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Published 3/1/2013
Jordan C. Apfeld, BA; A. Alex Jahangir, MD, MMHC; Manish K. Sethi, MD

The Lowdown on EMRs

Will they really lower costs and increase the quality of health care?

In 2005, a RAND Corp. report predicted that widespread use of electronic medical records (EMRs) could save the U.S. healthcare system $81 billion per year. Although use of EMRs has increased steadily (Fig. 1), a new RAND analysis finds those earlier predictions overly optimistic.

How can EHRs lower costs?
Although often used interchangeable, EMRs and EHRs (electronic health records) are quite different. EMRs, according to the Office of the National Coordinator for Health Information Technology, are digital versions of paper charts.

EHRs, on the other hand, are built to share information with other providers and systematically collect electronic health information about individual patients or populations. EHRs aggregate data on demographics, medical history, medical procedures, and provider billing/reimbursement. By sharing this data across health systems, EHRs are purported to improve the quality and cost of health services.

In theory, if all medical events and procedures were electronically recorded and monitored, patients would benefit from the coordinated care, routinely measured quality, and significantly reduced medical errors. For example, implementing computerized physician order entry (CPOE) can save money by avoiding adverse drug events, monitoring chronic and infectious diseases, instantly recalling immunization records, and cutting down on administrative costs.

The big question is whether cost savings from CPOE and new ways to make clinical decisions are worth the initial investment in EHRs, including hardware costs, software installation costs, and ongoing maintenance costs (not to mention disruptive losses in efficiency with a new system).

To encourage providers to invest in computerized medical records, the 2010 Health Information Technology for Economic and Clinical Health (HITECH) Act included incentives for hospitals and doctors to subsidize investment in costly EHR infrastructure, as well as penalties if they didn’t do so by 2015.

Why haven’t EHRs lowered costs?
As a result of HITECH, each eligible professional can receive as much as $44,000 through Medicare and $63,750 through Medicaid for installing computer systems that meet federal standards. The increased demand has resulted in a significant increase in the number of certified EHR vendors—from 60 in 2008 to more than 1,000 today. But has the investment in EHRs resulted in any cost savings to date?

According to the 2013 RAND analysis, putting a dollar figure on increased or saved costs is difficult. Since the 2005 report, healthcare spending has increased $800 billion; the target of $80 million in annual savings has almost certainly not been attained. In fact, current EHRs might actually increase the quantity of health services (and associated billings) rather than cut costs of overall health care.

Increased federal pressure for providers to implement EHRs might be one of several reasons for the increase in healthcare costs. Initially, new EHR systems had to demonstrate an impressive number of core objectives for “meaningful use of technology.” However, slow adoption forced a drastic lowering in mandatory EHR capabilities. Consequently, today’s revamped healthcare systems are neither standardized nor interoperable, minimizing the ability to streamline care and inform clinical decisions.

A second reason for increased costs is the lackluster efforts on the part of providers to reengineer care processes. According to David J. Brailer, MD, PhD, providers “buy the systems today to get government handouts, but figure out how to make them work tomorrow.” Doctors and nurses learn what they need to know to operate the systems, but lack the technical support to extensively streamline care.

As a result, EHRs can sap time and present a liability for patient safety protocols. Compromised care leads to increased health risks, clinical mistakes, poor outcomes, and soaring health bills.

Another reason for cost increases is that patient billing has become the most efficient of the new computerized systems. In a fee-for-service payment system, EHRs make sure no procedures (surgeries, tests, labs, imaging, or consults) are overlooked.

Furthermore, EHRs have made it easier to overbill for services. For example, clicking yes-boxes or coding for keywords multiple times—a process called “cloning”—replicates procedures unnecessarily. “Upcoding” the intensity of care or the severity of patients’ conditions boosts charges without improving the quality of care.

According to a 2010 analysis by the Office of the Inspector General, claims for lower reimbursement categories have dropped since 2001, but higher-paid levels of care have increased across all visits—especially for Level 5 emergency department visits. Although these costly trends should, in part, be attributed to EHRs, the administration is calling for stronger Medicaid/Medicare oversight to avoid fraud and false documentation in the future.

Additional concerns
Although costs are a major objective for proponents of EHRs, accessibility and quality of care are other variables that must be examined. For example, many healthcare systems experts are optimistic about the patient safety improvements resulting from the adoption of EHRs. According to a recent study in the New England Journal of Medicine, electronic data can be used to “help detect, manage, and learn from potential safety events in real time.”

For example, automated medication or treatment alerts could help save a patient’s life. The authors caution, however, that real improvements in healthcare quality will only occur after the following risks to patient care are addressed:

  • possible breakdowns in infrastructure
  • inter- or intrahospital miscommunications
  • incomplete computerization of health records (ie, recording patient medications, but not lab tests)
  • human error or cognitive constraints regarding new ­technology
  • patient ­confidentiality breaches
  • “alert fatigue” (ie, when computerized danger alerts override and interrupt the proper monitoring of care)
  • improper coding of patient treatment and billing data

The verdict on EHRs
The true effect of EHRs on healthcare quality and cost is still unclear. “We believe the failure of health 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 Arthur L. Kellerman, MD, MPH, FACEP, the senior author of the 2013 RAND report. He attributes lost potential to delays in full adoption and complete process changes by providers.

The following improvements would help to realize the cost benefits of health IT:

  • Health IT that is stored in one system should be retrievable by other systems.
  • Patients should have ready access to their electronic health information.
  • Health IT systems should be engineered to aid the work of clinicians, not hinder it; systems should be intuitive, consumer-driven, and require only moderate training.

These objectives are designed to make clinical decisions easier, streamline care, avoid redundancies, minimize adverse health events, and monitor overall quality—all of which affect the patient’s healthcare bills.

In many ways, the original proponents of EHRs were also prophetic about the inherent risks, noting that “a lengthy, uneven adoption of nonstandardized, non-interoperable EMR systems will only delay the chance to move closer to a transformed healthcare system.” To reap the full cost benefits of EHRs, systems must be comprehensively adopted, interoperable, and involve providers in reengineering care processes.

Future directions
Overall, health professionals agree that EHRs are still developing. The 2013 RAND report sheds light on the difficulties in using EHRs in ways that will significantly decrease healthcare costs. Based on recent trends, federal officials are looking at new rules to address concerns about EMRs and their effect on costs.

Orthopaedists should pay careful attention to EMR-related legislation, because it will influence the ways that practices, hospitals, and healthcare systems are run. More importantly, providers need to take on a larger role in reengineering care processes, the lynchpin in efforts to decrease healthcare costs through EHRs.

Jordan C. Apfeld, BA; A. Alex Jahangir MD, MMHC; and Manish K. Sethi, MD, are all associated with the Vanderbilt Health Policy Institute.


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