Is Achieving ROI on EHRs a Reality or Fantasy? Expected cost savings and productivity benefits associated with EHR implementation have not materialized. Why Not?
Does anyone in their right mind believe that these are the best of times in healthcare or health IT?
Does anyone besides Judy Faulkner and Neal Patterson believe these are the best of times? (I mean, everyone knows that Dramatic Transition + Industry-wide Upheaval + Piles of Cash = Satisfaction / Contentment, proving the point mathematically.)
The question: At what cost to overall healthcare improvement do Epic and Cerner (and others, to be fair … except you, Allscripts) reap massive profits?
The short answer: We don’t really know.
While it is generally acknowledged by most (certainly not all, which you know if you’ve spent any time on HIStalk) that the ready availability and automated cross-checking of electronic health records improves care, there is no definitive study showing dramatic clinical improvement, demonstrable return on investment, etc.
Indeed, we now have a number of studies suggesting exactly the opposite:
This is not to say that healthcare should bring the EHR train to a screeching halt. We know how technology has transformed other industries. We know that paper records are archaic and put patients at risk while asking them to maintain endless patience when the same test has be performed a third time. And we know that electronically is the only way information can be shared in a timely manner.
So, while we may not know what the overall cost of corporate profits are to healthcare, we do know that they are really, really high. You’ve seen the figures associated with Epic contracts.
The truly important point is that the initial value of Epic and Cerner contracts isn’t even a reliable indicator of overall cost. According to a recent study by the consulting firm Katalus Advisors, hospitals that adopt Epic can expect to pay an additional 40-49 percent of initial contract value for “varying upgrade costs.” For Cerner, estimates were a slightly more reasonable 30-35 percent of contract value.
Based on these figures, Duke University Health System and Partners Healthcare can expect to pay an additional $350 million to Epic on top of the $700 million contracts they already signed. UC San Francisco will probably pay an additional $75 million for their Epic relationship.
[See also: The Costly Darkside of EMR Implementations]
Generally speaking, what they will get for that investment is not lower costs and greater efficiency. According to a report by the RAND Corporation that evaluates predictions made by a 2005 vendor-financed RAND study, expected cost savings and productivity benefits associated with EHR implementation have not materialized.
In a nutshell: Sluggish adoption. Clinician intransigence. Poor planning and change management. Lack of interoperability.
Other than interoperability, these are organizational constraints, which are the constant in the EHR adoption equation. Which begs the question, why spend multi-millions of dollars—plus as much as 50 percent of contract value on top of that—for systems that are not interoperable and may threaten the financial viability of your hospital and organization?
The simple truth is that EHR systems do not currently offer cost savings equal to purchase price. With some solutions, there’s an uncrossable chasm between sticker price and ROI. And we’re talking about the financial viability of hospitals, here, not breakfast cereal. If those Lucky Charms disappear from the shelves, your kid may throw a tantrum, but nobody will get hurt.
Purchasing an EHR is not like a buying a car that you just get in and drive away. It’s like buying a car that you have to stop and recalibrate every mile with the assistance of the trained experts in the back seat who charge you a fee every time they have to listen to you speak or look under the hood. In this situation, paying less for the car is probably a good idea.
We have the most fractured and expensive healthcare system in the developed world, and the way we’re pursuing health IT adoption is making that worse, not better. Hospitals and health systems must show some restraint and take control, forcing health IT vendors to behave in a way that at least adds as much value to American healthcare as it takes out in cash.