New Math for Electronic Health Records

By now most of us have heard of Electronic Health Records, or alternatively, Electronic Medical Records. Electronic records are a digital copy of our medical visits, test records, prescriptions, and physician’s notes, which have lived in paper form for the past century of medical practice. Many of us have experienced the frustration of getting records from one doctor and hand carrying them to another, showing up at a specialist appointment to find that the fax of your referral didn't arrive, or compiling medical records from multiple doctors and hospitals to coordinate care for an elderly parent or sick child.

Electronic Health Records (EHR’s) are one of the critical enabling pieces of the Business Innovation Factory’s Primary Care Practice of the Future, and for every national model and initiative to transform primary care effectiveness. Their presence unlocks the potential to put the patient at the center, and to let the care follow them across multiple providers. Putting together disparate clinical data into a single picture of the patient is the first step to treating people, not problems. Through the Primary Care Practice of the Future project, BIF is working with the Rhode Island healthcare community to shape and build the business model that will enable widespread adoption of EHR’s, and leverage them to transform the patient experience.

Over the past ten years, enormous strides have been made in digitizing every other area of our lives. Bank and investments, mortgage and credit card information, utility and phone bills, tax records, municipal public data, and so on. It wouldn't be going too far to say that health and medical records are the final frontier, a hodgepodge collection of fragmented, repetitive, and often indecipherable paper files in doctor's offices across America.

This plethora of paper causes and contributes to all sorts of inefficiencies in the US health systems. Study after study have shown that paper records and hand recording increase medical error, decrease productivity, cause duplication of testing and procedures, and increase hassle for the patient. They drive administrative costs at insurers through the roof, and make data tracking nearly impossible.

Yet, despite numerous EMR technology companies, standards bodies, and policy calls-to-action, the use of paper records stubbornly persists. At a forum last week, the Providence Chamber of Commerce and RI Quality Partners explored the inertia of the status quo, and what must change to make doctor's shift to electronic records. Seen through today's lens of the doctor's office, the roadblock comes down to cost. Not just the initial cost of an EMR system, which averages $25K per doctor, but the perceived cost of disruption to the office administration, learning curves, IT maintenance, and other hassle costs that are estimated to be as high as a 30% productivity hit on the office !

That really struck me. In any other industry in which I've worked, walking in to a business person's office and trying to sell them a piece of technology that reduced productivity by 30% would get you a quick re-orientation to the pavement. In health care, the insurance companies are trying to force the issue by mandates, subsidies, and supplementary practice management resources. I'm convinced this won't move anybody but the early adopters, who were going to move anyway.

And the docs have a legitimate concern. Where is the shining example of the practice that has increased productivity by 30% since introducing EMR's? An electronic record is simply a digitization and automation of patient and procedural information, and enables (in theory) a host of improvements around office process, care management, and customer experience. So far, the "opportunity" has not been framed this way for the practitioner community, so they've been dragged reluctantly to the lowest and most ineffectual level of electronic record implementation, the brute-force digitization of paper-based data. Perversely, this proves and furthers the naysayer's point of view, that EMR's are more trouble than they are worth.

While listening to this impasse, I started scribbling some numbers on the back of a notepad. $25K for an EMR system per doc, plus a multiple, lets say 4X, to get past the hassle factor to a successful digitized transformation of the office. (Lets assume for the moment that we can figure out what that transformation would look like, I'll come back to that). That price tag of $100K is seen as a huge hurdle for a family physician, especially if a large part of the efficiency benefit flows to the insurer.

But think about it another way. We've got about 1500 active primary care physicians in RI - family docs, internists, pediatricians and geriatricians. At $100K a doc, that's a $150 Million dollar project to install EMR's across them all and transform the offices with the new capabilities. Sure, $150M is a big number, and lets say it would take 5 years to roll the whole thing out.

Want to know what we spend on healthcare in RI in 5 years?

$30 Billion bucks. A little over $6 Billion a year, per the Kaiser Foundation.

Wow, suddenly $150M looks like a rounding error. $150M on $30B, to get lower error, more continuity of care, and a better patient experience? Maybe its worth looking for some new math to solve this problem.

Primarily the $150M investment is a denominator problem. When you divide the spend across 1500 primary care providers, it just doesn't work for any individual provider. But what about if you spread it across all the insured patients? At 90% health insurance coverage in RI, we've got 900K of them. And what about visits? 53% of visits are primary care, accounting for a whopping 2.5M visits a year. Those are much bigger denominators, and if you consider that truly transformed practices should deliver better value to the provider, the patient, the insurer, and the employer, it makes the financial work a lot lighter by spreading the burden further.

I won't bore you with the spreadsheet, but doing the long division shows something interesting. If we all pitched in a little - $8 / year from the insurers for each digitized patient, $2 / year from the employers for each digitized patient, and $1 a piece from the provider and the patient for each digitized visit - you'd cover the cost for the EMR and the office transformation handily.

Here's where the business model innovation comes in, and we steal a page from the airline industry. GE realized a few years ago that selling big expensive airplane engines to upgrade existing planes was a difficult sell to commercial and corporate jet owners. So they rethought the "job to be done" from the customer's perspective; in their case, the jet customer wants, and will pay for, an hour of safe, reliable and efficient time in the air. That same customer could care less about the features and functions and engineering characteristics of the engine. So GE decided to sell engine uptime by the hour, and manage all the complexity behind that on the customer's behalf. GE makes the engine, installs, upgrades and maintains the engine once on the jet, and finances the capital and ongoing expenses.

The jet owner has a higher perception of value because they pay for something they care about, and GE makes a much higher and more predictable profit, and the constant arm-wrestling that goes with selling big capital investments disappears. We can see this example of changing the business model to from selling a piece of technology to selling a unit of outcome exploding in many other capital intensive but distributed markets, such as facilities management and solar energy.

Back to our EHR challenge in RI. Imagine an EHR Transformation consortium with a rotating fund, financed by a commercial bank with about $40M. The consortium members are the state's healthcare provider leaders, who have agreed on the crucial EMR and office transformation template (which is practices and outcomes based, rather than stipulating a software vendor).

The Health Commissioner sets out a statewide goal, 80% adoption of EHR transformation across primary care in 5 years, and the insurers align reimbursements to that goal, progressively decreasing reimbursement rates for non-digitized offices.

Any primary care provider can sign up for the EHR Transformation program, which supplies a package of transformation services around a set of EHR software vendors that have a set of standard features in place. Once a primary care office signs up, a team of practice consultants works with them to not just install the software, but to customize and implement practice management processes and training to unlock the productivity and customer experience that is the EHR's true potential. This is that transformation template I referenced, which must be developed, agreed, and templatized. There will probably be several of them, for small, medium, and large practitioner offices.

The key change here is the financing. Every time a primary care provider signs on to the EHR program, service agreements ensure that everyone pays a little over 5 years; everyone buys the utility of a digitized patient or a digitized visit. The insurer pays $1 a month for each patient registered with that practice, split between the insurer and the employer. The provider pays a dollar for each visit to their practice, and collects an extra $1 from the patient. The consortium provides billing software that manages the distributed payments, payment counts, and services the payments on the line of credit to the bank.

Sure there are plenty of questions to be answered, but I would argue that we need to answer many of them by trying this out with 20 doctors. Using the same assumptions that I've spelled out above, we could do this for $2M, and we'd know in 1 year whether it was working. If we do nothing, in 1 year we'll waste $2M of the health care community's time, arguing about how to break the logjam, and who should pay. we need to make payment a non-issue, a shared assumption that allows us to move on to the important questions.

Questions such as:

How should the office work differently once it is digitized? How can this transform the patient experience?

When the electronic record is extended to the consumer, how will it change the relationships between the providers and the consumer?

How will we network the health records across providers, and how will it change the way we prepare for patients and deliver care?

How will we measure work and outcomes differently in the office and at the insurer, and how will it change the way we approach quality improvement?

Technology and financing should pave the way, not stand in the way, of getting to these questions. Lets change the denominator.

Posted June 14, 2007 02:20 PM by Allan Tear | Permalink