The federal economic stimulus bill signed into law last month contains several financial incentives that could get laggard doctors and hospitals to adopt IT-based tools that can cut costs and save lives.

The $787 billion American Recovery and Reinvestment Act makes $2 billion available immediately for loans and grants to help health care providers implement electronic health records systems and to fund research into the use of various health systems. It also provides more than $17 billion for new programs rewarding doctors and hospitals over the next five years for the "meaningful" use of e-health records systems.

Exactly what constitutes meaningful use will be spelled out by the new secretary of health. Basic requirements specified so far mandate that health care providers use certified e-records products and e-prescriptions, and that they be able to electronically exchange clinical data and report data about the quality of clinical care to government health agencies.

Lack of funding is the biggest obstacle keeping cash-strapped doctors and hospitals from adopting electronic health record and related technologies. These systems can reduce medical errors, paperwork, redundancies, and other problems, but the financial rewards from them mostly go to health payers like insurance companies, health plans, and government programs such as Medicare and Medicaid, not to the doctors and hospitals that pay for them.

Stimulus funds could soon change that. Depending upon how many Medicare and Medicaid patients a practice treats, it could receive $44,000 to $64,000 over five years. Hospitals can earn up to $11.5 million.

Health care providers who don't adopt certain e-health systems will find their Medicare and Medicaid reimbursements reduced by 1% a year from 2015 to 2018. And if by 2018 fewer than 75% of providers nationwide are using e-health records, the secretary of health can penalize holdouts an additional 1% per year, up to 5%, says Janet Marchibroda, CEO of eHealth Initiative, an independent nonprofit group that's working on using IT to improve health care.

Big Money
For Partners HealthCare, which operates several Boston-area hospitals, stimulus incentives will mean tens of millions of dollars, says CIO John Glaser. Partners already has a lot of this technology in place but plans to continue to enhance its e-health systems, Glaser says. "This money is large," he says, but it doesn't fully offset the cost of these systems.

E-health records systems can cost from a $30,000 to $50,000 per doctor, says Dr. Steven Waldren, director of the American Academy of Family Physicians' Center for Health IT. Stimulus incentives could cover much of that, he says, but the money won't be available up front, making the initial investment a challenge.

Vendors are expected to provide financing help and more affordable systems. Allscripts, a provider of e-prescription and digital health record products, already offers health care providers monthly subscriptions to its Web-based offerings. Wal-Mart's Sam's Club and Dell are partnering to sell doctors computers bundled with an e-health record SaaS offering from eClinicalWorks. Systems will start at less than $25,000 per seat.

The need for financial carrots is especially great for solo doctor practices and hospitals with fewer than 50 beds. There are 180,000 U.S. medical practices with four or fewer doctors, Glaser says, and that's a lot of physician offices trying to have these systems running by the start of the incentive program in 2011. The federal government needs to act fast to fill in the details. The legislation includes a provision for setting up resource centers, probably at universities and medical centers across the country, to help doctors implement e-health records systems.

The Congressional Budget Office estimates that stimulus provisions could drive adoption of e-health record systems to nearly 90% of U.S. doctor offices and hospitals in a few years. Glaser says a more realistic estimate is 60% to 70% by 2014. Right now, less than 10% of U.S. doctors have adopted the systems, and the number of hospitals adopting them is in the low double digits.