The Adoption Hurdle

June 24, 2011
It is impossible to attend current national conferences held by HIMSS, MGMA, MRI/TEPR, AAFP and other groups without sensing the growing "pressure"
It is impossible to attend current national conferences held by HIMSS, MGMA, MRI/TEPR, AAFP and other groups without sensing the growing "pressure" towards adoption of electronic charting and health records on physicians, and to realize that the uptake of EHRs has not yet developed to robust levels. If one asks, "Why not?" — several factors emerge.

The conventional wisdom is that EHR solutions are just too expensive, and while cost is clearly a major issue, it would be wrong to assume that cost is the only significant inhibitor. Even if it were, escalating expenses will not abate anytime soon because almost every major EHR gatekeeper has adopted an approach that escalates future EHR costs.

If one assumes that 438,196 additional office-based physicians (see Table 1) will be convinced to abandon paper charts and embrace EHRs, at an average selling price (ASP) 18 months ago of $44,000 per M.D., then the additional cost of conversion from paper to electronic records will be approximately $19.28 billion, a cost that has clearly risen since that Health Affairs survey figure was first published in the fall of 2005. That number doesn't include the direct and indirect costs of CCHIT-certification, or the costs of medical inflation, which have already added another 4.7 percent (approximately $885 million in 2006).

Table 1 — Basic Physician Statistics From Which Initial EHR Conversion Costs Can Be Estimated

Number of MDs

Hospital-Based MDs

Offi ce-based MDs

MDs Currently using EHRs

Yet To Acquire EHR

Source: Medical Strategic Planning Estimates

853,187

90,720

511,912

73,715

438,196

At current (2006) dollars, once the EHR market reaches saturation, the service maintenance costs alone will be approximately $4.35 billion per year before adjustments for inflation, currently running around $626 million. Therefore, anything that works to increase the average selling price of EHR per physician will ultimately be very expensive for America. This includes the failure or market withdrawal of lower-than-average cost EHR solutions.

In the 12th annual, Andrew & Associates EHR Benchmark, conducted by Medical Strategic Planning Inc., an Andrew & Associates Alliance Partner, one significant issue was the variety of EHR gatekeepers, each driving the market in different directions. These gatekeepers include: CPM (computerized practice management) companies, third party payer organizations and, given the relaxation of Stark regulations, increasingly hospital CIOs, who will be free to assist group practices to adopt EHRs.

Of these three influencers, only the CPM developers are being driven by sensitivity to doctors' EHR needs, as they attempt to offer integrated solutions that combine EHR and CPM functionality under a unified code set and database structure. This is a response to physician group practices that are increasingly looking to add EHR as they replace aging CPM solutions already installed. This is, in fact, the one positive trend driving the market towards a lower total cost (as the sum of EHR and CPM costs are less than the costs of purchasing the two systems separately).

Other gatekeepers however are not having as positive an impact because they tend to stifle competition and increase the costs of EHR acquisition. Third-parties offering to underwrite part of the initial costs of implementation of EHR solutions are reducing the costs paid directly by physician group practices, but not necessarily reducing the total costs of EHR deployment.

Third-party payer approaches stifle competition (rather than increase it) by advantaging a few EHR developers that have established legacy payer interfaces. Such an approach will result in the disappearance from the U.S. market of a range of smaller EHR developers offering innovative and cost-effective EHR solutions tailored to specific practice specialties; which could precipitate a rise in the ASP of EHR deployment by removing many of the lower-priced EHR developers from the market.

What will the influence be of hospital CIOs helping group practices to select and deploy EHR solutions?

Like their payer counterparts, they could take the approach of promoting those EHR developers that can already interface to the hospital's legacy I.T. solutions, rather than simply allowing the group practice to choose the EHR solution and then interfacing it to hospital systems. Of course, the large hospital information system developers that control the legacy hospital infrastructure, also now offer group practice EHR solutions, mostly because they have recently acquired them or through partnering relationships.

The main M&A movers in the vendor market have carefully crafted acquisitions over the last 15 months to be suppliers through the physician group practice EHR developers they have acquired or established partnerships with. These and other prominent hospital I.T. vendors (or their EHR group practice partners) could become the EHR solutions offered to physician group practices by hospital CIOs. Will hospital CIOs independently research physician group practice needs and choose a variety of EHR solutions that best meet them, or will they simply promote the physician group practice solutions of their current hospital I.T. partners?

The Andrew & Associates EHR Benchmark explored the question, "Can any limited set of EHR developers provide the diversity of EHR solutions needed by 39 different practice specialties?" The answer was clearly no. (See Table 2).

Table 2 — Percent of EHR Developers Covering 39 Practice Specialties

Practice Specialty Coverage

% EHRs Covering Specialties

Source MSP 2006 Andrew & Associates EHR Benchmark

1 or 2 Specialties

62.1%

3-5 Specialties

6.3%

6-9 Specialties

11.6%

10-15 Specialties

7.4%

16-20 Specialties

5.3%

20-29 Specialties

3.2%

> 30 Specialties

4.2%

No single EHR developer currently claims to offer an EHR solution that is installed in all of the 39 major practice specialties, much less fits all of them well. The 12th annual (2006) Andrew & Associates EHR Benchmark conducted by MSP, in which 104 EHR developers participated, identified no EHR developer that could address more than 35 separate specialties and revealed that the average number of different practice specialties that were accommodated by an EHR was less than five.

So it seems that the larger hospital HIS suppliers are not yet that well positioned (even with their current EHR partners) to support the diversity of practice specialties in the physician group practice EHR market.

It should be intuitively obvious that physician group practices, which are usually standalone businesses, are certainly as diverse as hospitals. Thus, EHR and CPM solutions that don't "fit" a specific physician group practice can disrupt or cripple its workflow — and impact the financial stability of the practice. Forcing one EHR solution on a diversity of practice specialties is short-sighted and likely to cripple, rather than augment practice workflow and efficiency. Yet that is what many of the EHR market gatekeepers are effectively doing. Indeed, this is the overlooked fallacy of the entire standardization approach taken until now by CCHIT, and supported by third party payers and legislators that are relaxing the Stark regulations.

If the CCHIT approach is followed, EHR choice will ultimately become very limited. What CCHIT supporters and government policymakers appear to be overlooking is that once the damage is done and the smaller, more cost-effective and practice-specific EHR developers leave the market, devastation may result like that caused by Katrina — it could destroy the diverse EHR developer foundations, which can't be easily or inexpensively rebuilt. The damage will be permanent.

Arthur Gasch ( [email protected]) is CEO and founder of Medical Strategic Planning (MSP), a New Jersey-based corporation established in 1992 and involved in the medical market research William Andrew, P.E. retired ( [email protected]), is an EHR system researcher and author.

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