EHRs Lose Money for Most Physicians, Study Says

March 04, 2013

Adopting an electronic health record (EHR) system is a money-losing proposition for most physicians, even with the availability of federal bonuses for meaningful use of the technology, according to a study published online today in the journal Health Affairs.

Lead author Julia Adler-Milstein, PhD, an assistant professor at the University of Michigan, and coauthors projected the average physician to lose $43,743 over 5 years and only 27% of practices to achieve a positive return on investment (ROI). That percentage of in-the-black practices would increase to 41% if they received $44,000 in meaningful-use incentive payments over 5 years.

The good news in the otherwise discouraging report is that practices achieving a positive ROI did so in part by using their EHRs to significantly boost their revenue.

Dr. Adler-Milstein and coauthors based their findings on a survey of 49 practices in a large EHR pilot program called the Massachusetts eHealth Collaborative (MEC), organized by the American College of Physicians and the Massachusetts Medical Society. MEC paid for the EHRs and the consultants who helped the practices implement the technology from March 2006 through December 2007.

Groups With 6 or More Physicians Post Positive ROIs

The study accounted for both one-time costs of the pilot such as the cost of the EHR system and on-going costs such as the salary of an information technology expert. These were set against benefits of EHR adoption, which broke down into revenue increases and avoided costs. An example of the latter was less money spent on paper medical records. The authors took pains to distinguish between costs and benefits attributable to EHR adoption and those associated with other changes in the practice.

The financial data on both costs and benefits covered fiscal 2005, before the roll-out of the MEC pilot, and fiscal 2008, when the pilot was in full swing. The authors used that data to generate 5-year ROI projections.

Although the average physician was expected to lose $43,743 over 5 years, the damage was not as bad for physicians in primary care, who lost $29,349 compared with $50,722 for specialists. Unlike smaller practices, groups with 6 or more physicians posted a positive though meager ROI — an average of $2205.

Physicians nationwide did not begin receiving federal incentive payments for meaningful use of EHRs until 2011. Nevertheless, Dr. Adler-Milstein and colleagues recalculated the ROI for the MEC practices assuming that they had earned the full $44,000 in incentive payments available from Medicare. With this bonus, the percentage of all practices achieving a positive ROI jumped from 27% to 41%. More significantly, the federal cash raised the percentage of primary care practices in the positive ROI category from 25% to 56%. The increase was nearly as steep for practices with 6 or more physicians — from 38% to 75%.

Some Practices Learned How to Boost Revenue With New EHRs

Dr. Adler-Milstein and coauthors write that an investment in an EHR system may not pay off for practices who fail "to make the operational changes required to realize benefits."

For example, nearly half of the practices failed to save money on paper medical records because they continued to keep paper charts on hand even after they turned on their EHR systems. Practices with positive ROIs saved an average of $8245 on paper charts compared with $3898 for practices with negative ROIs. The gap was even wider when it came to savings on dictation services ($52,782 vs $8345) and support staff ($41,983 vs $5038).

Even more significantly, the 13 practices with positive ROIs averaged $114,613 in additional revenue attributable to their new EHR systems compared with only $9204 for the 36 practices with negative ROIs. Five of the practices with positive ROIs reported that their EHRs allowed them to see more patients per day. And 9 practices boosted revenue through improved billing. Their EHR systems produced more error-free claims, resulting in fewer rejections. Plus, the technology allowed physicians to more accurately code their work, which solved the problem of undercoding and led to higher reimbursement.

However, the study authors note that revenue gains based on more accurate coding highlight "the potential misalignment between optimal provider use of EHRs and the savings that policymakers hope will result from greater EHR adoption, underscoring the recent concern about the potential for EHRs to drive up healthcare costs."

The authors write that more small practices might recoup their investment on EHRs and then some if the federal government increases the size of meaningful-use incentive payments. However, a "more compelling approach" would be to pursue policies that reduce the cost of EHR adoption and increase its benefits. Encouraging small groups to join larger ones could shrink adoption costs through economies of scale. And more practices could learn how to reorganize their operations to exploit EHR technology if the government increased funding for so-called regional extension centers that help with implementation.

Coauthor David Bates, MD, MPH, reported serving on 2 advisory groups for the federal Office of the National Coordinator for Health Information Technology and having financial relationships with a number of medical device and information technology firms. The other coauthors have disclosed no relevant financial relationships.

Health Aff. 2013;32:562-570. Abstract