Financial analysis projects clear returns from electronic medical records

• HIT Description: Hypothetical electronic medical record (EMR) system More info...
  
• Purpose of Study: Estimate the cost-benefit of implementing an EMR system and articulate lessons for success
  
• Years of study: 2000
  
• Study Design: Predictive cost-benefit analysis
  
• Outcomes: Cost and benefits of an EMR system
  

• Settings: Virginia Mason Medical Center in a major metropolitan area on the West Coast
• Evaluation Method: Predictive cost-benefit analysis
• HIT System: ¤ Vendor-developed EMR for point-of-care that includes laboratory and radiology order entry, pharmacy order entry, documentation, and charge capture. No detailed description.
• Strategy: The EMR system was planned to be implemented over 7 years of period.
• Financial Context: A 280-bed acute care hospital, 16-hospital-based and satellite outpatient clinics, a research institute, and a network of about 400 employed physicians. Patient population was not described.
• Facilitators: The authors implied the following facilitators: 1) assess the organization's receptiveness to EMR technology and to adjust its implementation approach accordingly, 2)involve users in the planning process, 3) tailor by organization type, needs, and objectives, 4) people in the organization need to be willing to change the way of doing business so that the technology works for them.
• Extrinsic Factors in valuing cost and benefits: The organization's current clinical information systems were badly outdated and not extensively used. Only a small portion of patient medical information was stored electronically but difficult to use. Paper charts and paper-based processes were the standard practice.
• Cost of HIT systems: Annual cost was estimated but no detail breakdowns. The total costs for the seven-year period were estimated to be approximately $19 million.
• Cost of Implementation: The author mentioned that, because the EMR implementation was scheduled to be phased in over a six-year period, they did not factored in the temporary reduction in physician productivity during the transition to the new system. No other implementation cost, such as training and data entry, was mentioned.
• Healthcare Utilization: Assumed cost-effective prescribing to reduce capitated prescription benefits costs by 10%, and improved formulary compliance to reduce inpatient medication cost by 10%.
• Quality of Care and Patient Safety Outcome: Assumed 28% reduction in adverse drug events (ADEs).
• Benefits: The net benefit was estimated at $31,360,953 (net present value at 10% discount rate, but not stated as to year of dollars) over the 7 years period.
• Changes in healthcare costs: The eventual dollar benefit by changes in healthcare cost includes $1,127,604 from reduced ADEs, $1,087,958 from reduction in capitated drug benefits cost, and $720,000 from reduced inpatient medication cost.
• Changes in efficiency and productivity: Financial benefits are estimated for the following changes in efficiency and productivity: o Reduction in time spent managing laboratory and radiology orders ($921, 044) o Reduction in laboratory/radiology FTEs needed to process orders ($93,600) o Reduction n laboratory FTEs involved in working suspended charges ($62,400) o Reduction in pharmacy FTEs because of streamlined order-entry processes ($200,000) o Reduction in documentation costs through the use of structured documentation in the outpatient setting ($1,027,547) o Availability of information at the point of care ($2,744,834) o Charge capture ($9,602,407)
• Time needed to accrue benefit: It was estimated to see the above benefit in Year 2, and the benefit will outweigh the cost in Year 3.