Can IT solve the electronic health records challenge?

Financial and technology issues make Obama's EHR push not so easy to execute

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President Obama's stimulus package addresses very diverse segments of the economy, including health care, education, research, and infrastructure. However, all of these components have one thing in common: the reliance on information technology as the engine powering these stimulus initiatives.

A key initiative in the stimulus plan is addressing the issue of establishing electronic health records to reduce health care costs and improve the care itself by making all medical information for a patient available to anyone who treats her. The federal government has advocated for such a system for a decade, but little visible progress has been made.

So what about the Obama plan would change the equation? It's designed to tackle one of the two biggest barriers: the financial penalty that has existed so far for adoption. But it does little to solve the technology issues that will hinder large-scale deployment.

Problem No. 1: Electronic health records reduce profits
Up until now, the benefits of electronic medical records that have occurred accrue to just about everybody -- patients, employers, state and federal governments, and medical insurers -- but the actual health care providers. Doctors get the least benefits, especially in small practice groups (those with fewer than five physicians) that make up most medical practices.

But even those who might benefit from electronic health records don't, says Homer Chin, associate medical director for clinical information systems at Kaiser Permanente Northwest. Why? Because there is little incentive to share information, the core of an electronic health record (EHR; also called an EMR for "electronic medical record"). For example, hospitals make money by doing tests. But once EHRs are up and running, a doctor ordering a test electronically might immediately receive an alert saying the test was unnecessary because the patient had the same test or procedure at another location. "There is not much revenue and profitability in putting in an EHR. There is little financial incentive," Chin says.

An ironic consequence of EHRs is that, by helping raise the quality of health care, they penalize doctors and other medical providers for success, says Wes Rischel, a vice president at Gartner. The bottom line: Doctors will see fewer patients.

Beyond the income factor, the high cost of EHR systems today -- not only the systems, but the setup and training -- also dissuades adoption by doctors, especially those in small groups. Physicians have been unwilling to invest anywhere from $20,000 to $50,000 in an EHR system where the economic benefits tend to go to someone else. Today's EHR systems are not as easy to use as they could be, so there is a large learning curve required, Chin says: "There is something intuitive about paper chart and prescription pad."

Recognizing these factors, the stimulus package tackles these financial challenges head on by offering money to health care providers. Hospitals submitting via EHR systems to Medicare and Medicaid will receive up to $6 million a year in additional payments for sending data electronically. This incentive will remove much of the adoption inertia seen so far, says Richard Archer, a principal in the health care IT advisory practice a KPMG.

And every medical practice that uses an EHR system to submit an invoice to the government Medicare and Medicaid insurance systems will be reimbursed at a higher rate than those who submit a non-electronic invoice: up to about $44,000 extra per year. To a physician in a small practice, this incentive is large enough to get doctors' buy-in, says Michael Lake, principal at Circle Square a health care consultancy. "It is a lot money, and we will see physicians adopt it," he adds.