A cost-benefit analysis of electronic medical records in primary care

• HIT Description: Hypothetical electronic health record (EHR) systems in ambulatory primary care settings More info...
  
• Purpose of Study: Electronic medical record systems improve the quality of patient care and decrease medical errors, but their financial effects have not been as well documented. The purpose of this study was to estimate the net financial benefit or cost of implementing electronic medical record systems in primary care.
  
• Years of study: Not Available
  
• Study Design: Predictive cost-benefit analysis
  
• Outcomes: 5-year net financial benefit or cost per primary care physician from using EHR
  

• Settings: A hypothetical primary care clinic cased on Partners HealthCare System, an integrated delivery network formed in 1994 by the Brigham and Women's Hospital and the Massachusetts General Hospital.
• Evaluation Method: We performed a cost-benefit study to analyze the financial effects of electronic medical record systems in ambulatory primary care settings from the perspective of the health care organization. Data were obtained from studies at our institution and from the published literature. The reference strategy for comparisons was the traditional paper-based medical record. The primary outcome measure was the net financial benefit or cost per primary care physician for a 5-year period.
• HIT System: Hypothetical electronic health record (EHR) systems with clinical decision support alerts and reminders in ambulatory primary care settings. No further detail described.
• Financial Context: A hypothetical primary care provider patient panel using average statistics from the Partners HealthCare System. At base case, this panel included 2500 patients. Three fourth of whom were under 65 years old; 17% of those younger than 65 years of age belonged to capitated plans.
• HIT System Sustainability: 5 years
• Cost of HIT systems: System costs include the cost of annual software license estimated at $1,600 per provider per year, hardware $6,600 per provider and replaced every 3 years (including three desktop computers, a printer, and network installation), and ongoing maintenance and support $1,500 pr provider per year (including additional technical support staff and system/network administration)
• Cost of Implementation: Implementation costs were estimated at $3,400 per provider in the first year that included workflow process redesign, training, and historical paper chart abstracting. Temporary productivity loss was estimated at $11,200 in the first year.
• Long-term Cost: The estimated initial cost was $13,100 and annual cost for the following 5 years were $14,300, $3,100, $9,700, $3,100, and $3,100 respectively. Hence, the total five year cost was $46,400, or equivalently, $42,900 in present value.
• Benefits: The estimated net benefit from using an electronic medical record for a 5-year period was $86,400 per provider. Benefits accrue primarily from savings in drug expenditures, improved utilization of radiology tests, better capture of charges, and decreased billing errors. In one-way sensitivity analyses, the model was most sensitive to the proportion of patients whose care was capitated; the net benefit varied from a low of $8400 to a high of $140,100. A five-way sensitivity analysis with the most pessimistic and optimistic assumptions showed results ranging from a $2300 net cost to a $330,900 net benefit.
• Changes in healthcare costs: Decreased utilization can be transferred to financial benefits under capitated reimbursement. It was predicted that the decision support alters and reminder built in the EHR could decrease healthcare costs by reducing 34% of adverse drug events, offering 15% savings by using alternatives, less expensive medications, and reducing the cost of laboratory and radiology tests by 8.8% and 14%, respectively, as a result of decreased utilization. The financial benefits are savings by $2,200 for adverse drug events, $16,400 for drug savings, $2,400 for laboratory savings, and $8,300 for radiology savings.
• Changes in efficiency and productivity: It was estimated that 600 manual chart pulls could be reduced annually. At $5 per chart, a saving of $3,000 is estimated. In addition, $2700 was estimated to be saved from 28% reduction of transcription costs from partial elimination of dictation. For fee-for-service patients, the authors projected 2% improvement in billing capture and 78% decrease in billing errors, which transferred to $7700 and $7600 additional savings.
• Time needed to accrue benefit: Predicted to see the benefits of chart pull savings and transcription savings from the first year; prevention of adverse drug events and drug savings from the second year; and laboratory savings, radiology savings, charge capture improvement, and billing error decrease from Year 4. � � á Annual benefits were estimated to be savings of $5,700 for Year 1, $24,300 for Years 2 and 3, $50,300 for Years 4 and 5, totaling $154,900 or $129,300 at present value. The savings were estimated to outweigh the costs from Year 2 of the EHR implementation. � � á The estimated net benefit for a 5-year period was $86,400 per provider at present value.� � á Sensitivity analyses showed that the estimates were sensitive to the assumption of the proportion of patients whose care was capitated. The net financial value could range from a $2,300 net cost to a $330,900 net benefit.
• Conclusions: Implementation of an electronic medical record system in primary care can result in a positive financial return on investment to the health care organization. The magnitude of the return is sensitive to several key factors�