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BREAKING EVEN The Amount of Time for Return on Investment for Adopting an EHR Evan Varadi and Jennifer Nguyen, The University of Texas Health Information Technology Summer Certificate Program 2011 INTRODUCTION DATA DISCUSSION Many reasons exist to adopt an Electronic Health Record (EHR) including Average Median Minimum Maximum Table 2. Average Implementation Costs For the purpose of this study, we only focused on the chart creation costs improving patient safety, quality of care, and access of information2. However, and Ongoing Costs for Adopting an and chart pull costs along with the “Meaningful Use” incentives from the majority of providers have failed to adopt an EHR because many different Implementation Costs $43,826 $45,747 $14,462 $63,600 EHR per Provider HITECH Act. Even though we only used these specific factors as a method of barriers exist. For example, only 15% of providers have adopted a fully Software Training and a calculating the breakeven point and ROI, there are still other tangible and $22,038 $22,834 $8,475 $32,607 This table shows the initial and ongoing costs per full- functional EHR and only 4% of providers have adopted a basic system.1 One of Installation time provider. The initial costs ranged from $37,056 to intangible factors that need to be taken into account. For instance, another the major barriers is that EHRs are expensive and there is a great deal of Hardware $12,749 $12,492 $5,261 $23,600 $63,600 per provider. This variation in initial costs was tangible cost to consider would be storage space cost. With the implementation mainly due to the diversity in the amount of hardware uncertainty about the return on investment (ROI) as well as the amount of time it Lost Revenue from reduced before implementation in small practices. In addition, of an EHR, space to store all the medical records would no longer be required. takes to recollect their initial investment.1,2 $7,473 $7,473 - $20,000 differences in technical and negotiating skills resulted in For some practices, this would mean the storage room can be used for other Productivity A 2007 study found that it takes 16 months to recover their initial costs and part of the variation in this range. Ongoing costs purposes and they would also save money on no longer needing to pay to store Miscellaneous $1,145 - - $9,652 included vendor software maintenance and different a provider saved around $14,000 per year.2 However, since this study, new support fees, hardware replacement, and payments for the records in a storage warehouse elsewhere. Depending on where and how policies have been passed, such as the "Meaningful Use" conditions from the Ongoing Costs per year $8,412 $7,231 $5,957 $11,867 information systems staff or external contractors. The the records are kept, the savings on storage space will vary. In addition, other HITECH Act. This would inevitably affect the ROI on an EHR investment.1 Software Maintenance and average on going yearly cost per provider was $8,412 studies have cited that some other tangible benefits include increased revenues $2,439 $2,403 $1,200 $3,800 per year. NOTE: The average costs per provider were Nonetheless, using the method from this study and given that all the necessary Support calculated for each practice and then averaged across due to charge capture and a decrease in billing errors, improved cash flow, policies and conditions are met, we can still forecast the ROI of a practice that Hardware replacement $3,187 - - - fourteen different practices. Hardware replacement reduced transcription costs, and improved productivity.6 An intangible cost will implement an EHR system. So the question remains, when can providers costs were also estimated for all practice. SOURCE: would include patient waiting time from the time they check in to the time they Internal/external information Miller, R. H., C. West, T. M. Brown, I. Sim, and C. and practices break even today? $2,047 $683 - $5,556 Ganchoff. "The Value Of Electronic Health Records In leave, as well as less the quality of patient care. Studies have shown that there system contractors This study aims to find the length of time for a 5 physician primary care Solo Or Small Group Practices." Health Affairs24.5 is also an increase in patient safety, improved patient education, improved Miscellaneous $739 $586 - $2,742 (2005): 1127-137. Print. coordination of care, and improved ability to conduct research.6 For the purpose practice to recapture their initial investment after adopting an EHR. We focused on the elimination of charts and their associated costs and the “Meaningful Use” of this study however, we focused on tangible costs (since it would be easier to incentives from the HITECH Act. RESULTS measure than the intangible costs) and narrowed it further to just chart creation and chart pull costs to avoid making the study too convoluted. METHODS Based on the data, for a 5 physician practice the total implementation costs would be $219,130 with an average ongoing yearly cost of $42,060 (as shown in figure 1). The practice can save from the elimination of paper alone approximately $51,419.00 per year ($46,440 from pulling charts and $4,979 from new chart creation costs). With that said, it should also be noted that since every practice is run differently, there is no one set way of determining ROI and break even point. As Implementation costs and Ongoing costs This doesn’t include the Meaningful Use incentives which could total $220,000 over 5 years. Figure 2 shows the proportion of savings over a 5 yearlong period and such, calculating ROI is somewhat of a “fuzzy science”. That is, there are too To gather information on the costs and ROI, we plan to use information done in figure 3 shows the breakeven point by plotting the costs and the savings over time. many factors (both tangible and intangible) involved. Because of this, more previous studies. Table 2 depicts the initial costs and the ongoing costs for Figure 1. Costs from Adopting an EHR Over 5 Years for a 5 Physician Figure 2. Savings from Adopting an EHR Over 5 Years for a 5 case studies need to be conducted. It is also important to note that no single adopting an EHR. Practice Physician Practice study can possibly accurately measure all the costs and/or savings achieved Chart Pulls and Chart Creation Costs through EHR systems. The results we have generated are simply a forecast of Chart pulls are the number of times a day a paper chart is retrieved for visits, Information Miscellaneous system what the outcome might be and are based only on the trend that we saw from phone calls, and prescription refills. Multiple studies have shown that the 4% contractors the 2007 case study. With the “Meaningful Use” conditions today, along with average cost of a chart pull is $0.86 and that 43 chart pulls are done daily per other policy changes and requirements that were not included in the case study, physician. This cost per chart pull was established by a practice by determining 12% we realize that our numbers are not completely accurate. The “Meaningful Use” the number of charts pulled per hour divided by the clerk’s average salary.2 This incentives is not expected to be a reimbursement for the EHR implementation means that 215 chart pulls are done daily per 5 physician practice meaning that Meaningful Use costs. Rather, the Meaningful Use incentives should be thought as a monetary approximately 54,000 chart pulls are done each year assuming that there are Hardware 46% subsidy. 50 weeks of working days per year.1 Chart Pulls replacement Implementation Ultimately, aside from the potential savings that a practice can have with a Chart creation costs include both supplies and labor involved in creating a new 49% 19% Costs fully functional EHR system and if they use it to meet Meaning Use, it is critical paper chart. Studies have shown that this costs $6.50 per chart. In addition, a 51% to point out that the overall goal of EHR implementation is to provide patients study has shown that on average a provider sees 153 new patients each year with the best quality care. meaning that a 5 physician practice would see 766 new patients each year.1 Software Full Time Employee Costs Maintenance New Chart A large number of practices have an entire staff dedicated to paper chart and Support Creation ACKNOWLEDGEMENTS manager. Studies have shown that the elimination of full time employees can 14% 5% We would like to thank Leanne Field, PH.D., Diane Kneeland, PH.D., increase the amount of savings per year. Practices that have staff whose sole Figure 3. The Amount of Time to Breakeven after Adopting an EHR for a 5 Physician Practice Kimberly Smith, PH.D., Rick Nauert, PH.D., Bob Ligon, Jason Crandall, and Vu purpose is chart management report higher savings than whose staff performs $600,000.00 Tran for all of their help while developing this poster. multiple duties.1 However, for the purpose of this study we will assume that no employees were eliminated. Meaningful Use $500,000.00 WORK CITED “The Health Information Technology for Economic and Clinical Health Act 1 DesRoches, C. M., E. G. Campbell, S. R. Rao, K. Donelan, T. G. Ferris, A. Jha, R. Kaushal, D. E. Levy, (HITECH) authorized incentive payments through Medicare and Medicaid to S. Rosenbaum, A. E. Shields, and D. Blumenthal. "Electronic Health Records in Ambulatory Care -- A National Survey of Physicians." New England Journal of Medicine 359.1 (2008): 50-60. Print. clinicians and hospitals when they use EHRs” in a “meaningful” way.4 Providers $400,000.00 2 Grieger, D., S. Cohen, and D. Krusch. "A Pilot Study to Document the Return on Investment for choosing to participate in this program can earn as much as $44,000 through Implementing an Ambulatory Electronic Health Record at an Academic Medical Center." Journal of the Medicare and $63,750 through Medicaid per provider (as shown in table 1). American College of Surgeons 205.1 (2007): 89-96. Print. 3 Fleming, N. S., S. D. Culler, R. McCorkle, E. R. Becker, and D. J. Ballard. "The Financial And Furthermore, if providers fail to adopt an EHR by 2015, they can receive deductions in payments each year. For the purpose of this study we will only $300,000.00 Nonfinancial Costs Of Implementing Electronic Health Records In Primary Care Practices." Health Affairs 30.3 (2011): 481-89. Print. focus on Medicare. 4 Blumenthal, David, and Marilyn Tavenner. "The “Meaningful Use” Regulation for Electronic Health Table 1. Medicare “Meaningful Use” Incentive Payments Per Eligible Provider Records." New England Journal of Medicine 363 (2010): 501-04. Print. $200,000.00 5 Miller, R. H., C. West, T. M. Brown, I. Sim, and C. Ganchoff. "The Value Of Electronic Health Records In 2011 2012 2013 2014 2015 2016 2017 Total Solo Or Small Group Practices." Health Affairs24.5 (2005): 1127-137. Print. Costs 6 Menachemi, Nir, and Robert G. Brooks. "Reviewing the Benefits and Costs of Electronic Health Records Adopt 18,000 12,000 8,000 4,000 2,000 - - 44,000 Savings and Associated Patient Safety Technologies." Journal of Medical Systems 30.3 (2006): 159-68. Print. 2011 $100,000.00 Adopt CONTACT INFORMATION 18,000 12,000 8,000 4,000 2,000 - 44,000 2012 $- Adopt 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 15,000 12,000 8,000 4,000 - 39,000 2013 Year Evan Varadi Jennifer Nguyen firstname.lastname@example.org email@example.com Adopt 12,000 8,000 4,000 - 24,000 Our study found that it would take approximately 3 years to break even after adopting an EHR with an average savings of $95,419 over 5 years per provider. Many 2014 different reasons could explain why there is such a strong difference between other studies.RESEARCH POSTER PRESENTATION DESIGN © 2011www.PosterPresentations.com