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Most electronic health record systems are a cost drain for practices, but deriving revenue from a system is possible.
It’s difficult for small practices to get a return on investment (ROI) from their electronic health record (EHR) systems, even if they receive government Meaningful Use payments, health information technology consultants say. Still, it’s possible for practices to achieve ROI if they participate in alternative
delivery models that help them garner value-based reimbursement.
The two traditional sources of ROI are increased efficiency and higher charges, based on better documentation. Using an EHR to increase efficiency requires major changes in office processes, and the government has recently increased its scrutiny of certain documentation techniques that help practices justify higher charges.
As a result, says Michelle Holmes, a principal with ECG Management Consultants in Seattle, Washington, not many small practices can achieve ROI on their EHRs in a fee-for-service world.
“The big Meaningful Use incentive dollars were in the early years,” she notes. “So at this point, the practices’ spend is greater than what they take in, unless they’re doing something in addition to the EHR implementation.”
Nevertheless, Holmes and other experts say, it’s possible for practices to achieve ROI if they participate in alternative delivery models that help them garner value-based reimbursement. These include accountable care organizations (ACOs) that participate in shared savings programs; Patient-centered Medical Homes, which many insurers incentivize; and pay-for-performance programs that pay quality bonuses.
All of these models, to varying extents, require the use of EHRs. Therefore, Holmes notes, not having an EHR represents an
“opportunity cost” that can be quantified and weighed against the cost of installing a system.
Most practices are still not receiving much, if any, income from value-based reimbursement. But ACOs and medical homes are increasing, and some physicians are beginning to see the possibility of achieving ROI.
Nephrology group counts on ACO
Simon Prince, MD, is part of a seven-doctor nephrology practice in Manhasset, New York. The physicians have attested to Meaningful Use for two consecutive years, but those payments covered only 20% to 25% of what they invested in their EHR, Prince says.
While the EHR has made the practice more efficient in some ways, in other ways it has decreased efficiency and productivity, he says. For example, documentation of patient encounters takes him longer than it used to. On the other hand, improved documentation has led to fairer reimbursement, in his view.
With these and other factors included in the analysis, he says, the ROI on his EHR “is around a wash,” at best. But the group’s participation in an independent practice association that has turned into an ACO could change the picture in the long run, he says.
Next: Incentives pay for small practice's EHR
The ACO, which Prince leads, includes 325 doctors in 100 practices. It participates in the Medicare Shared Savings Program (MSSP) and is one of 29 ACOs that qualified for bonuses in that program’s first year. The ACO also holds shared-savings contracts with several private payers.
To participate in the ACO, a practice must either have an EHR or plan to acquire one within 12 months. The EHR is necessary partly because the Centers for Medicare and Medicaid Services (CMS) factors the percentage of ACO members who have achieved Meaningful Use into its bonus calculations. Also, some of the quality measures in the MSSP require clinical data that’s easier to collect with EHRs.
Prince believes that once the MSSP bonuses start flowing, they will help him and his colleagues in the ACO achieve ROI on their EHRs. He’s not sure those bonuses will be substantial, but he believes that value-based payments will continue to increase for practices that participate in the Medicare and health-plan shared savings programs.
Meanwhile, he points out, the ACO has barely begun to take advantage of its EHRs. The 30 EHRs used by member practices cannot yet exchange information with each other; when they do, it will be much easier to coordinate care. Currently, he notes, the ACO’s population health management software uses claims data, combined with clinical data that practices enter on a web portal and lab data feeds.
Jeffrey Kagan, MD, of Newington, Connecticut, practices internal medicine with one other physician and a nurse practitioner (NP). The group’s EHR cost about $120,000, including interest payments. Meaningful Use incentives will cover most of that, he says.
Learning the EHR slowed the doctors and the NP initially, but productivity has rebounded, and they see more patients now than they did before implementing the system. Moreover, Kagan notes, “We’re billing at higher levels than we did before.”
So even though the practice is paying about $5,000 a year for software maintenance and may have to buy some new computers, it has achieved ROI on its EHR, he says.
Kagan, a Medical Economics editorial board member, expects further ROI from participation in an ACO and from pay-for- performance. The EHR allows his practice to pull quality data that it sends to the ACO. In turn, the ACO reports on the physicians’ performance to CMS’ Physicians Quality Reporting System (PQRS), which pays bonuses for reporting.
In addition, when insurance companies ask Kagan to fill out quality improvement forms, he can use the EHR to complete them, which results in small additional payments. While Kagan is not yet getting pay-for-performance bonuses from the health plans, he says, “I think that’s coming.”
Other Sources of ROI
As Kagan’s story shows, it’s still possible to get ROI from a combination of meaningful use incentives, efficiency, and higher charges. But it’s getting harder to pull off.
“Some people do get ROI, but it requires real change,” observes Rosemarie Nelson, a Medical Group Management Association healthcare consultant in Syracuse, New York and Medical Economics editorial consultant. “People want to keep what they do the same, so they try to retrofit the technology into their current processes. But in order to take advantage of what the technology offers, your processes must change.”
Next: Estimating a return on investment
Nelson says she has seen practices that don’t take advantage of their EHR’s ability to track test orders against results to see if they came back. Instead, nurses print out the orders and put them in a tickler file. Nor do they use patient portals that enable patients to self-register and enter their chief complaint and family/social history before scheduled visits.
Holmes agrees that process redesign is essential if practices want to increase efficiency. But because of the tight MU deadlines, she says, “people aren’t taking enough time to implement these systems in a way that might increase efficiency.”
The amount of additional revenue practices can realize by coding higher depends on whether they were undercoding before they got their EHRs, Holmes notes. But even if they could raise their charges by improving documentation, CMS is looking closely at physicians who copy parts of past notes into current notes or who document by exception. The threat of being accused of fraud has thrown a chill into physicians, she says. As a result, many are coding more conservatively.
Another key factor in ROI is the 5-year cost of an EHR system. Vendors of web-based EHRs claim that their products are cheaper than site-based systems because they have a lower upfront cost. But Nelson says that the research she’s seen shows that the differences in 5-year costs are “insignificant.”
Holmes contends, however, that there is a difference in cost that depends on the size of the practice. Larger groups can get economies of scale by hosting their own EHR, but small practices can’t. Therefore, the latter are probably better off with a cloud-based EHR, she says.
Costlier EHRs have sophisticated features not found in modestly-priced systems, including business intelligence and advanced reporting features that can be useful in population health management.
Holmes doesn’t think that small practices need these features.
“That’s one way to look at the ROI,” she points out. “How much are you paying for the stuff you’re actually using? If you’re paying $1 million for the EHR, but you’re only using the features and functions you could have gotten in a simpler EHR for $250,000, you may have overpaid.”
Nelson sees the cost/benefit ratio in terms of how well a practice implements its EHR. “A really good Amazing Charts implementation probably has a way better ratio than a poorly implemented NextGen,” she says.
Finally, don’t forget about the practice management system that comes with most EHRs. If that doesn’t work well, you’re going to feel the pain in your bottom line.
For a variety of reasons, including the challenge of maintaining an interface, it makes sense to buy an integrated EHR/practice management system, rather than separate systems, Nelson notes. And if you outsource your billing, you should hire a service that uses the practice management system that comes with your EHR, she adds.
If you’re not getting ROI on your EHR, don’t despair; that EHR could be the ticket to future revenue streams. But to enjoy those added revenues, you’ll have to start participating in the programs and alternative care delivery systems available to you.
Also, don’t worry if you and your colleagues can’t yet use your EHRs to optimize your income from these new models. As Prince explains, “We’re succeeding despite the challenges that we have with getting any data out of our EHRs. We find that the ROI from that perspective is limited for now, but the potential is there.”