ICD-10 & HIPAA 5010

Taking a strategic approach to nationwide EMR adoption can produce meaningful changes for all industry stakeholders, including payers (namely employers, state and federal government), patients, and providers (hospitals, physicians and all other healthcare professionals).

However, sorting out the complexities of the EMR incentives in the American Recovery and Reinvestment Act (ARRA) is challenging. The stimulus bill uses a sliding scale of incentives and disincentives to encourage providers to adopt EMRs sooner rather than later. For the provider, qualifying for the subsidies depends on their patient mix and adoption date. In other words, the higher the Medicare / Medicaid mix, the larger the available incentive for a physician to adopt EMR; the earlier the new technology is adopted, the sooner the provider will realize the increased Medicare and Medicaid payments.

To help decision-makers weigh all the factors as they consider EMR adoption, Ingenix Consulting developed a sophisticated actuarial model that analyzes the effects of various changes on the performance of physician practices while assessing the cost/benefit and return on investment (ROI) of EMR adoption. The ARRA ROI Calculator can be tailored to individual provider circumstances, factoring in such specific characteristics as practice payer/patient mix, specialty and specific use of physician extenders in order to estimate the economic impact of EMR adoption. This model demonstrates a substantial risk that, even with the stimulus incentives, provider costs may exceed provider benefits.

ARRA ROI Calculator – Example Physician Scenarios

Using the model, we’ve performed the cost / benefit analysis for a few average examples of several physician specialties. Exhibit 1 demonstrates the financial impact to four specialist physicians adopting EMR in 2011 versus not adopting. Financial impact is based on the physician’s average patient panel distribution, productivity, and expense.

¹The OB/GYN patient mix has been purposely skewed toward a larger proportion of Medicaid patients to demonstrate the increase in subsidies available to the physician.

Exhibit 2 illustrates the percentage reduction in the specialist’s net compensation and benefits as a function of the year in which they become a meaningful user of EMR.

It is important to realize that many of the benefits achieved by EMR adoption are not immediately fruitful. In fact, according to our model, positive benefits are not realized until the latter years of our 7-year financial proforma period. Exhibit 3 supplies a view of the expected financial outcome of a neurologist who becomes a meaningful user in 2011.



As a result of the drop in productivity from EMR adoption, a physician must either choose to accept less income or increase their productivity level to offset the disruption. Exhibit 4 illustrates the annual percentage increase in specialist productivity that would be required to break even (i.e., achieve a return on investment of 100%) after EMR adoption.



The productivity increase could be driven by seeing more patients or by delivering more services to existing patients. The exhibit demonstrates each specialist’s practice revenue for the projection years of our financial proforma. In the long run, the expected efficiencies of adopting EMR should enable the physician to see more patients than not adopting the technology.

Conclusion

The stimulus incentives – and disincentives – offer a complex array of risks and benefits that will be difficult for physicians to sort out. Declining subsidies based on patient mix, escalating penalties and meaningful use criteria that have yet to be defined make for a tough decision for providers, especially since optimal results won’t be achieved unless the entire health care delivery system can become connected. And right now, those that benefit the most ante up the least. Other health care stakeholders must make significant contributions – either by participating with EMRs or funding their implementation – to ensure we achieve widespread EMR adoption and can reap all the benefits of the deep well of health information EMRs can provide.

A nationwide EHR system offers significant benefits for all stakeholders in our health care system. But right now, the costs and benefits are not fairly aligned among them. In order to reach this goal, each stakeholder group must be willing to approach the situation with initiative, understanding and a willingness to commit resources. If not, the benefits of EMRs will remain far off, and the promise of meaningful change will be unfulfilled.

This article was prepared for general information purposes only to permit you to learn more about Ingenix Consulting and its services. It is not intended as a basis for decisions in specific situations, may not be current, and is subject to change without notice.