The primary differences between ambulatory and in-patient
uses of health information technology are: (1) inpatient workflows are more
complex than out-patient because of the complexity of multiple departments each
with their own systems, staffing, and needs; (2) in-patient care is more labor
intensive, the bulk of which is by medical assistants, who are the least
trained and lowest paid in western healthcare; and, (3) inpatient facilities
have different and more complex billing procedures than ambulatory
settings. (Ryan, 2015)
The “Meaningful Use”
provisions of the Patient Portability & Affordable Care Act attempting to
use public policy to incentivize the creation and use of electronic health
records (EHR), patient portals, and care coordination system in stages 1, 2,
and 3, respectively, are creating neither higher quantity nor lower
costs. They may eventually create higher quality, in 5-10 years’ time,
but at a substantially higher cost, which may push financially struggling
health care providers to close rather than improve the quantity and quality of
their care.
Analysis in a 2010
report by the global management consulting firm McKinsey & Company
demonstrates that mandated EHR, and subsequent patient portals and care
coordination systems, will have financially negative return on investment (ROI)
for the foreseeable future. McKinsey’s analysis uses a patient bed cost rubric
wherein the average total cost to implement only the early stage EHR mandated
by “meaningful use” is estimated at $80,000 to $100,000 (averaging $97,500)
which after subsidies from the US government, could reduce the cost to $60,000
to $80,000 depending how early health care organizations implemented the
technology. Incentives decreased annually from $17,500 per bed in years
2011, 2012, and 2013, to $10,500 in 2014, $5,500 in 2015 and zero in
2016. Meanwhile the financial penalty for choosing not to implement
meaningful use began at $2,000 per bed in 2015 up to $35,000 per bed by
2019. Their analysis went on to project long-term maintenance costs of
$13,500 per bed (recurring annually) and benefits of $25,000 to $44,000 per
bed. (Francois M. Laflamme, 2010)
Erroneous presumptions
make EHR have a negative ROI for health care organizations. First,
assuming the annual maintenance cost is only $13,500 per bed, means the true
penalty for choosing to ignore meaningful use is only $21,500 per year, which
means organizations that waited to implement EHRs until 2015 won’t realize any
financial return until 2020 at the earliest. By that time, the engineered
life of the EHR software will be exceeded and they will need to re-implement
new software, meaning they never actually receive a positive ROI, only pay
software and IT services companies in a never-ending
implement-support-implement cycle.
Second, if one
examines the type of costs involved in implementing an EHR system, many more of
them are recurring expenses than $13,500 (13.5%). While organizations may
not pay the estimated $27,000 to $30,000 external consulting costs annually,
they will need to pay the remaining costs on a recurring basis, which consist
of: (a) $15-25,000 in hardware every three years; (b) $20-$22,000 in clinical
software licenses annually; (c) $10-12,000 in training/re-training costs every
36 months presuming 30% turnover; (d) $5-6,000 in other annual software
licenses; and, (e) $3-5,000 in additional internal IT support. (Francois
M. Laflamme, 2010) In total, the more probable annual support costs for
the ERH are $40,834 per bed per year. Therefore, from the annual support
costs alone, health care organizations will arguably lose $5,834 per bed per
year. This fails to account for original capitalized cost of $80,000 to
$100,000 per bed (average of 200 bed equaling $19.7 million per EHR).
Therefore, the government’s “meaningful use” mandates as applied to EHRs, are
asking health care organizations to spend an average of $19.7 million every
five years, then lose $1.167 million per year supporting it for five years,
then repeat.
Ostensibly, the
operational efficiency and clinical improvements organizations will
gain from EHRs are estimated at $25,000 to $44,000 per bed. However,
examination of the analysis that calculates those numbers suggest the analysis
is equally dubious. For example, they estimate that organizations will
save $8,000 to $15,000 per bed (32-34% of benefits) from EHRs preventing
adverse drug events (ADEs). (Francois
M. Laflamme, 2010) The problem
with that is that ADEs are a profit-center for health care delivery
organizations, not a loss. Whenever a patient has significant
complications from an ADE, the provider must provide more and intensive
treatments, for which they charge substantially. Therefore, ADE reduction
doesn’t’ save providers money, it saves payers money, and costs providers that
money that payers would have needed to reimburse them.
Second, McKinsey notes
that another $20,000 per bed is projected to be saved from improving
staffing efficiency. (Francois M.
Laflamme, 2010) That’s only
true if there are infinitely more patients for the providers to see with the
saved time – if there is a true opportunity cost. Otherwise, staff may
work more efficiently using EHRs; however, it doesn’t result in a less
compensation for the organization, nor reduced, nor more billable hours, for
the providers.
Therefore, it appears
that the primary financial beneficiary of the government’s “meaningful use”
mandate of technologies are the IT service and software companies realizing
$120 billion per year implementing EHR systems, (Francois M. Laflamme,
2010) then redoing them every 3-5 years when the hardware and software
changes. The “meaningful use” mandates are, thereby, acting as financial
incentives to the technology services and software industry more than health
care organizations. I would argue that a better focus for public health care
policy than incentivizing what is already one of the strongest technology
markets in the world, would be the elements of for-profit and not-profit
hospital conversions that are going awry. Namely, mandating that health
care organizations be barred from having “insiders” on their boards, only
independent directors from different regions with expertise in health
economics, delivery, and administration; and, prohibiting geographic monopolies
or oligopolies of “non-profit” health care organizations, which reduce
competition and thereby lower quality of care and increase prices.
Works Cited
Francois M. Laflamme, W. E. (2010, August). Reforming
hospitals with IT investment. Retrieved from McKinsey & Company:
http://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/reforming-hospitals-with-it-investment
Kristin Harper, G. A. (2010). The Changing Disease-Scape in the
Third Epidemiological Transition. Int J Environ Res Public Health,
675–697.
McKeown, R. E. (2010). The Epidemiologic Transition: Changing
Patterns of Mortality and Population Dynamics. Am J Lifestyle Med,
19S-26S.
Robert York, K. K. (2016, January 6). Where Have All The
Inpatients Gone? A Regional Study With National Implications. Health
Affairs Blog, pp.
http://healthaffairs.org/blog/2014/01/06/where-have-all-the-inpatients-gone-a-regional-study-with-national-implications/.
Ryan, J. (2015, December 15). Instructions for HIT:
Inpatient vs Outpatient. Retrieved from Northwestern University 401:
American Health Care System:
https://canvas.northwestern.edu/courses/38753/pages/instructions-for-hit-inpatient-vs-outpatient
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