EHRs Don't Provide Savings

Pablo Valerio, International Business & IT Consultant | 2/4/2013 | 17 comments

Pablo Valerio
A few years ago, a report from RAND Corporation, "Analysis of Healthcare Interventions that Change Patient Trajectories," stated that electronic health records (EHRs) could improve health and reduce healthcare costs.

The report was widely praised by the technology industry and helped persuade the US government to invest billions in stimulus funds to help the healthcare industry move to EHRs. As a result, companies providing EHR solutions saw their revenues triple over the last five years.

When the report was published in 2005, RAND projected that EHRs would reduce healthcare spending by $81 billion per year. Now, RAND is admitting that their savings predictions for the healthcare industry were overly optimistic, and in reality, annual healthcare expenditures have increased by $800 billion. The new report from RAND Corporation claims that:

In our view, the disappointing performance of health IT to date can be largely attributed to several factors: sluggish adoption of health IT systems, coupled with the choice of systems that are neither interoperable nor easy to use; and the failure of health care providers and institutions to reengineer care processes to reap the full benefits of health IT.

"The failure of health information technology to quickly deliver on its promise is not caused by its lack of potential, but rather because of the shortcomings in the design of the IT systems that are currently in place," said Dr. Art Kellermann, the study's senior author and the Paul O'Neill Alcoa Chair in policy analysis at RAND.

Some voices claim that the amount of funding from the government in the form of stimulus money flowing into IT created a "race to adopt" mentality -- get the money now and make the system work later.

Probably the biggest part of the failure was the lack of CIOs' input. Purchasing decisions were made mostly to get the EHR funding, the biggest piece of the IT budget in the government Stimulus Package. And initial reports were giving the impression of substantial savings.

The fact that the 2005 report was originally funded by heavyweights in the healthcare IT industry -- including Cerner Corporation, General Electric, Hewlett-Packard, Johnson & Johnson, and Xerox -- raises some questions about the independence of the report and the methods RAND used to arrive at the forecast savings. Unfortunately for the American taxpayer, the money has been spent, and neither RAND nor their sponsors are going to be held responsible for missing the savings expectations.

Cerner Corporation, one of the original sponsors of the report, is expected to post revenues of up to $3 billion this year, up from $1 billion in 2005. But they are also facing several lawsuits from hospitals and other healthcare providers for not delivering integrated solutions and trying to raise prices. One example, featured last year in the Wall Street Journal, is Girard Medical Center, a rural hospital in Kansas that serves mainly uninsured patients and the elderly. From WSJ:

The 25-bed rural health-care provider claims in a lawsuit that despite paying Cerner more than $1.2 million in fees, it still has no electronic medical record system and still doesn't qualify for federal monies to pay for one.

The company is also facing lawsuits from Mayo Foundation for Medical Education & Research, Siemens Medical Solutions, and several patent disputes.

Not all the money spent should be considered a loss. There are many other reasons why the healthcare industry is expending more money and the move to EHR is already providing savings in other areas -- most notably, in medical research. Some scientists are eager to get their hands on healthcare data, to turn every patient into a participant in a vast, ongoing clinical trial.

Nevertheless, CIOs are now required to clean up the mess without the financial support of the original funding, which has already been spent. RAND Corporation includes some recommendations in their latest press release.

Kellermann and co-author Spencer S. Jones conclude that a compelling vision is needed to guide future investments in health information technology and offer a few suggestions:

  • Health information stored in one IT system must be retrievable by others, including doctors and hospitals that are a part of other health systems. This is particularly important in emergency situations.
  • Patients should have ready access to their electronic health information, much as consumers now have access to their bank accounts. Patients should be able to view their own records and share them with health care providers of their choice.
  • Health information technology systems must be engineered to aid the work of clinicians, not hinder it. Systems should be intuitive, so they can be used by busy health care providers without extensive training. Doctors and other health care providers should be able to easily use systems across different health care settings, much as consumers easily drive various makes and models of automobiles.

The task to make the systems work will require coordination between healthcare providers, vendors, and the rest of the industry. The question is: Will they be able to rework the existing systems already purchased or will hospitals and insurance companies need to invest in new systems? Healthcare CIOs, what do you think?

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The_Phil   EHRs Don't Provide Savings   5/26/2013 8:00:07 PM
Re: EHR saving may be lots of hype
Which means that there's going to be another huge industry: EHR middleware development

To connect all of these sytems easier once it's a real requirement.
KeithGrinsted   EHRs Don't Provide Savings   5/26/2013 5:18:53 PM
Re: Calculating Savings
Now in UK we are in danger of our accident and emergency (ER) services collapsing! This on top of our GP services being under pressure and our out of hours service is appalling! The chances of collaboration and linked systems seems farther away now than ever!
Susan Nunziata   EHRs Don't Provide Savings   3/14/2013 9:53:07 PM
Re: Calculating Savings
@Pablo: belated thank you for that link and excerpt from the NY Times. Pretty eye-opening indeed!
Pablo Valerio   EHRs Don't Provide Savings   2/21/2013 9:13:44 AM
Re: Calculating Savings
Susan, just saw an interesting NYT article about the "profits" of the EHR industry:
While proponents say new record-keeping technologies will one day reduce costs and improve care, profits and sales are soaring now across the records industry. At Allscripts, annual sales have more than doubled from $548 million in 2009 to an estimated $1.44 billion last year, partly reflecting daring acquisitions made on the bet that the legislation would be a boon for the industry. At the Cerner Corporation of Kansas City, Mo., sales rose 60 percent during that period. With money pouring in, top executives are enjoying Wall Street-style paydays.
The records systems sold by the biggest vendors have their fans, who argue that, among other things, the systems ease prescribing medications electronically. But these systems also have many critics, who contend that they can be difficult to use, cannot share patient information with other systems and are sometimes adding hours to the time physicians spend documenting patient care.
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Syerita Turner   EHRs Don't Provide Savings   2/21/2013 8:59:05 AM
Re: We got it wrong in UK too!!
Uh oh the stimulus. I am still salty that this money was not given to the people and to organizations that did not use the money appropriately (in my opinion). I think that this is not saving money but wasting money. If companies are not using the funds to eventually stimulate the economy but to get them out of hot water, where does that leave the consumer?
singlemud   EHRs Don't Provide Savings   2/18/2013 8:53:43 PM
Re: EHR saving may be lots of hype
I think that is the purpose of this EHR system, it is supposed to be the de fact standard and interoperable. The reality is there are so many different system and they are in different phrase of adoption.
Susan Nunziata   EHRs Don't Provide Savings   2/7/2013 7:21:13 PM
Re: Calculating Savings
@DMACambridge: You raise some great points about the difficult of measuring the ROI on tests and procedures that the medical establishment has NOT had to do becuase of EHR. I certainly hadn't considered this.

to answer your question as to whether we're on a normal, fine-tuning technology trajectory or are just fundamentally using an inapproprate approach or trying to automate what can't be automated, I think it's probablya little bit of both. Just as in early SAP or Peoplesoft deployments, whenever we're faced with new solutions we may have to adapt our metrics to measuring ROI as we consider what the solutions offer that may not have been possible before. And so this follows the same kind of fine-tuning process. The skeptic in me, though, has to wonder whether the cost-savings of EHR were exageratted at the start in order to speed up progress.
impactnow   EHRs Don't Provide Savings   2/6/2013 1:13:26 PM
Costs and savings ROI picture
While the svaings estimates may be off eventually the savings will be there, but I don't think they anticipated sunk costs and startup costs for hospitals and practicioners. There will be costs and the ROI will take time, that I think is the bigger issue. This is essentially an overhaul in the entire industry that will not come without pain and cost.
Pedro Gonzales   EHRs Don't Provide Savings   2/5/2013 10:31:40 AM
EHR saving may be lots of hype
Here in the United states, research on cost saving of EHRs has been relative small.  Also, altough there are many potential benefits, there has been few studies actually measuring those benefits.  I think one of the major problems is interoperability.  Although many systems have adopted, their information can't be shared with others.  If people change their health care provider, they can have to move their old information to the new in paper based form since they can exchange data with each other.
DMACambridge   EHRs Don't Provide Savings   2/5/2013 9:18:39 AM
Re: Calculating Savings
No worries, @Pablo - and I've been actually sitting here thinking a bit more about the elusive benefits of technology in healthcare, so thought I'd share and see if others have perspectives to add....

Before 2000, the popular solution for Y2K was to implement Enterprise-wide systems like SAP or Peoplesoft in many companies, especially manufacturing and product-related industries.  But, it took another wave of effort within a couple years AFTER implementation to ensure that the information being delivered as data was accurate and correct so that appropriate business and financial decisions could be made, as well as to ensure that process efficiencies were being realized through out the company.  I'm left wondering if there's any clarity about how much that effort cost and whether or not it was included in RAND Corps estimates for healthcare and EHR.  It's unlikely that 'wave 2' would have been considered part of the 'system implementation' since there was a bit of a delay, but it was critical to the success of those companies, certainly.  AND it's realistic to expect that within healthcare (given so much more complexity and sometimes time-criticality) that there would be additional / continued efforts to ensure EHR a) support the efforts of our expert healthcare workers as efficiently and effectively as possible, and b) had appropriate interconnectivity / data exchange with other systems.

I'm just wondering if @Susan, @Keith or others think that we're on a normal, fine-tuning technology trajectory or are just fundamentally using an inapproprate approach or trying to automate what can't be automated?  Thoughts?

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