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In August 2006, to encourage rank-and-file physicians to adopt electronic medical record systems, Congress passed legislation removing a key obstacle: the heavy cost burden on smaller, independent and outpatient practices. The change permitted hospitals to help fund the purchase of EMR systems by physicians in their service areas without risking penalties under the 35-year-old Stark law and anti-kickback statute.
The original rules sought to prevent hospitals from paying doctors to send their patients to them and prevent doctors from sending patients to clinics and hospitals owned by the doctors, but they also blocked hospitals from sharing information technology with doctors.
The new exceptions look great on paper. Physicians who would have thought twice about buying an expensive EMR system in the past can now go electronic by paying as little as 15 percent of the system’s total cost, including tech support. Hospitals with which they are affiliated can pay the rest.
It’s like having a rich uncle pick up the check at a five-star restaurant with the expectation that you’ll leave the tip. “Overall, this is a good move,” said John Glaser, vice president and chief information officer at Partners HealthCare System, a Massachusetts-based nonprofit organization that integrates academic hospitals with community health care centers. “A lot of hospitals are willing to do it.”
However, no one believes the new rules will rapidly extend electronic records across the health care industry. On the contrary, opinions vary wildly about the impact on individual physicians’ practices. Some predict negative side effects for practices while others believe the new rules could undermine the goal of disseminating the best EMR solutions. Still others would like to see the reforms work but not in the way they were intended to.
This much everybody agrees on: In health care, there are no rich uncles. And, Glaser said, “there’s no free lunch.”
Lay of the land
EMR systems come in two basic flavors: big systems for large acute-care settings, such as hospitals and medical centers, and products for the ambulatory or outpatient care market, primarily smaller doctors’ offices and group practices.
A handful of heavy hitters dominate the acute-care market, including Cerner, McKesson, Siemens, Meditech and Eclipsys. Launching systems built by those companies is a major undertaking that can take 18 months to complete at a cost of millions of dollars. Nonetheless, about 40 percent of the country’s acute-care facilities use the systems.
Among physicians who are not directly employed by big hospital systems — an estimated 71 percent of doctors — electronic records are less prevalent: Only about 16 percent of independent practices have some type of electronic medical record.
“A number of studies suggest that the single biggest barrier to adoption of electronic records is upfront costs,” said Tim Kostner, vice president of Cerner’s PowerWorks sales group.
“If you’re looking for a pure economic argument [for adopting EMRs], it can be tricky,” Glaser said. “If I have $10,000 to invest and my choices are mutual funds or electronic medical records, mutual funds are a better bet for return on investment.”
Unlike EMR software for acute-care facilities, the market for ambulatory systems is spread among an estimated 200 vendors. And attrition is high. Some 20 percent to 30 percent of such vendors leave the market each year, typically to be replaced by new entrants, said Don Schoen, chairman of the Electronic Health Record Vendors’ Association, whose members account for 90 percent of the EMR systems sold in the United States.
The biggest difference between EMRs developed for acute- and ambulatory-care settings derives from their users: hospitals vs. physicians’ offices. “We have found that there is a vast difference between what the hospital needs and what ambulatory care needs,” said Todd Nelson, vice president and chief financial officer at Grinnell Regional Medical Center, an 81-bed hospital in central Iowa.
Therefore, the systems must function differently. A doctor’s office keeps a history for the life of the patient; hospitals are geared toward episodic care. At hospitals, updating patients’ charts — on paper or electronically — occurs frequently and is essential to providing care. Furthermore, the two types of software sort and display information and share data among departments and users in different ways.
“It’s a totally different workflow,” said Schoen, who is also president and chief executive officer of MediNotes, a developer of EMR systems for the ambulatory-care market.
Hospitals seek alternatives
Now that the way has been cleared for hospitals to underwrite local physicians’ EMR systems, it seems that getting permission to buy is one thing but actually writing a check is another story.
“I don’t believe there is an absolute rush to make these things happen,” said Chuck Christian, CIO at Good Samaritan Hospital, a 300-bed acute-care facility in Indiana. “People are moving along cautiously. [Stark] wasn’t the stopper in the drain.”
Even before the reforms, organizations that were determined to provide financial support for EMR adoption came up with creative ways of getting around the prohibition, including establishing nonprofit groups and foundations to channel funds, Christian said.
In light of the rule changes, Good Samaritan will make some level of investment to speed the use of electronic records in its local market, Christian said. Good Samaritan uses McKesson’s acute-care EMR in the hospital and Allscripts’ EMR in its hospital-owned physician practices. Good Samaritan also hopes to bring a sense of order to EMR adoption in its region, possibly by offering physicians a choice of three ambulatory-care record systems.
“I don’t want to be put in the spot of having 20 different systems out there to integrate with,” Christian said.
‘It won’t work everywhere’
Partners HealthCare System, which two years ago developed managed care contracts with incentives for EMR adoption, doesn’t have plans to start paying for local systems. Reforming the Stark and anti-kickback rules was “a smart move on the part of the federal government,” Glaser said. “But it’s not the only game in town.… It won’t work everywhere.”
Grinnell Regional Medical Center, which recently launched an expensive hospitalwide information system, also won’t start underwriting EMR systems for local physicians any time soon. “We’re not in a financial position such that we have dump trucks of money to fund electronic health records adoption for every physician on our medical staff,” Nelson said.
Grinnell is more likely to capitalize on its “IT expertise and purchasing power to assist [physicians] in evaluating products and making sure the interface works with us and to support getting them up and running,” he added.
Despite the challenges, the American Hospital Association said many of its members are poised to take advantage of the relaxed regulatory environment — eventually. “They are thinking through their plans and thinking about how to implement electronic medical records,” said Lawrence Hughes, AHA’s regulatory counsel. “They are looking at how to do this over a period of time, but not every hospital is in a position to take advantage of the Stark and anti-kickback regulations.”
Doctors’ orders
Doctors in private practice can be fiercely independent, and regardless of the incentive offered, some are not interested in taking handouts from hospitals. In the view of some doctors, installing an EMR system paid for by the local hospital could entangle their medical and business interests in ways that would compromise the doctors’ independence.
Maria Rudolph, senior associate for informatics and quality improvement at the American College of Physicians, said she believes doctors have a number of concerns. “There is a fear of being locked into a single vendor,” Rudolph said. “What if you practice at several hospitals and they all have different types of information systems?”
Doctors are also concerned about the security and privacy of EMRs that share a platform with a hospital’s information system. “The hospital has access to a physician’s medical records created through that system,” Rudolph said. “There’s a lot of concern there. The physicians don’t want to be liable.”
Nor do physicians necessarily trust hospitals to secure the data. During a panel discussion in Washington this summer, Dr. David Brailer, former leader of the Office of National Coordinator for Health IT, said relationships between hospitals and doctors are deteriorating in many communities.
In some quarters, the new regulations have had the unintended consequence of slowing adoption of EMRs, Schoen said. Some doctors are waiting to buy new information systems until they hear whether the local hospital will pay for them.
The vendor’s-eye view
Where do EMR vendors stand on the question of the new rules’ effect? Officials at the Electronic Health Record Vendors’ Association said they believe the reforms offer an important new source of funds that can help the country meet its goals for health care IT.
But overall, vendors of acute-care systems are more enthusiastic than providers of ambulatory-care systems. Cerner views the regulations as an opportunity to build on its existing business relationships with hospitals. To penetrate the single-physician and small-practice market, the company has adapted its signature PowerChart EMR system into a Web-based model called PowerWorks. It charges a monthly subscription fee to host client data online and provide round-the-clock technical support.
Cerner executives said they believe the law will spur the market for EMR systems that are interoperable among hospitals, one of the requirements of the Stark reforms.
“We feel like, based upon the Stark safe harbor [provisions] and given our presence in the market and our single platform, we have a real opportunity to increase the level of adoption of electronic medical records by independent physicians,” Kostner said.
But vendors in the ambulatory-care market are less optimistic about the impact of the new reforms. Many of those firms believe physicians will still see their choices as limited to EMR systems sold by the big acute-care vendors. Moreover, the rule changes could open opportunities for hospitals and acute-care EMR vendors to make deals that stifle competition, which the original law was intended to prevent.
Allowing hospitals to underwrite the cost of health care IT is one way to create incentives for doctors to adopt the technology, said Schoen, who nonetheless has concerns about the new rules’ impact on competition. “As CEO of MediNotes, I certainly want to encourage CIOs [of hospitals] to offer more than one type of system to their physicians,” he said. “I don’t think there is a perfect system for the ambulatory marketplace.”
By John Pulley
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