Why providers need a cost-conscious approach in buying IT

Provider organizations have key needs for healthcare IT systems—they should be easy for clinicians to use, improve patient health and should not bankrupt their budgets.

And how is healthcare doing thus far?

The EHRs available today are developing rapidly. Vendors are making frequent and impactful improvements to improve system usability. Clinicians are getting better at maximizing the contribution healthcare IT makes to patient health and safety. It’s not hard to see how healthcare IT can meet the first two requirements and broadly contribute to improved healthcare.

But then, there are the costs. In this crucial third requirement, many EHRs are as much liability as asset.

"All the evidence is that we haven't paid enough attention to prices," says Ashish Jha, MD, director of the Harvard Global Health Institute, regarding a study recently published in the Journal of the American Medical Association. "And prices are where we are truly exceptional. We're just higher for everything—drug prices, physician prices, nursing prices, hospital prices, MRI prices."

And, yes, technology prices, but not just the healthcare IT kind. While healthcare IT purchases have contributed to noteworthy financial challenges at many hospitals and health systems, it is actual medical technology that has more impact on overall healthcare costs.

“The real culprit of increased spending? Technology,” health economist Austin Frakt writes. “Every year you age, healthcare technology changes—usually for the better, but always at higher cost. Technology change is responsible for at least one-third and as much as two-thirds of per capita healthcare spending growth.”

For healthcare IT, the concern is that exorbitant prices for EHRs and similar technology crowds out spending on other initiatives. It’s true that healthcare IT can help eliminate costly medical errors, and moving to the cloud should significantly reduce hardware costs. But EHRs don’t lower clinician salaries, the cost of pharmaceuticals or other costs.

"After investing more than $30 billion in health IT, we haven't improved the administrative efficiency," said Kevin Schulman, MD, an associate director of the Duke Clinical Research Institute and a contributor to a recent study on the impact of EHRs on billing processes. "That was one of the big promises of digitizing records."

According to the research data, the more complex a visit, the more expensive it is to bill. Payer complexity means a simple primary care visit requires 20 minutes to bill for it, and it costs slightly more than $20 to accomplish that. An inpatient surgery, by comparison, required 100 minutes of billing time at a cost north of $215.

"We think the costs are due to the complexity of the market itself," Schulman said. "Part of that complexity comes from the fact that every insurance company has their own way of doing things. This is a cost that's passed on to the provider organizations."

So it appears that budget-busting EHRs that can’t bring down these four costs—medical technology, salaries, drugs and payment complexity—are both failing to address the overall cost problem and adding to it.

So, if healthcare IT is neither a major contributor to rising costs nor a powerful cost mitigator, hospitals and health systems considering the purchase of healthcare IT systems should try to make wise, frugal purchases as part of a general cost-reduction plan. Indeed, the argument for a positive healthcare IT return on investment hinges on EHR platforms being significantly less expensive than most are now.

What can hospitals and health systems do to ensure that healthcare IT costs don’t become part of the overall concern with rising costs? At a minimum, adhere to these criteria:

Don’t put down a huge chunk of money. Some of the better known EHR vendors ask that hospitals and health systems invest millions upfront to get the implementation started. That’s a tall order for some organizations. Even for those that have the funds, aren’t there other ways to spend that money, such as new initiatives focused on patient care?

Look for pay-as-you-go, subscription-based contracts. Software was once something purchased for a lot of money and then upgraded until the company that made it decided to not support it anymore, after which you bought it again. Now, it is something that’s leased (software as a service) for a periodic fee.

Choose cloud-based systems. Going with a cloud EHR vendor makes someone else responsible for the purchase and maintenance of the hardware your system runs on. Your organization can reduce local IT support and stop worrying about regular updates. You can also put a café or some other revenue generator in the space where you kept a data center. Oh, and cloud-based systems are just as secure as local, if not more so.

Make it expandable. Application programming interfaces (APIs) make it possible for developers to create small applications that can be integrated into a larger platform. APIs and applications are sources of targeted functionality that come from a variety of sources, broadening the development base. Any EHR certified for Meaningful Use must include an API, but HIT executives also will want to ask the vendor about compatibility with current sources of applications.

As things change and improve, healthcare IT will have to enable improved administrative efficiency in tandem with hoped-for improvements to the way healthcare is administered. Pharmacy and related modules will have to be responsive to lower drug prices, if and when those changes occur. Perhaps healthcare IT can facilitate significant cost adjustments in other areas as well. In the meantime, hospitals and health systems can ensure that the EHR doesn’t become a financial albatross.