Many people saw the May 2007 Internal Revenue Service memorandum as removing one of the major impediments to community-wide adoption of EMRs. The memo stated that hospitals donating up to 85 percent of the cost of EMR software to physicians — as permitted by legislative exceptions to the anti-kickback statute and Stark Federal Physician Self Referral law — would not be in danger of losing their nonprofit status.

“In 2007, we saw a number of hospitals begin the process of evaluating whether they want to do this type of donation or not,” says Michael Mytych, president of Health Information Consulting LLC, in Menomonee Falls, Wis.

That makes 2008 the real testing period for whether EHR partnerships between hospitals and independent physicians will flourish.

“We will see a burst of activity in 2008,” Mytych adds, but he warns that the practice might not be as widely adopted as some people expect. Although hospitals are keenly interested in aligning themselves with specialty groups such as cardiologists, many believe they don't have the financial and staff resources to subsidize EMRs, and some have difficulty developing relationships with independent physician groups.

Mitch Morris, M.D., principal in Deloitte Services LP's healthcare provider practice (Stamford, Conn.), says hospitals thinking about subsidizing EMRs tend to be in a competitive environment. “If you're not in a competitive situation, it wouldn't be as high a priority,” he says, “or you might want the physicians or someone else to pay for it.”

And although they no doubt like the idea of a subsidy, physician groups have concerns, too. They may do 80 percent of their work with one hospital, but still refer patients to several others. How will the hospital EMR solution for independent physicians accommodate those arrangements? It's challenging for hospitals to discuss that level of integration with systems from competing hospitals, Mytych says. Also, physicians are concerned about what would happen if the funding were to dry up or if they aren't happy with the setup, especially in an ASP model. “You have prenuptial scenarios that have to be worked out,” Mytych adds.

Several business models are emerging. Hospitals can help physician offices with the purchase of ambulatory EMR software licenses that run on servers in the physician offices. Some hospitals extend the enterprise system to physician groups via the Web and support it from the facility's own data center in an ASP model. Other hospitals direct physicians to buy from vendors over the Web in ASP mode, especially if the institutions are dealing with lots of very small practices.

“If I had to predict the most likely model to prevail, I would say it's where the third party supports the practice. As a CIO, I wouldn't want to take on the support and liability issues associated with helping these independent physician office EHR efforts.”

One organization that has received an enthusiastic response from local physician groups is the seven-hospital Alegent Health System in Omaha, Neb., which is planning a pilot project for the first quarter of 2008.

The hospital group is offering physicians an ambulatory EMR from NextGen Healthcare (Horsham, Pa.), which is tightly integrated with the Soarian product from Siemens Medical Solutions USA (Malvern, Pa.) in use in Alegent's hospitals.

Michele Mann, a director in the advisory services group of First Consulting Group (Long Beach, Calif.), says Lawonn's concern about the support costs is typical of hospitals looking at EMR subsidies. “It changes their whole support model, having to take care of physicians spread out over a couple of counties,” she says. “They have to factor in that ongoing support cost when they figure out what to charge doctors.”

Alegent expects to subsidize 200 providers in 30 groups over the next five years. It projects that subsidizing EMRs will cost it about $600,000 per year. “We think it is a good investment,” Lawonn says. “We see this as more of a patient-care integration strategy rather than a business strategy. It should result in long-term alignment between these physicians and our hospitals.”

Seven-hospital Ochsner Health System in New Orleans is interested in offering physicians outside its system Web-based access to its EMR, which was developed in house. As a proof-of-concept project in 2007, it donated the software to a federally funded clinic for the elderly in the city's Bywater district.

“We are looking at offering this to other non-Ochsner doctors on an ASP basis for a nominal fee,” says Lynn Witherspoon, M.D., Ochsner vice president and CIO. He believes it's much easier to support offering Web-based access than setting up client/server systems in physician offices.

Witherspoon adds that a few clinics that already have their own EMRs have contacted Ochsner about working on interoperability. “That's vastly more cumbersome than the concept of providing access to our EMR via an ASP model,” he says. “This type of system will be much easier to implement if the doctors don't already have their own EMR system.”

Because its EMR is home-grown, Ochsner has to be concerned about keeping it certified by CCHIT, Witherspoon says. The Stark relaxation requires that the EMR software being donated be certified within the last 12 months. “That puts vendors on a never-ending cycle of getting certified,” he says. “Due to the fees and the overhead, it puts innovative smaller companies and home-grown EMRs at a disadvantage to bigger players.”

Both Lawonn and Witherspoon say the subsidy arrangements involve setting up steering committees to work through contractual issues as well as privacy and data security concerns (see Privacy Tech Trend, page 66), such as which staff members in a doctor's office can access the EMR.

Those time-consuming efforts are one of the reasons many hospitals are sitting on the fence waiting to see how others work them out. “I think we'll start to see presentations by groups saying, ‘Here's how we did it,’” says Deloitte's Morris, “and the technical side will not be difficult. It's the legal and contractual details and how they got buy-in — that will be the most interesting.”