Long Island Hospital System Throws Dice on Health IT

(MoneyWatch)  Back in 2006, the Department of Health and Human Services (HHS) announced that it was relaxing the Stark self-referral rules and the Anti-Kickback Act to allow hospitals to subsidize physician purchases of electronic prescribing systems and electronic health records (EHRs). Hospitals were permitted to provide up to 85 percent of the cost of EHR software, as well as technical support.

Since then, hospitals have become increasingly interested in "aligning" themselves with physicians, and many have stepped up physician hiring. But the number that have taken advantage of the Stark law "exception" to help doctors acquire EHRs is still miniscule. According to HIMSS Analytics' 2008 hospital survey, 3.3 percent of integrated delivery systems (i.e., multiple-hospital organizations) and 1.2 percent of single-hospital systems are providing Stark-related funds and services to physicians. Those planning to do so in the near future include 3.1 percent of integrated systems and 1.7 percent of single-hospital systems.

The passage last spring of the HITECH Act, which promises physicians from $44,000 to $64,000 for "meaningful use" of EHRs, starting in 2011, did not prompt many more hospitals to pledge aid to their staffs for health IT acquisition. Some observers, however, said that hospitals might be prone to help physicians if they could provide a lower subsidy to complement the government financial aid.

With this background, it came as a bit of a shock to hear that the North Shore-Long Island Jewish Health System, one of the largest health organizations in the New York metropolitan area, was planning to surge ahead of the pack by offering physicians the maximum allowable subsidy. North Shore-LIJ is offering the 7,000 physicians affiliated with its 11 hospitals and other facilities 50 percent of the cost of EHR software from Allscripts as a base. If the doctors also agree to submit de-identified patient care data to the big system for comparative effectiveness research, they will qualify for an 85 percent subsidy. It's estimated that that could provide each physician with up to $40,000 to buy an EHR, on top of the government subsidy.

This sounds like a tremendous amount of money, but the government's $44,000 will cover only about a third to a half of the five-year cost of a qualified EHR, according to consultants. So North Shore-LIJ's offer could prompt many of its physicians to go digital.

Of course, quality improvement is not the hospital system's only motive for spending up to $400 million to computerize patient records through its enterprise. It also wants that all-important "alignment," which would provide a competitive advantage and would also help North Shore-LIJ handle future payment bundling. But thousands of other hospitals have the same incentives, yet only a handful of big systems have jumped into the pond so far. Undoubtedly, North Shore-LIJ's progress will be carefully watched across the country.

Meanwhile, the Obama Administration, health IT vendors, and other interested parties await the verdict of physicians on the government incentives. Now that "meaningful use" has been mostly defined, one might expect doctors to choose soon, but they are undoubtedly trying to sort out the many changes coming down the pike. What they decide could have significant long-term implications for healthcare reform.