A number of physicians have asked us about the economics of acquiring an EHR as they near the twilight of their careers. Two representative questions follow, the first from a physician in the Southwest:
I question your comment that many physicians will "face significant penalties" if we don’t use EHRs. From what I read, if we don’t convert over, beginning in 2015 we will be fined 1% of what Medicare pays us. After that, there are no more fines unless 75% of the docs aren’t using EHRs. I’ve been in practice about 30 years and plan to practice another 5 years. I receive about $60,000 per year from Medicare. Most of my colleagues who have converted to an EHR say it slows them down. What would you recommend that I do?
By Neil Skolnik and Chris Notte
Or another typical question, from a physician in the Midwest:
I am planning to retire within the next 30 months for personal reasons. I have an associate who is young and will be in practice for many years. I may turn over the practice to my associate and just work part time in the hospital. My problem: Is it wise to start implementing and maintaining the EHR at this stage of my practice? I will have significant productivity loss and staff expenses. Will I face substantial deductions/penalties from Medicare and other insurance companies? I am interested in it, but does it make financial sense?
These physicians raise a common, important question about whether or not to transition to an electronic health record as a physician gets closer to retiring from practice. This question is important, because a recent survey suggested that as many as 25% of physicians older than 56 years of age are planning to retire in the next 3 years.
To intelligently address this issue, one first needs to be explicit about the costs vs. the benefits of EHRs.
The benefits, while often not realized quickly, are numerous and are why in the long-term all practices will have EHRs. Physicians increasingly will be expected to provide quality assurance data, carry out population management, contact patients if medications are taken off the market or have serious safety issues identified, and eventually provide patients with thoughtful, secure access to their own lab and medical records.
All these needs will require the use of an electronic record, and will therefore make the acquisition of an EHR essential over the long haul.
What about the short haul, though?
The potential for increased revenue that might occur with increased efficiency and improved billing, which has often been touted as an advantage by EHR vendors, has just as often not materialized quickly, if at all, in most practices.
The costs of converting a practice to an electronic health record are important to consider in any decision about EHR acquisition, particularly one that is occurring close to retirement.
First is the cost of the EHR software. This varies from free software to software that costs up to $30,000 per practitioner. For this example, we will use an initial cost of $12,000 per provider for the software. Hardware, which usually involves new personal computers for the office, adds another $5,000 per provider. Add in training costs at another $2,000. Total cost of implementing the EHR may be approximately $15,000-$20,000 the first year.
Even more important, though, is the effect of the EHR on productivity of the practice and the sanity of the individual physician. Depending on what numbers you use, an EHR may increase productivity by up to 20%, decrease transcription costs – which can be up to $10,000 per year – and decrease costs of chart re-filing.
Alternatively, it is very possible – even likely – that implementation of an EHR will cause a significant decrease in productivity for the first few months, but will improve productivity after that time to bring it up to – or exceed– pre-EHR levels.
In a practice with a gross revenue of $300,000 per physician, the cost of the EHR system itself is quickly eclipsed by the effect of the EHR on productivity. If productivity decreases by 20% in the first 4 months of implementation, that will mean $20,000 in lost revenue, an amount almost equal to the cost of the EHR and hardware itself. In addition, if productivity remains depressed by 5%-10% for the rest of the first year, it could cost an additional $10,000 to $20,000 of lost income.
This leaves a total cost between lost productivity and cost of the system of approximately $40,000 in the first year – a significant investment that one hopes will be recovered in subsequent years.