Improving EMR Interoperability:A Financial Analysis

Kirti Patel,MDUMass Memorial—Health Alliance Hospital

Organizational Background

Health Alliance Hospital (HA) is a 135-bed, not-for-profit hospital serving North Central Massachusetts and Southern New Hampshire. It is affiliated with the UMass Memorial Healthcare System (UMMHC).1

UMMHC and HA do not have a cohesive EHR system. The numerous and disparate systems pose a challenge to transparent communication of health information.

In recent years, UMMHC and HA have made strategic investments to improve IT infrastructure.

Problem Statement

  The Physician Networking Project was initiated at HA in the past year with the goal of developing interfaces between

key inpatient areas (lab, rad) and the affiliated office

practices.

Financial Barriers and Opportunities

BARRIERS OPPORTUNITIESLimited capital budget Meaningful Use

incentive paymentsOffice practices have

limited budgetsCost savings due to efficiencies created3

Stark Law2Cost savings due to

decreased utilization of resources4

EMR vendor fees Improved billing5-7

Ongoing costs of maintenance and

upgrades

Decreased liability risk8

ASSUMPTIONS*

Avg cost of an interface $10,000Subsidy to office practices $5,000Net cost of interface to office practices

$10K - $5K = $5,000

Average labor cost/secretary $25.40/hrEstimated secretarial time saved daily per physician

15 min/day

Labor time saved per week/provider

15 min x 5 days = 1.25 hours/wk

Labor costs saved/week/provider

1.25 hrs/wk x $25.40/hr = $31.75/week

Labor costs saved/year/provider

$31.75 x 48 work-weeks/yr = $1524 /year

*Base case assumptions are based on current practice estimates at the Montachusett Women’s Health Practice at HA for a single provider.

InterpretationO The projected 5-year capital investment analysis

suggests that development of interfaces between critical service areas (lab, radiology) and the office practices are an overall wise investment, especially when partially subsidized by HA.

O The projected 5-year capital investment analysis shows that larger practice groups can achieve even greater savings, capitalizing on efficiency gains to be had when multiple providers are utilizing a single interface.

O The hospital subsidy of a single physician practice is a critical factor in sustaining these savings.

O The loss of the subsidy does not negatively impact practices with two or more physicians.

RecommendationsO Continue the networking project for fiscal year 2015, as it is

resulting in significant cost-savings to office practices.

O Communicate the cost-savings to physicians to encourage further on-boarding to the project.

O Emphasize the importance of taking advantage of the hospital-funded subsidy, which will only be provided for a limited time (due to restrictions set forth by Stark Law).

O Expand the project to encourage interface development between other critical inpatient areas, such as pathology, the emergency room, and the operating room, connecting them to outpatient practices.

O Continue current pace of the IT implementation projects, until such time as current demands are met. Thereafter, initiate projects on an incremental, as-needed basis.

References1. http://www.umassmemorialhealthcare.org/healthalliance-hospital2. http://www.cmanet.org/news/detail/?article=hhs-extends-stark-

exception-and-safe-harbor3. Tierney WM, Miller ME, McDonald CJ. The effect on test ordering of

informing physicians of the charges for outpatient diagnostic tests. N Engl J Med. 1990;322(21):1499–1504.

4. Schmitt KF, Wofford DA. Financial analysis projects clear returns from electronic medical records. Healthc Financ Manage. 2002;56(1):52–57.

5. Agrawal A. Return on investment analysis for a computer-based patient record in the outpatient clinic setting. J Assoc Acad Minor Phys. 2002;13(3):61–65.

6. Wang SJ, Middleton B, Prosser LA, et al. A cost-benefit analysis of electronic medical records in primary care. Am J Med. 2003;114(5):397–403.

7. Ewing T, Cusick D. Knowing what to measure. Healthcare Financial Management. 2004;58(6):60–63.

8. Virapongse A, Bates DW, Shi P, et al. Electronic health records and malpractice claims in office practice. Arch Intern Med. 2008;168(21):2362–2367.

9. Gapenski, L. Healthcare Finance, 5th Edition. Health Administration Press, Chicago, 2014.

10.https://institutional.vanguard.com/VGApp/iip/site/institutional/investments/benchmarks/performanceSP?File=SPPerfReturns&bench=SP