health Affairs. doi:10.1377/hlthaff.w5.10