Health Information Technology Adoption in Massachusetts: Costs and Timeframe
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1 Health Information Technology Adoption in Massachusetts: Costs and Timeframe
2 Understanding the MA HIT Landscape Our Approach The Provider Landscape How may providers are in Massachusetts? The Cost and Potential Benefits of HIT What are the costs of EHR and CPOE technologies? What are the benefits of technology adoption by group Estimated Current Use of HIT What are the current adoption rates of various technologies? Cost and Benefits of HIT Adoption in MA What are the estimated costs to get providers in MA up and running? What is the realistic time-frame that can be expected based on market trends and intervention strategies? The Provider Landscape in Massachusetts Estimated Use of HIT in Massachusetts The Cost and Potential Benefits of HIT Implementation Estimated Cost and Potential Benefits of HIT Implementation in Massachusetts Number of Providers Provider HIT Technology X X = Adoption Costs/Benefits Estimated Cost/Benefit of HIT Implementation Page 1
3 Estimated Use of Health Information Technology in Massachusetts Provider Type State Providers (# Sites in MA) Estimated Use of HIT EHR erx CPOE Total Hospitals % (1) ~15% (2) % (3) Group Practice/Solo Physicians ~7, % (4) 4-18% (5) 8% (6) Community Health Centers 51 44% (7) 4-18% (5) N/A Total Patient Care Office Based (16,256 physicians) ~7, % (4) 4-18% (5) 8% (6) Total Post Acute/ Long Term Care >1,203 Little adoption beyond billing in post acute/long term care settings (8) Retail Pharmacies 1,042 N/A Growing (9) N/A Clinical Laboratories ~200 Depends on location 1) National hospital adoption rate according to the 15th annual leadership survey of Health Information and Management Systems Society (2004). 2) National hospital e-prescribing figures quoted by Tommy Thompson in "Thompson Urges Companies Focus on Employee Health, Wall Street Journal 4/15/05 3) Massachusetts CPOE adoption according to: Leapfrog Group Survey in 2005, 6.3% of hospitals in MA have fully implemented CPOE; Massachusetts Technology Collaborative in "Treatment Plan: High Tech Transfusion," (2003), 7.3% of Hospitals have fully Implemented CPOE. 4) "Information Technologies: When will they make it into physicians' black bags?, Commonwealth Fund, 12/2004 adoption rates for medium size groups (10-49 physicians) were approximately 35% and adoption rates for large groups (50+ physicians) were 57%, 13% of solo physicians. According to John Halamka, 10% is more appropriate for solo providers. 5) National e-prescribing ehealth Initiative s Electronic Prescribing: Toward Maximum Value and Rapid Adoption references studies from 5% - 18%; ihealthbeat, April 7, 2005 sights references from 4% - 9%. 6) "Use of Computerized Clinical Support Systems in Medical Settings: United States, , CDC quoted the 2003 NAMCS survey citing 8% of physician practices using CPOE 7) Massachusetts League of Community Health Centers IT Survey ) Final Summary Report of the Status of Electronic Health Records in Post-Acute and Long-Term Care, University of Colorado Health Sciences Center s Division of Health Care Policy and Research, February 19, 2004 requested by Assistant Secretary for Planning & Evaluation (ASPE). This extensive review by University of Colorado Health Science Center s Division of Health Care Policy and Research could not find any adoption rates in these settings. 9) High utilization for billing, erx increasing, additional increases likely with CMS regulations. Page 2
4 Cost/Benefit Analysis Caveats Value of the Investigation The data in this analysis are meant to provide general directional guidance on the impact of future HIT implementations for the State of Massachusetts. Therefore some numbers may be imprecise in absolute value, yet are directionally accurate for strategic planning purposes. Caveats of the Analysis Very few prospective studies of measurable HIT implementation benefits have been conducted to date. The data collected on cost and savings that have been utilized in this analysis are, to-date, the most widely accepted empirical studies available. The distribution of costs and benefits by stakeholder group are based on assumptions by thought leaders and published in empirical studies. These distributions have not been fully investigated and may differ as industry learning ensues. Where figures varied, we chose the most conservative estimate (higher cost, lower benefit). Calculations of benefit figures are built on assumptions, further built on other assumptions. Where adoption rates were reported in a range, we chose the lowest. Page 3
5 Estimate of Ambulatory EHR Costs for Unconnected Providers in MA Cost of Ambulatory EHR Implementation in MA (ASP Model) Adapted from Partners Health Care System EMR Implementation (1) Software annual license $3,500 Implementation $3,400 Support and Maintenance $1,500 Ongoing yearly cost Increased from $1,600 to $3,500 based on thought leader input and expected private vendor costs Includes workflow redesign, training, and historical chart abstracting Hardware (3computers+network) $6,600 Assumption: hardware replacement every 3 years Temporary productivity loss $22,400 Total Adjusted Present Value of the 5 year Cost per Physician in MA $64,215 Costs Applied to Unconnected Providers in Massachusetts Increased from $11,200. Many thought leaders agree that productivity losses are more likely to be seen for 6-months or greater. (Assumes 20% loss in months 1+2, 10% for months 3+4, and 5% for months 5+6) Total Estimated Cost (pv) for 100% Adoption of EHR Year1: $802.1 M 5-Year Cumulative: $1,241.2 M 1) Source: Wang SJ, Middleton B, et.al. A Cost Benefit Analysis of Electronic Medical Records in Primary Care, American Journal of Medicine 2003;114: ) Savings calculations not presented here based on Wang et.al. 2003, including reduced chart pulls (up to 600), reduced transcription costs (28%), reduced adverse drug events (34%), alternative drug suggestion savings (15%), reduced laboratory charges/utilization (8.8%), savings from DSS (14%), FFS improvement in billing capture (+2%), and reduction in FFS billing errors (78%). Many of these savings have been reproduced in other studies with advanced EHR systems and according to the thought leaders interviewed in this analysis, the savings are representative of a higher cost/capability system as demonstrated by our cost adjustments. Note: All present value figures assume a 5% discount rate. Page 4
6 Estimate of Inpatient CPOE Costs at Unconnected Acute Hospitals in MA Cost of Inpatient CPOE Implementation at Acute Care Hospitals in MA (1) MA 500+ Bed Hospitals (2) (assume installation of wraparound CPOE systems) Year 1 5 Year Cumulative Initial Costs $19.7 M $19.7 M Annual Ongoing Costs $3.1 M $7.0 M Total Costs $22.8 M $26.7 M MA Bed Hospitals (20) (assume 60% retain current HIS vendor, 25% install wraparound CPOE, and 15% replace the current HIS application suite) Initial Costs $120.0 M $120.0 M Annual Ongoing Costs $15.7 M $71.4 M Total Costs $135.7 M $191.4 M MA <200 Bed Hospitals (36) (assume 60% retain current HIS vendor, 25% install wraparound CPOE, and 15% replace the current HIS application suite) Initial Costs $132.0 M $132.0 M Annual Ongoing Costs $12.1 M $55.0 M Total Costs $144.1 M $187.0 M Total Cost for CPOE in All MA Acute Care Hospitals $302.6 M $405.1 M 1) Cost figures are based on those reported in Treatment Plan: High Tech Transfusion Case Statement for Implementation of CPOE in all Massachusetts Hospitals, The Massachusetts Technology Collaborative and First Consulting Group, 2004, originally derived from Computerized Physician Order Entry: Cost, Benefits and Challenges, FCG report written for the American Hospital Association (AHA) and the Federation of American Hospitals (FHA) 2003, Advanced Technologies to Lower Health Care Costs and Improve Quality, Massachusetts Technology Collaborative, 2003, and FCG market intelligence, applied to Massachusetts provider statistics, and adjusted based on the type of application the specific providers would adopt; reported as present value in 2005 dollars. Page 5
7 Estimated Costs of Interoperability Interface Implementation to Unconnected Providers in Massachusetts Estimated Costs (1) Estimated Interoperability Interface Costs Hospitals/Clinics Group/Independent Physician Total 1 st Year (Initial + 1 st Year) $8.3 M $149.6 M Public Health Department $100,000 Pharmacy Laboratory $52.1 M $10.0 M Cumulative 5 Year One time cost, does not include the costs associated with regional data sharing initiatives Total Interoperability Interface Costs $220.1 M $220.1 M 1) Source: Walker J, Pan E, et.al. The Value of Health Care Information Exchange and Interoperability, Health Affairs, January 19, CITL included the costs and benefits of clinical systems and their implementation in their estimates of the value of health care information exchange and interoperability. For the purposes of this analysis we did not wish to duplicate costs or benefits. Therefore we only included the costs of interoperability not associated with the previous EHR and CPOE implementation figures. Page 6
8 Estimated Costs and Benefits of HIT Implementation in MA Estimated Costs (1) Total 1st Year Cumulative 5 Year Estimated Ambulatory EHR Costs $802.1 M $1,241.2 M Estimated Acute CPOE Costs $303.7 M $406.6 M Estimated Interoperability Interface Costs $220.1 M $220.1 M Total EHR, CPOE, and Interoperability Interface Costs $1,325.9 M $1,867.8 M Estimated Savings (Benefits) (2) Total 1st Year Cumulative 5 Year Hospitals $50.5 M $638.5 M Group/Independent Physician $7.3 M $174.6 M Payer/Purchaser $90.9 M $1,886.3 M EHR and CPOE Savings (3) $ M (3) $2, M (3) Estimated Net Benefit of EHR, CPOE, and Interoperability Interface ($1,177.0 M) $831.7 M 1) All costs and benefits reported in 2005 dollars as present value assuming a 5% discount rate, some totals may differ based on rounding. 2) Savings calculations are not reported in detail in this presentation due to the high number of referenced sources and the complexity of the reported savings in the empirical literature. In this analysis the conservative savings associated with CPOE and EHR were included based on their reproducibility in the literature and thought leader input. 3) These figures do not include the potential additional savings associated with interoperability not recognized in the EHR and CPOE value figures. Page 7
9 Diffusion of HIT in Massachusetts Most cost and benefit analyses assume a 1-time investment to connect 100% of providers, which does not accurately represent the diffusion of new technologies. Rand Health conducted an extensive literature review and assessed potential diffusion curves for HIT based on macroeconomic theories and microeconomic examples. (1,2) CHPR, based on the work of a Senior Economist at RAND, have applied the MA specific cost/benefit assumptions to two diffusion scenarios based on this work. Scenario 1: Estimated diffusion of EHR and CPOE based on market influences Scenario 2: Estimated diffusion of EHR and CPOE based on market influences and a 3-year infusion of $50 Million 1) Teng, JTC, Grover V, Guttler W. Information Technology Innovations: General Diffusion Patterns and Its Relationships to Innovation Characteristics. IEEE Transactions on Engineering Management, V.49, No.1, 2002, p ) Bower A. The Diffusion and Value of Healthcare Information Technology, RandHealth, prepared for Cerner, General Electric, Hewlett Packard, Johnson & Johnson, and Xerox Page 8
10 Estimated Percentage Diffusion of Ambulatory EHR to all MA Providers 100% 90% EHR is expected to diffuse to ~87% of providers Percentage Diffusion (Adoption) 80% 70% 60% 50% 40% 30% 20% 10% % with $50M infusion First EMR in MA ~1982/1983 with rudimentary intraoperability % Adoption % with no intervention 0% Year No Policy Intervention 3-year $50M Infusion in 2005 Page 9
11 Estimated Percentage Diffusion of CPOE to all MA Acute Care Hospitals 100% 90% 80% CPOE is expected to diffuse to ~100% of Acute Care Hospitals Percent Diffusion (Adoption) 70% 60% 50% 40% 30% 20% 10% 0% % with a $50M infusion First CPOE implementation in MA ~1993 at the Brigham % Adoption Year % with no intervention No Policy Intervention 3-year $50M Infusion in 2005 Page 10
12 Diffusion and Failure According to David Brailer MD, National Coordinator for Health Information Technology, at the National AHRQ Patient Safety and HIT Conference (June 8, 2005), there has been a 30% to 40% failure rate of EHR implementations to date in the US. These failures are a result of: Lack of implementation planning Inadequate research and expectations of technology Incomplete training of staff Mismanagement of workflow and staffing changes as a result of technology (change management) Reluctance of providers to take on additional burden Etc. Any investments made by public entities need to assure the appropriate level of project management in the planning, research, purchasing, implementation, and sustainability of all HIT systems. Page 11
13 100% Estimated Ambulatory EHR Diffusion in Massachusetts 90% Percentage Diffusion (Adoption) 80% 70% 60% 50% 40% 30% 20% 10% 0% Year Expected 3-yr $50M Infusion 30% Failure Rate Including a 30% failure rate reduces adoption rates significantly, increasing the time required to reach 80% adoption from 10 years to 18 years. Page 12
14 Status of HIT in Massachusetts Summary The Cost and Potential Benefits of HIT Implementation The 5-year cost of ambulatory EHR is most likely ~$60K per provider, with both patient safety and administrative benefits There are significant costs associated with CPOE adoption based on the software suite and the type/size of the hospital CPOE administrative benefits vary based on the business model of the hospital, yet consistent patient safety benefits have been demonstrated Interoperability interface costs potentially range between $20,000 and $50,000 per provider site but have not been fully investigated The Cost and Potential Benefits of HIT Implementation in Massachusetts The first year costs of HIT (based on 100% adoption) are significant EHR: $802 Million CPOE: $304 Million Interoperability Interface: $220M Total potential cumulative 5-year positive net benefits for implementation of ambulatory EHR and acute inpatient CPOE is $832M Even with a $50M investment, it will take up to 10 years for these systems to diffuse to levels of >80% If the reported failure rate of 30% is taken into account, diffusion levels will decrease substantially increasing the time to 80% adoption by up to 8 years Page 13
15 For Further Information Shaun Alfreds MBA, CPHIT Project Director University of Massachusetts Medical School 222 Maple Avenue Shrewsbury, MA Phone: Fax: Web: Page 14
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