Electronic Medical Records. The thirty year struggle for adoption. Drew Loucks, Dwight Keysor and Lauren Peters

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1 Electronic Medical Records The thirty year struggle for adoption Drew Loucks, Dwight Keysor and Lauren Peters

2 Introduction Electronic medical records (EMRs) were introduced to the healthcare market in the 1980s and were expected to transform the healthcare industry by digitizing all medical records. EMRs were expected to massively reduce costs and improve patient safety and quality of care. However, the healthcare industry as a whole has been slow to adopt this technology principally due to poor economic incentives for the care delivery organizations (hospitals, private practices, clinics) that would use them. As of Q1 2010, less than 40 hospitals in the US (.7%) had adopted a fully integrated EMR (See Figure 1). 1 As a result, the government has had to subsidize the capital costs of the technology given the apparent benefits to the healthcare industry and greater society. This paper is going to look at the EMR ecosystem and its stakeholders in order to better understand why a technology with so much promise, hype, and perceived benefit has seen such slow adoption rates. Obviously, the producers of EMRs did not fully understand the overall ecosystem and what would be required in order for the technology to take hold in the industry. There is also the concern for what the emerging standard will be across the EMRs themselves as well as within an EMR (e.g. different software applications). We believe that some of the main reasons for the slow adoption are that the return on investment for a care delivery organization is low relative to the large up front capital costs and ongoing operation costs (See Appendix 1 for example pricing) For example a small practice can pay $30,000 for a 3-year licensing contract and about $3,000 per year in maintenance, this can go up to $125,000 and $20,000 respectively for larger networks. 2 In addition, the time required for integration and training never outweighed the perceived benefits, which mainly accrued to the other players within the ecosystem. On top of this the EMR software packages were historically not user friendly, hard to install, and other innovations and standards were not in place to make this a successful endeavor. Even today the promise is still the same: the EMR environment should provide the healthcare industry as a whole with massive benefit including improved accuracy, increased efficiency, better patient safety, more accurate coding, improved patient confidentiality, disaster recovery capabilities, massive reduction in paper, better patient data safety, better resource allocation, significant cost savings, reduced malpractice premiums, advanced data outputs, coordination of care regardless of patient location, and better information flow to give better care at a lower cost. But even with all these benefits, adoption of the technology has taken well over 30 years and we still need to have a government stimulus program in place to incent doctors to migrate to EMR technology. HIMSS Analytics, the authoritative source on EMR adoption trends, devised the EMR adoption model to track EMR progress at hospitals and health systems (See Figure 1). This model scores hospitals in the HIMSS Analytics Database on their progress in completing the 8 stages to creating a paperless patient record environment. 3 As you can see 1 HIMSS Analytics, EMR Sophistication correlates to hospital quality data, white paper, 2006 (illustrated in Figure 1) 2 Zaroukian, Michael MD, PhD. EMR Cost Benefit Analysis: Managing ROI into Reality Accessed 10 October HIMSS Analytics, EMR Sophistication correlates to hospital quality data, white paper, 2006.

3 from the figure below the healthcare system is still a long way from a true paperless environment. Why has adoption of this technology taken so long? Why do we need government intervention into a market where there is so much value? What was the EMR technology ecosystem missing in the past that today can make this technology successful? Figure 1 What is an EMR? The leading healthcare technology organization, Healthcare Information and Management Systems Society (HIMSS), defines an EMR as a software application environment composed of a clinical data repository, clinical decision support, controlled medical vocabulary, order entry, computerized provider order entry, pharmacy management software, and clinical documentation application. This application supports the patient s electronic medical record across inpatient and outpatient environments, and is used by healthcare practitioners to document, monitor, and manage health care delivery within a care delivery organization (CDO). The data in the EMR is the legal record of what happened to the patient during their encounter at the CDO and is owned by the CDO. 5 It is important to understand the difference between EMRs and EHRs (Electronic Health Records) as they very often are used interchangeably but are actually quite different. HIMSS defines EHRs as a subset of each care delivery organizations EMR. It is the EHRs of the patient 4 4 HIMSS Analytics, EMR Sophistication correlates to hospital quality data, white paper, Garet, Dave and Davis, Mike, Electronic medical records vs Electronic health records: Yes, there is a difference, white paper, 2006.

4 that can be shared across different CDOs and states to allow the data to be accessed anywhere not just in the CDO s infrastructure. 6 The EMR environment is fairly complex as it includes several core applications that work together to capture accurate patient data. The players throughout the ecosystem can then access it to improve quality of care, patient safety, reduce medical errors, and greatly reduce the time and cost needed to administer patients. Government Intervention HITECH ACT Despite these benefits the healthcare industry has been very slow to adopt the EMR technology. The primary reasons for the historically low adoption rates, which we will discuss in greater detail later, are low return on investment (ROI) to the CDO, the cost of ongoing maintenance and the massive amount of time required to implement the system. The government, however, recognizes the tremendous benefits that EMR technology offers in the form of cost savings and improvements in quality of care. As a result, in 2009 the government passed the HITECH Act which budgeted approximately $20 billion over the next 10 years to incent hospitals and physicians to implement the use of EHRs and EMRs. Under this plan each hospital is eligible for $2 million and physicians $44,000. Below is a chart of expected reimbursements and payments made to specific doctors over time. Figure 2 7 To receive these incentives organizations must implement an EMR that (1) protects the privacy of health information; (2) ensures the comprehensive collection of patient demographic and clinical data; (3) includes patient demographic and clinical health information; and (4) has the capacity to provide clinical decision and physician order entry. In addition, the organization must demonstrate meaningful use of EHRs and EMRs. The criteria for meaningful use includes: 1) eprescribing electronic prescribing, 2) allowing for the electronic exchange of 6 Garet, Dave and Davis, Mike, Electronic medical records vs Electronic health records: Yes, there is a difference, white paper, AthenaHealth, Inc, A summary of the HITECH ACT, whitepaper, 2009.

5 health information to improve the quality of health care, such as the promoting of care coordination, and 3) submitting clinical quality measures to the government to be decided at a later date by CMS. 8 The general goal and timeline of the bill is below: Focus on data capture and sharing Stage Focus on purely gathering data and implementing EHRs and EMRs Advanced analytical and clinical processes Stage Healthcare analytics should begin to start being used more heavily Improved performance and health outcomes Stage Benchmarking against relevant data will become standard Those practices that do not adopt the technology will be penalized with cuts in Medicare and Medicaid payments: %, %, % (maximum reduction). 9 This penalty paired with the subsidy provides an incentive to implement a meaningful use EMR. This should drive massive market adoption of the technology. The Innovation Ecosystem: An Assessment of Risks I. Initiation Risk: At this stage there is essentially no initiation risk as the concept and products have been available for well over 30 years. Initiative risk concerns that have been addressed during EMR progression include storage capacity, ease of data transfer, speed, determining certain format and language standards, and information security. For assessment purposes, however, we will review four relevant questions to more thoroughly evaluate the risk. a. Feasibility of product: The hardware and software applications have been developed and proven. The standard/platform consideration is less of a threat now, but there is still anticipation about which product will emerge as the leader. Particularly given industry consolidation, the producer that can secure momentum in the marketplace (with proven efficacy) will most likely have a long-term hold on majority market share. 8 AthenaHealth, Inc, A summary of the HITECH ACT, whitepaper, AthenaHealth, Inc, A summary of the HITECH ACT, whitepaper, 2009.

6 II. b. Benefit to customers: The value proposition to customers, which are the care delivery organizations, is clear; enhanced operational efficiency and significantly improved quality of care, as long as security of records is ensured. c. Competitive landscape: There have been hundreds of companies focused on harnessing this market opportunity over the past 30 years. A few of the top, mature vendors in the space include GE Centricity, Cerner, Sage and McKesson and some of the newer vendors include NextGen, e-mds, eclinicalworks, and MED3000. However, the large number of players within this space has added to the problem of adoption, which we will review in greater detail shortly. d. Supply chain management: As previously mentioned, the products have been brought to market and therefore we do not believe the supply chain poses a risk at this stage. Interdependence Risk a. Interdependence represents one of the biggest challenges towards the success of EMR technology. As mentioned in our discussion of the competitive landscape, there have been hundreds of companies that have entered the market with new and innovative healthcare delivery product offerings. Given the highly specialized nature of the healthcare industry, there are many opportunities to carve out a niche. One problem that has evolved as a result is that many of the EMR hardware and software applications that have been developed are incompatible with each other. Figure 3 illustrates the complex environment that exists within the EMR environment (note: definitions of acronyms are included in the appendix). The numerous service and product offerings available and the weak interdependence links between applications will continue to hinder success for EMR technology. Not only is there interdependence required within the applications of the EMR itself, but within other digitized components currently existing within the CDO, which represents operational uncertainty. The adoption of digital critical complementary systems (e.g. bill pay system) has not been absent from the healthcare space and these systems have faced the same hurdles as EMRs (capital investment, training). The existence of this fragmented, piecemeal digital landscape within some CDOs presents a challenge for EMRs to be adopted. Managers want to find a system that will talk with or at least provide the least disruption to the networks already in place. The EMR adoption may make these previous investments obsolete and therefore may delay the decision to implement a new system.

7 Figure 3 10 III. Adoption Risk a. Herein lies the crux of the issue. A map of the players involved in the EMR ecosystem is illustrated below. We have also included a chart outlining the pros and cons. Organizational uncertainty exists as there may be many decision makers that influence adoption (e.g. pharmacy, lab, core hospital). Our key takeaway in analyzing the EMR ecosystem is that the benefits offered by EMR technology do not exceed the costs (economic and intangible) incurred by the care delivery organizations. It is true that EMR technology would greatly enhance efficiency and improve the quality of care for these organizations. However, below we discuss the principal issues that have hindered adoption over the past 30 years. i. ROI: Given the massive amount of cost savings that are associated with EMR adoption, it is easy to make an argument that the ROI is quite attractive. The challenge, however, is that it is difficult to measure the savings. For example, if errors in prescription filling are cut due to the adoption of electronic records (no more illegible handwritten prescriptions from doctors) it is difficult to measure the cost savings that is associated with this improved efficiency. ii. Integration and training: The adoption of EMR technology would require an immense amount of training for doctors, supporting staff and 10 HIMSS Analytics, EMR Sophistication correlates to hospital quality data, white paper, 2006.

8 Figure 4 administrators (mostly the latter two). The time and cost associated with this endeavor proved to be a major hurdle for adoption among care delivery organizations. There is also some resistance among doctors about losing the individualization of care since these systems often create standardized checklists. iii. Ease of use: Many of the initial attempts at adoption were met with resistance because users found the applications difficult to install and use. iv. Interdependence: As mentioned above, the dynamic nature of the ecosystem has led to numerous product and service offerings within the ecosystem. The problem that has evolved is that many of these hardware and software applications do not speak to each other. This too has inhibited adoption.

9 Figure 5 Stakeholders Pros Cons Software Providers Meaningful market Compatibility with opportunity other products and Hardware Providers Meaningful market opportunity Regulators Improved quality of healthcare Reduced care costs Improved data sources for analysis Insurance Companies Improved information flow More accurate and efficient coding and billing Reduced diagnosis and treatment error Less paper applications Compatibility with other products and applications New regulation standards to be determined and enforced (e.g. Potential for insurance companies to use data to discriminate against ill patient pools or reimbursement to providers) Doctors Better patient safety More accurate coding More efficient billing Patient Confidentiality Disaster recovery capability Reduction in paper Data safety Reduced malpractice premiums Improved information flow Coordination of care regardless of patient location Advanced data output Training requirement Not all user friendly Weak interdependence between applications Fear of doctor that it depersonalizes and mechanizes the art of care delivery Requirement of EMR more cost burdensome for private practice doctors than those affiliated with hospital

10 Patients Reduced wait times Better quality of care Reduced insurance premiums Less paperwork Enhanced confidentiality Reduced risk of misdiagnosis and treatment error Care Delivery Organizations Better patient safety More accurate coding Patient Confidentiality Disaster recovery capability Reduction in paper Data safety Reduced malpractice premiums Improved information flow Cost savings Lack of process improvement as EMRs have not been adopted to scale (product improvement has existed for 30 years). Digitizing records brings in new notion of security breaches to patients (similar to identity theft risk financial services sector experienced) High initial capital costs ROI difficult to measure Training requirement Weak interdependence between applications Not all user friendly Lack of process improvement in EMR industry may penalize early adopter CDO Conclusion The value EMRs present to society, including improved patient outcomes and better efficiency of expensive resources (healthcare professionals and equipment) outweigh the implementation and operating costs. Allowing for cost sharing and aligning benefit realization across all players in the EMR ecosystem will help with the enormous costs associated with having a nationally coordinated Health IT system. One health economist, Professor Robert Miller of the University of California, San Francisco, suggests a full implementation of EMRs in all U.S. physicians' offices and hospitals would cost a massive $150 billion spread over the next eight years, He assesses this amount as manageable given that it accounts for less than 1 percent increase per year in total U.S. healthcare spending. 11 This amount may be manageable but CDOs have not taken the leap. The complexity of the product and the ecosystem within which an EMR operates in addition to the high cost of adoption and operation has left this technology on the ground for 30 years. Uptake is inevitable, as there is no substitute for digitizing records (the choice lies in either paper or digital) but the speed of the adoption curve will most likely uptick due to recent legislation. EMRs are currently still on the product 11 National EMR Adoption could cost $150B. FierceHealth IT. 3 August 2008 accessed 8 Oct

11 improvement curve and the recent HITECH act is trying to spark adoption and start the march down the process improvement curve. This switch will hopefully allow for price decreases making the system more accessible to smaller care organizations such as nursing homes and notfor-profit hospitals. The HITECH act helps the organizations (CDOs) responsible for the capital outlay with the full cost as these CDOs do not fully internalize the benefit, all players in the ecosystem do. Since everyone benefits (including society as a whole) the costs should be distributed amongst the ecosystem and not solely placed on the CDO. Cost distribution is a difficult topic to breach, as it cannot burden any one or all collectively, so as to further discourage adoption. The HITECH act has partly aligned this cost sharing initiative between CDO and government with the subsidy and penalty, easing one of the largest roadblocks to adoption. Since the healthcare sector, given its high regulation and complex web of players, does not operate as a true free market economy this balance between internalizing benefits and costs is delicate and often requires legislation. The next key player in the ecosystem for alignment is the Payers/Insurance companies as they see they benefit most from digitizing (we consider Doctors as decision makers within the CDO). Patients do benefit, and perhaps a small amount of the cost can be passed along, but we suspect that is not the most effective route of cost sharing and may exacerbate the rising healthcare cost problem that plagues the nation. EMR companies and legislators need to examine how the payers benefit from increased data accuracy and outcome information these networks provide and have them contribute financially for this benefit. If laws are put into place requiring funding and reimbursement to rely on digital reporting and analysis, the success of EMR systems will be necessary from the view of every stakeholder and the costs will be more manageable if shared.

12 Appendix 1 Estimated EMR Costs (Source: Accessed 9 October 2010: Costs Software License EMR license prices range from $1,000 - $25,000. Where an average license for a FULL/TRUE EMR usually starts at $10,000 and a where a light/entry level EMR usually starts at around $1,000. Implementation Implementation costs are usually billed hourly at a rate of $75-$150 per hour. Average implementation time per provider is 35 hours. Where 10 hours are used for customization, 25 hours for training and 10 hours for computer/network setup. This becomes exponentially lower as more physicians are added. For our example, we will use an hourly rate of $100 per hour. Hardware Where most physicians have a 3 to 1 assistant ratio, we ve suggested 1 Tablet PC for the provider, 3 workstations for the assistants and a Server. Tablet PC = $2,500, Workstation = $1,000, Server = $2,000. Support & Maintenance Ongoing support costs will be incurred from both an annual support contract with the software vendor for updates and technical support and the increased need of hardware/network support through a local IT representative. Appendix 2 - Definitions clinical data repository (CDR): The CDR is a real-time database that consolidates data from a variety of clinical sources to present a unified view of a single patient. In a hospital this is a repository for clinical data from the various departmental systems or a data warehouse, which provides access to a patient's health information through a single log in. controlled medical vocabulary (CMV): it ensures that the practitioners who use the EMR are accessing accurate and comparable data. clinical decision support system (CDSS): is software designed to aid clinicians in decision making by matching individual patient characteristics to computerized knowledge bases for the purpose of generating patient-specific assessments or recommendations. computerized provider order entry (CPOE): this systems comprises clinical applications that enable clinicians (eg, physicians, nurses, therapists, pharmacists) to enter orders (for tests, medications, services, or other clinical processes) for further processing (storage in a database for record-keeping, routing/communicating to someone.

13 Bibliography AthenaHealth, Inc, A summary of the HITECH ACT, whitepaper, Garet, Dave and Davis, Mike, Electronic medical records vs Electronic health records: Yes, there is a difference, HIMSS Analytics white paper, HIMSS Analytics, EMR Sophistication correlates to hospital quality data, white paper, Le Clair, Craig. Electronic Medical Records Need More To Support Meaningful Use. Forrester Research. May 20, National EMR Adoption could cost $150B. FierceHealth IT. 3 August 2008 accessed 8 Oct Rishel, Wes. The Definition of EHRs in US Health IT Incentive Regulations. Gartner. February 3, Rishel, Wes. Meaningful Use and certification of EHRs: Tracking evolving targets. Gartner. September 17, Shaffer, VI. Predicts 2010: Healthcare Providers and Governments Seek the Benefits and Address the IT Implications of Electronic Health Record. Gartner. December 7, Zaroukian, Michael MD, PhD. EMR Cost Benefit Analysis: Managing ROI into Reality Accessed 10 October 2010.

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