Electronic Health Records and Financial Incentive

The literature review examined existing studies regarding the implications of maintaining a nationwide, interconnected, Electronic Health Record (EHR) system. The U.S. Government sees the implementation of an EHR system as a priority, as evidenced by the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009, which provides approximately $560 million to states to create the infrastructure necessary to operate such a system. The paper discussed the positive and negative implications of such a system, focusing on patient outcomes, care coordination and effects on patient privacy in a national EHR structure. A review of the literature for that paper demonstrates there is conflicting information regarding the financial impact of complying with the HITECH Act, separate from the potential penalties that may be incurred by healthcare organizations for failure to comply by converting to EHRs. More study is needed to determine if there are positive or negative business reasons, separate from patient outcomes, for compliance with HITECH.

Three issues mentioned in the paper raised flags asking for more study about the business implications: the potential that switching to EHRs might increase revenue through more billable encounters, the possibility that smaller organizations may not be able to afford switching to EHRs and the possibility of liability for violations of the Health Insurance Portability and Accountability Act (HIPAA) and HITECH.

In the case of the first issue, Schenarts, Goettler, White, Brett, and Waibel (2013) found that billable encounters increased in a trauma center they studied, possibly due to errors from the use of fillable forms and the copying of previous notes. In effect, it may be that patients received care that was not medically necessary due to poorly written notes. More billable encounters likely equate to more revenue, and while healthcare organizations have a mandate to care for patients, they are still businesses. If the implementation of EHRs in practices increases billable encounters in general, there may be a strong financial incentive for an organization to convert on a faster schedule than it may have perhaps planned to. More studies may be warranted to determine if that is true, and some discussion of the ethics of implementing a system simply for the additional revenue its errors may generate may be needed as well.

Next is the potential cost of converting from paper records to EHRs. In one example, P.D. Smith reported in his 2003 article for the American Academy of Family Practitioners (AAFP) that in the case of a “small …residency clinic,” “the total cost for implementing the EHR systems at Bellevue Family Medical Clinic and one year of technical support was about $220,800 to $260,800.” That is a significant outlay of capital, even for a larger business. A smaller business might be challenged to pay for the electronic system, even if the amount was financed over ten or more years. This could delay the growth of a practice, preventing the hiring of more staff, expanding facilities, etc. More studies to determine if there are many practices struggling to pay for the cost of converting could be beneficial.

Finally, there is the potential of liability for HIPAA violations, which the literature reflects may be more likely due to the electronic nature of EHRs. In the case of power outages, human error, technological errors, etc., there is likely a higher potential for spillage of personal data. The smallest bit of personal data leaked may be a HIPAA violation, and the more significant the data loss, the higher the penalty may be. In a summary of possible penalties under the Act, the American Medical Association (AMA) lists the potential civil penalties like up to $1.5 million, in the case of multiple penalties (AMA, 2013). In reality, fines may be higher due to HITECH, as in the case of the fine levied in 2011 against Cigna Health of Maryland, which totaled $4.3 million, both for releasing data in violation of HIPAA and for failing to cooperate with investigators (hhs.gov). Criminally, violators may be subject to fines and imprisonment up to $250,000 and ten years in prison for the most egregious violations swell (2013).

Of course, where there are courts, there are lawyers and related expenses, which has potentially necessitated a cottage industry for HIPAA liability insurance. Due to the potential for astronomical fines and even jail time for violations, even if they are inadvertent, it stands to reason that there would be new language in liability policies to cover the defense of HIPAA violations, and associated fines. It seems that these increased premiums would cost thousands of dollars per year, but that may be a small price compared to the potential millions of dollars that may be lost in the event of a violation, amounts that could completely cripple a healthcare organization and put it out of business. The potential effect of these premiums, and the level of risk associated with not having appropriate liability coverage, might make for interesting study as part of evaluating the overall financial impact HITECH has on healthcare organizations. It may be that the cost of switching to EHRs and exposing an organization to additional risk of expensive data spillage could be a disincentive to complying with HITECH.

In the previous literature review, a thorough examination of studies and other work on the impacts of HITECH on patient outcomes and other metrics measuring the success of medical organizations did not look specifically at financial issues. Those issues did become apparent however, upon a reading of the review. The questions of the potential that switching to EHRs might increase revenue through more billable encounters, the possibility that smaller organizations may not be able to afford to switch to EHRs, and the possibility of liability for violations of HIPAA and HITECH may assist in determining if there are financial incentives or disincentives to compliance with HITECH.  

References

Civil Money Penalties. (n.d.). United States Department of Health and Human Services | HHS.gov. Retrieved December 12, 2013, from http://www.hhs.gov/

HIPAA Violations and Enforcement. (n.d.). American Medical Association. Retrieved December 14, 2013, from http://www.ama-assn.org/

Schnerts, P., Goettler, C., White, M., & Waibel, B. (2013). An objective study of the impact of electronic medical records on outcomes in trauma patients. Division of Trauma Surgery & Surgical Critical Care, Department of Surgery, Brody School of Medicine.

Smith, P. D. (2003, May 1). Implementing an EMR System: One Clinic’s Experience. aafp.org. Retrieved December 14, 2013, from http://www.aafp.org/fpm/2003/0500/p37.html