Electronic Medical Records Are a Limited Tech Money Transfusion

Last Updated Jul 14, 2010 8:40 PM EDT

The government finally announced new rules on electronic health records (EHRs, also known as electronic medical records). Doctors and hospitals will get money for "meaningful use" of the systems. And although it may not be as much as originally envisioned by the Obama administration, it will be enough to make a lot of high tech companies smile in anticipation of booking sales.

Back in February I mentioned that healthcare reform could trigger big tech spending. EHRs was a prime aspect, because they enable the data collection and analysis that -- in theory, at least -- will lead to more effective and more cost-efficient treatments, as well as reducing the amount of inefficiency and expensive rework that have long plagued the healthcare system.

The legislation envisioned an "Office of the National Coordinator for Health Information Technology" that would "ensure optimal use of health information technology." This would include "standards, implementation specifications, and certification criteria" for electronic health care records, which could help enforce a single set of standards for EHRs and make it possible for systems to easily interoperate -- at least, in theory.

What is far more actual than theoretical now is the money that will be on the healthcare reform operating table to entice hospitals, doctors, and others to adopt the new system:

  • Incentive payments could reach $27 billion over ten years.
  • Professionals could get upwards of $44,000 from Medicare and $63,750 from Medicaid.
  • Hospitals "may receive millions of dollars."
A tasty tech opportunity, indeed, but time for a reality transfusion. The money is for "implementation and meaningful use of certified EHRs." The systems have to meet government standards:
In particular, while the proposed rule called on eligible professionals to meet 25 requirements (23 for hospitals) in their use of EHRs, the final rules divides the requirements into a "core" group of requirements that must be met, plus an additional "menu" of procedures from which providers may choose. This "two track" approach ensures that the most basic elements of meaningful EHR use will be met by all providers qualifying for incentive payments, while at the same time allowing latitude in other areas to reflect providers' needs and their individual path to full EHR use.
In other words, there are more standards now in place than before. In the spring of last year, only 6 percent of hospitals would have qualified for government incentives. Have healthcare providers suddenly become more compliant? Probably not. Uncle Sam doesn't turn on the money tap until doctors and nurses regularly use digital records.

That will be tough to ensure, so expect a big portion of any money to go into training and additional supervision, to say nothing of the data entry costs to get all that patient data into EHRs in the first place. And the hospitals will get little if they can't get affiliated doctors to cooperate, as a huge amount of the data would get recorded in their offices.

Finally, $27 billion a year over a decade averages $2.7 billion a year. There are about 5,700 hospitals in the U.S. That would average $463,684 a year per hospital if they got all the money, but they don't, as the doctors and clinics will want their share. In other words, the healthcare industry will have incentives that sound impressive in the aggregate, but less so when broken out. Furthermore, only a minority of doctors and hospitals use basic EHR technology. That's a lot of necessary bang for the buck.


Image: U.S. Army Materiel Command Flickr account, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.