ROI for EMR: Does It Even Make Sense Now?

There’s a new data point to add to the debate over EMR return on investment.

Norton Healthcare Inc. in Louisville, Ky., has experienced a $12 million increase in federal reimbursement since it started using Epic, Louisville Business First reported. The health system, which operates five hospitals and a network of outpatient sites, is three years into a five-year, $200 million implementation.

Sounds like the beginning of some pretty good ROI. Or does it?

It’s hard to say.

ROI for records systems is notoriously hard to pin down. The word is that many hospitals don’t even try. And they might be onto something.

A revenue boost is a good sign. It’s often a result of improved coding and lower claims denial rates, as Colin Konschak of health care consulting firm Divurgent and Garrett Blair of Norfolk, Va.-based health system Sentara Healthcare recently wrote. And of course, there are the federal incentives for using an EMR — for hospitals, as much as $11 million over four years.

There’s also the rise in productivity that EMRs are expected to cause. At first, an EMR can slow down clinicians’ workflow and cost them and their organization money. But in time, the system could increase productivity.

But revenue is only part of the equation. Cost savings are the more important — and harder to calculate — factor.

Here are a few ways, as described by Konschak and Blair, that EMRs can help hospitals to save:

• Less need for transcription.

• Reduced use of staff time for copying and filing.

• Reduced — often by 50-70 percent — use of preprinted forms.

• Potentially lower malpractice premiums because of more complete documentation.

Many other potential benefits are probably real but are even less straightforward to measure. Features such as clinical decision support and electronic medical administration records, for example, could lead to reductions in medical errors — the types of mistakes the federal government no longer pays for. But measuring the money you saved from the errors you didn’t make is fairly abstract.

Many hospitals do little if anything to measure the return on their EMR investment, according to a study released by Beacon Partners last year. Healthcare Scene’s John Lynn wrote a few months ago that CIOs likely view the systems as a “necessary requirement of being a hospital today,” somewhat like cleaning supplies. So they don’t see the need to measure ROI.

To me, the “investment” part of ROI suggests that you have a choice. You put money into something now with the hope — but no guarantee — of a payoff later.

Building an imaging center on the edge of town or buying a surgical robot would probably be considered investments. Maintaining your buildings or upgrading your phones would not.

Doing something the government is making you do is not an investment. Given the reimbursement penalties that will eventually kick in for organizations that stick with paper, it’s hard to imagine that many hospital executives see EMR adoption as a matter choice.

The idea of ROI for EMR is probably outdated, a holdover from the days when having a system was optional. Hospital leaders are shopping for EMRs with an eye toward getting the best value for their money — just the way they shop for cleaning supplies, furniture or legal services.

You could say that as a society we’ve invested in the idea of EMRs and that we’re hoping for a payoff in terms of better outcomes and lower costs. But that doesn’t predict much about whether any particular hospital or doctor will see a dollar-and-cents ROI.

At Norton in Louisville, it sounds like they’re happy just to be recovering some of what they’re spending.

“It really does improve the continuity of care,” Norton’s chief medical officer, Dr. Steve Heilman, told Business First.

For now, it sounds like Norton is on track.

(Note: I work for Business First as a freelancer but didn’t write the story linked here.)