Report Says Federal Government's Stimulus Funding Won't Cover EHR Costs

A report recently issued by the PricewaterhouseCoopers Health Research Institute concludes that government incentives intended to spur the use of health information technology are a "small carrot" when compared with the amount of money it will cost hospitals and physician practices to implement and maintain electronic health records, or EHRs, during the next five years.

The recently enacted American Recovery and Reinvestment Act of 2009, or ARRA, makes funds available to hospitals and physician practices that implement government-certified EHR systems between 2011 and 2015. According to the ARRA, the federal government will pay individual physicians as much as $44,000 to upgrade their practices from paper-based records to EHRs.

However, the report "Rock and a Hard Place: An Analysis of the $36 Billion Impact From Health IT Stimulus Funding" estimates that a three-physician practice could spend anywhere from $173,750 to $296,000 for an EHR package complete with software, implementation, training and software maintenance.

Those who choose to not implement EHR systems stand to reap penalties rather than rewards, because beginning in 2017, the government will reduce Medicare payments to noncompliant physicians by 1 percent per year for as many as five years. Hospitals, whose health IT stimulus funding allotments for implementation would be based on their Medicare, Medicaid and charity care volumes, could see even larger reductions for failing to implement such systems.

For example, the loss in Medicare reimbursement for the average 500-bed hospital that fails to implement a government-certified EHR begins at $966,000 in 2015 and soars to nearly $3.2 million in 2017, according to the report.

"(Although) the penalties for physicians won't be as significant as for hospitals, the revenue implications could still have a major effect," says the report. "The penalties may be severe enough to motivate compliance with government-certified systems."

For some physician practices, however, "the purchase, deployment and operation of an EHR may still be unaffordable because of the current cost of these systems and the lag between incentives and time of initial capital outlay," says the report.

Figures in the report are based on data from physician clients with high-end EHRs, said Brad Bowman, a director in PricewaterhouseCoopers' national health care advisory division and one of the authors of the report. He noted that EHR prices likely would come down in the future, especially with retailers such as Sam's Club entering the market and selling prepackaged EHR systems at warehouse club prices.

Jason Mitchell, M.D., assistant director of the Academy's Center for Health IT, said AAFP members are looking to the Academy for advice on implementing EHRs.

"Lots of members are interested in the government incentive. I wish we had more solid advice to give physicians at this point, but there are still too many unknowns," said Mitchell.

He added that many family physicians had a rocky ride with another government incentive program -- CMS' Physician Quality Reporting Initiative -- and may be reluctant to jump into another federally administered incentive program.

Bowman pointed out that there are hidden costs associated with EHRs. "It takes physician time and effort to get data into the system, and that cost is hard to measure," he said. As for system upkeep: "That's a cost physicians don't have right now that will carry forward year after year," he said.

Bowman also noted that after EHRs have become firmly entrenched in the nation's health care system, there would be no turning back. According to him, CMS intends to mine the data collected in EHRs as it builds a case for value-based and evidence-based medicine. The end goal is to produce more uniform physician practices and to see more uniform health care outcomes, said Bowman.

Language in the report hits a similar note. "Some of the hardest work to be done in health care is still left undone, that of an overall alignment of financial incentives from acute care disease to wellness and prevention. Technology may enable the capture, analytics and transparency required to move closer to this objective," says the report.