Meaningful Use Is Only the Beginning: Efficiency and More-Appropriate
Coding Bring Savings and Increase Revenues
Today, the hope of receiving “Meaningful Use”
rewards is motivating some physicians to begin
using electronic health records sooner rather
than later. But the government incentives will not
cover all of their EHR-related costs, and there are
many other reasons to get an EHR now.
Properly implemented, an EHR system with superior features can:
• Improve practice efficiency. By replacing paper
records with EHRs, for example, practices can
reduce record handling and access data more
quickly for both clinical and billing purposes.
• Help improve quality of care. Decision-support
features can help avoid medical errors, while
reporting and registry functions allow practices
to track and reach out to patients who need
preventive or chronic care.
• Be a building block for a medical home. Many
payers are now giving incentives to encourage
physicians to create patient-centered medical
homes, which require EHRs.
• Prepare practices for accountable care: EHRs
in interoperable networks are essential to
accountable care organizations (ACOs).
• Help recruit new physicians. Young doctors
who trained on EHRs in residency want to work
in computerized practices.
Sources Of Return On Investment (ROI)
According to experts, the incentives for
Meaningful Use — up to $44,000 per provider
through Medicare or nearly $64,000 through
Medicaid — will cover only a portion of the longterm cost of an EHR system. Estimates of the fiveyear cost of EHR hardware and software range
from $30,000 to $80,000 per physician, depending partly on practice size. And that doesn’t
include the cost of training, interfaces, patient
portals and conversions from other systems.
So a business plan for an EHR system
acquisition must include sources of ROI that go
beyond Meaningful Use rewards. A short list of
these would include:
• Tax write-offs (in 2011 and 2012)
• Savings in labor and supplies
• More accurate and complete coding, which
usually results in higher revenue
• Improved accounts receivable (A/R) management
• Conversion of space currently used for chart
storage
• Rewards from Medicare’s Physician Quality
Reporting Initiative (PQRI)
• Pay for performance and medical home incentives
Except for depreciation, all of these ROI sources
can be facilitated by the use of an integrated
EHR and practice management (PM) system with
a single database. The government’s regulations
also allow physicians to show Meaningful Use
by employing a combination of certified EHR
modules — for example, electronic prescribing,
document management, and charting systems.
But if these systems are from unrelated vendors,
it will be very difficult and expensive to connect them with a single interface so they can
work together. So, even though these modules
may enable some practices to meet the Stage
1 Meaningful Use requirements, they will slow
physicians down and make practices less, rather
than more, efficient.
Government Incentives
To obtain financial incentives, physicians must
demonstrate Meaningful Use of an EHR system
certified by a government-approved certification
body. In Stage 1 of Meaningful Use, a physician
or other eligible professional (EP) may attest to
Meaningful Use for a 90-day period in either
2011 or 2012. That attestation will entitle the EP
to a payment of $18,000. Further payments follow over the next four years if the EP meets the
Stage 2 and 3 criteria for Meaningful Use, which
have yet to be specified. UBM TECHWEB WHITE PAPER | Return on Investment in EHRs
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If a physician does not show Meaningful Use of
an EHR by 2015, his or her Medicare reimbursement will be reduced by 1 percent. In later years,
the reduction could be as high as 5 percent.
An EHR can also help physicians qualify
for rewards under Medicare’s Physician Quality
Reporting Initiative (PQRI). Physicians can provide
quality data by submitting special billing codes
or by sending data to CMS from approved EHRs
or electronic registries. Practices that report PQRI
data successfully receive a bonus equal to one
percent of their Medicare Part B charges for the
measurement year.
Aside from Meaningful Use, the biggest
incentive to buy an EHR system now is the ability to write off the cost on a doctor’s federal
tax return. If the physician purchases the system
by Dec. 31, 2011, he or she can write off 100
percent of the cost of hardware and software
as “bonus depreciation.” That write-off drops to
50 percent of the cost in 2012 and reverts to the
regular depreciation schedule the following year.
One caveat: For the cost to be deductible,
the EHR needs to be “in service” before the end
of the year. So that means a practice must not
only buy the EHR but must also implement it
by then.
Tax considerations are also important in
deciding whether to lease or buy an EHR. A physician may be able to expense the entire amount
of the lease payments. But if he or she takes out
a bank loan to purchase the EHR, only the interest is deductible. Technology companies such as
HP and GBS can offer financial services for leasing or financing an EHR system to defray the cost
of implementation.
The EHR Business Case
While the business case for an EHR system should
include government incentives, many practices
have achieved a return on investment in their
EHRs without any kind of external aid.
A study published in Health Affairs in 2005—
long before Meaningful Use — looked at 14 solo
and small-group practices that had purchased
EHRs from either of two vendors. Here’s what
the researchers found:
“Initial EHR costs averaged $44,000 per
full-time-equivalent (FTE) provider, and ongoing
costs averaged $8,500 per provider per year.
The average practice paid for its EHR costs in 2.5
years and profited handsomely after that.”
Notably, 11 of the 14 practices had “tightly
integrated” EHR and practice management systems — a major factor in their efficiency. All of
the providers used the EHR for common tasks,
such as prescribing, documentation, viewing
of data, and internal messaging, and almost all
used it to assist in billing. Transcription was rare,
and 10 of the practices no longer pulled paper
charts at all.
“One thing that really swayed us toward
GBS was that they sold and serviced both
hardware and software,” said Melody Gray,
Practice Administrator, Medical Associates of
Cambridge, Inc. “The NextGen product itself has
Electronic Medical Records in addition to Practice
Management, so you don’t have to worry about
an interface between the two systems, they run
on one platform. Some of the templates that are
available through NextGen are very customizable, so you can make it do just about anything
you want.” She added, “GBS brought HP Servers
with Intel processors, which had a very good
reputation for reliability, so those were the reasons that we made the choices we did.” (see
diagram, p. 4).
Financial benefits averaged $33,000 per
FTE provider per year. The two main sources of
these benefits were increased coding levels and
efficiency-related savings or revenue gains. Three
practices in which physicians had previously
dictated their notes also saw a major savings in
transcription costs.
More Appropriate Coding
Many physicians habitually undercode, often
because they’re not sure whether their documentation supports appropriate billing codes.
National studies have shown that, on average,
physician undercoding results in a loss of 7 to 9
percent of revenue.
The NextGen EHR automatically gives the
user the appropriate level of evaluation and management, based on the documentation entered
during a patient encounter. That not only helps
a clinician determine whether the visit should be
coded at level 1, 2, 3, 4 or 5, but also reminds the
provider to complete the necessary documentation. By using these prompts, a typical family
While the business case for an EHR system should
include government incentives, many practices have achieved a return
on investment in their EHRs without any kind of external aid.UBM TECHWEB WHITE PAPER | Return on Investment in EHRs
4
practice can increase its average coding level by
3.5 percent — without running a risk of failing
payer audits.
EHRs also offer other revenue-side advantages, starting with improved charge capture.
The NextGen EHR, for instance, alerts providers to select charges as an integral step in the
documentation and ordering process so that they
don’t overlook anything. This feature can raise
practice charges by 5 percent.
If an EHR is integrated with a top-notch
PM system, the latter can track A/R so that billing issues are dealt with in a timely manner.
NextGen’s enterprise PM system, for instance,
has a Worklog Manager feature that identifies
delinquent accounts and sends them to billing
personnel to handle. The assignment of these
accounts can be tracked and reported to ensure
accountability.
Efficiency Savings
If the providers in a practice dictate their notes,
the cost of transcription can be up to 11 percent
of collections. That cost mostly disappears after a
practice gets an EHR system if all of the clinicians
use point-and-click templates for documentation. Alternatively, NextGen and other leading
EHR vendors incorporate voice-recognition software that allows clinicians to dictate certain parts
of the note and have the free text go into the
record automatically. By using these methods,
practices can eliminate 75 percent or more of
transcription costs.
As practices transition from paper to electronic documentation, the costs of pulling, routing and filing charts eventually go away, although
staff must still scan paper documents from outside sources or fax them to the EHR’s document
management module (see the accompanying
case study). In the long run, most practices can
either reduce their staff or reallocate people to
more productive roles.
EHRs also greatly reduce costs for paper and
supplies. Assuming an average cost of $5 to create a paper chart, if the providers in a practice
see just five new patients a day, an EHR can cut
supply costs by $6,500 a year.
Reductions In “Soft Costs”
EHRs also lower many “soft costs” that are
hard to measure. For example, when physicians
prescribe electronically and the practice is online
with local pharmacies, it takes less time to do
refills, and front-desk staff field fewer pharmacy
calls. Using the internal email and tasking functions of an EHR can help clinicians work together
more effectively. And patient portals allow easier
communication with patients on everything from
As CMS and private payers move toward “pay for
value” reimbursement methods, an EHR system will be more essential
than ever.
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EHR CUTS OVERHEAD IN PRIMARY CARE PRACTICE
Medical Associates of Cambridge, an eight-provider primary care practice in
Cambridge, Ohio, was growing rapidly and had run out of space to store its
charts. To solve this problem and to improve quality and efficiency, the practice’s leaders purchased a NextGen EHR and practice management system.
The group went live on the new system in May 2006 and gradually implemented its component parts over the next two years.
Since then, the EHR has helped the group reduce its overhead by 8 to 10
percent, according to practice administrator Melody Gray. “The biggest efficiency and cost savings has been from the reduction of staff,” she says. “We
are down eight employees across the board. We have one less lab person
and have reduced our clinical staff by three and our clerical staff by four.”
In addition, she notes, the practice has achieved considerable savings on
supplies, because it no longer buys chart folders, other paper products and
printer toner.
The labor savings came in two areas: In the clerical area, the practice no
longer needs a transcriptionist and has sharply reduced record handling.
The paper charts still in storage are hardly ever consulted any more, and
most incoming documents are computer-faxed to the practice and routed
to NextGen’s document management module. The staff also faxes incoming
paper to the EHR system rather than scanning it in.
The efficiency of the practice has also increased on the clinical side. “By
nurses having access to every doctor’s messages through the messaging system in the EHR, they’re able to get messages done a lot faster,” Gray points
out. “You can check patients in faster. Things just move much quicker. There
are interfaces with EKGs, Holter monitors, spirometers. All patient data is in
a single record.”
Because of their EHR access, receptionists and nurses can answer patient
questions faster, reducing time on the phone. Similarly, nurses don’t have to
call in prescriptions that go online to the pharmacies. The decrease in calls
from pharmacies has lowered pressure on the phones as well, Gray notes.
The physicians usually are finished documenting visits and answering messages by the end of the normal business day. That means nurses don’t have
to wait for doctors to complete their work, so the practice pays less for
overtime. And the physicians are happy to be able to go home at 5:30 p.m.
on most days, Gray observes.
appointment and refill requests to simple queries
about medications or self-management.
Once physicians learn how to document
efficiently in an EHR system, they can complete
most of their notes during or between visits.
This and other efficiencies created by the EHR
may allow them to see more patients per day.
Alternatively, they can go home earlier.
EHRs offer other possibilities for improving
a practice’s bottom line. For example, EHRs can UBM WHITE PAPER | Return on Investment in EHRs
6
help doctors reduce malpractice risk, leading to a
lower rate of paid settlements. As a result, some
liability insurance carriers offer discounts to EHR
users. In addition, CMS lets providers use certain
EHRs — including NextGen — to report PQRI data,
reducing the administrative burden on practices.
And the use of an EHR’s health-maintenance features enables providers to call back patients for
needed preventive and chronic care, improving
quality and generating new revenue.
Changing Environment
As CMS and private payers move toward “pay for
value” reimbursement methods, an EHR system
will be more essential than ever. This will not happen right away. For instance, Medicare will not
start putting a small portion of physician payments
at risk for meeting quality goals until 2015. CMS’
shared-savings program for ACOs, also partly
based on quality benchmarks, starts in 2012, but
it will take a few years for ACOs to be formed in
most parts of the country.
Nevertheless, when these programs begin to
have an impact, practices that know how to use
EHRs for quality improvement and reporting will
be way ahead of the game. And, since Meaningful
Use requires reporting of quality data, practices
that are ready to attest to Meaningful Use of their
EHRs should be able to do that for other performance-based programs, as well.
Meanwhile, EHRs can help practices reap
rewards in pay for performance (P4P) programs
and medical home pilots, where those exist. In
California, for example, the Integrated Healthcare
Association, representing providers and plans, pays
millions of dollars in P4P incentives to group
practices and independent practice associations
(IPAs). And Blue Cross Blue Shield of Michigan is
providing medical home payments to 1,800 doctors across Michigan.
Conclusion
There is no better time to buy an EHR system than
today. Aside from the Meaningful Use rewards,
there are numerous other public and private
incentives and tax breaks available to physicians
who acquire EHRs now.
While these incentives will help pay for an EHR
system, they won’t cover the total cost. But a stateof-the-art, integrated EHR/PM system can generate
more than enough cost savings and extra revenue
to bring a return on investment.
A combination of EHR modules may enable
practices to attest to Meaningful Use, at least in
Stage 1. But in the long run, physicians who rely on
a collection of disparate systems won’t garner full
government incentives and won’t be prepared for
the much more arduous process of building medical homes and accountable care organizations.
Physicians who are now shopping for an EHR
system should buy a first-class, integrated system
from a well-established vendor. They would also
be well-advised to work with a recognized valueadded reseller or technology company which can help them implement and maintain their EHR system over the long haul.
If physicians already have an EHR, they might
consider some ways to enhance the usability and
security of their system. These might include:
• A backup/archival solution to protect their data,
or a cloud-based archival service.
• A security solution or assessment to protect their
enterprise from hackers and data corruption.
• A virtual desktop infrastructure to improve the
efficiency of the system.
If physicians do their due diligence, select the
system that is right for their practice, and implement it fully, the EHR system will more than repay
their investment. n
