Some Physicians See Revenue Loss After EHR, Study Says

A new Health Affairs study shows that, not counting Meaningful Use incentives, the average physician would lose nearly $44,000 over five years as the result of implementing an electronic health record (EHR) system. However, the researchers pointed out that some practices in the study had a large return on investment, suggesting that an individual practice's situation and the way it uses its EHR may determine whether it benefits financially or not.

The study looked at the experience of 49 physician practices in three Massachusetts communities. These were among the practices that received free EHRs and implementation support from the Massachusetts eHealth Collaborative (MAeHC) with funding from Blue Cross and Blue Shield of Massachusetts. The practices chose among a few different EHR vendors, which installed their systems in 2006 and 2007. Counting the value of the EHR donation as a cost, the researchers examined the practices' revenues and expenses before and after EHR adoption and then projected these five years forward from 2008.

The average projected five-year return on investment was a negative $43,743 per physician. Only 27% of the practices achieved a positive ROI in this scenario. Primary care practices fared slightly better than specialty practices, and larger practices (those with six or more doctors) did better than smaller practices. Of large practices, 38% achieved a positive ROI, compared to 26% of practices with one or two physicians.

The main reason for this difference is that larger groups can spread out the costs of EHR implementation across more doctors, said Julia Adler-Milstein, a study author and an assistant professor at the University of Michigan, in an interview with InformationWeek Healthcare. Also, large practices are more likely than small ones to lay off staff members as a result of EHR efficiencies, she said.

[ What are experts saying about the future of EHR interoperability? Read EHR Interoperability A Hot Topic At HIMSS. ]

The study period predates the government's EHR incentive program, which launched in 2009. But the study estimated the potential economic impact of Meaningful Use incentives if all of the physicians in the study had received the maximum five-year Medicare award of $44,000. The results were sobering: only an additional 14% of the practices, for a total of 41%, would have achieved break-even if they'd gotten the incentives. And Adler-Milstein noted that most of those practices would have been larger ones that were closer to break-even to start with.

The reason the incentives wouldn't balance out the average financial losses, she added, is that there were no "average" practices in the survey. Some practices lost far more than $44,000 and others did very well financially.

The most common financial change among the practices after they adopted EHRs was a reduction in the cost of paper records. The most common ongoing cost was additional hours of physician time, reported by 22% of the practices.

The practices that achieved positive ROI increased their revenues more than those that lost money on EHRs. On average, the former group of practices increased revenue by $114,613 per physician over five years, more than 12 times the average for those with a negative ROI.

Ten practices grew their revenues by using their EHRs to become more efficient and see more patients each day. Nine practices said they increased revenue through improved billing and more accurate coding.

The biggest cost savings came from the reductions in outsourced transcription and billing services. For practices with a positive ROI, cutting these services saved just over $100,000 per physician over five years. In practices that lost money on their EHRs, the savings from these sources totaled only $13,000 per physician.

Practices that did not have billing systems before they acquired an EHR with an integrated billing function were more likely to see a positive EHR than those that already used practice management systems for billing. The average ROI in the former category was $34,573 per doctor, versus a $57,885 loss for those in the latter category. One reason for this big difference was that for practices that used billing services, those firms' fees were eliminated, Adler-Milstein said.

Another big difference between the winners and the losers was how they used their EHRs. The successful practices achieved efficiencies by converting entirely to electronic records, eliminating dictation and laying off people who were no longer needed. But nearly half of the practices in the study could not realize these savings because they continued to use paper records alongside their EHRs.

Overall, Adler-Milstein said, the average losses of practices after they acquired EHRs can be attributed more to their utilization of EHRs than to the acknowledged shortcomings in those systems. Most of the practices in the study were small and "just didn't have the organizational slack" to figure out how to optimize their use of EHRs, she said. While they received some help from MAeHC, she said, this points to a need for greater technical assistance to practices that are struggling with EHRs.

Adler-Milstein added that she hoped her team's findings wouldn't be used to question the wisdom of EHR adoption. "We have to move toward EHRs. We just can't be naïve about how hard it is and [about] the economic reality. There are practices that did really well. So the challenge is to figure out how all practices can get there."

As large healthcare providers test the limits, many smaller groups question the value. Also in the new, all-digital Big Data Analytics issue of InformationWeek Healthcare: Ask these six questions about natural language processing before you buy. (Free with registration.)