NEW YORK, April 16, 2009 (GLOBE NEWSWIRE) -- Federal stimulus incentives for doctors and hospitals to implement interoperable electronic health records (EHRs) will not nearly compensate them for the overall costs they will incur, but future penalties from reduced Medicare reimbursement could be a bigger motivator, according to an analysis published today by the PricewaterhouseCoopers LLP (PwC) Health Research Institute.
In its paper entitled "Rock and a Hard Place: An Analysis of the $36 Billion Impact From Health IT Stimulus Funding," PricewaterhouseCoopers says that capital-constrained healthcare organizations are struggling to find the necessary funding to purchase EHR systems at a time when they are being asked to cut information technology costs.
In a March 2009 survey of 100 hospital chief information officers (CIOs), PwC found:
- 82 percent of hospital CIOs have already cut their IT spending budgets in 2009 by an average of 10 percent, with one in 10 making more drastic cuts of greater than 30 percent.
- Two-thirds (66 percent) of CIOs say they expect to be asked to make further cuts in IT spend before the end of 2009.
- Sixty-four percent of CIOs agreed that it is impossible to balance demand with the need to cut costs.
- One-half of CIOs with more than 500 beds say that federal funding is "crucial" to their ability to implement EHRs.
To help drive adoption of electronic health records by 2015, the federal government is investing $33 billion in incentives to providers. An analysis by PricewaterhouseCoopers' Health Research Institute shows that a 500-bed hospital could receive an average of $6.1 million in incentives to purchase, deploy and maintain a government-certified, interoperable electronic health record system. By comparison, the average 500-bed hospital that fails to implement a system by 2015 could see a reduction in Medicare funding by $3.2 million or more, depending on their Medicare volume.
PwC estimates that the average three-physician practice can expect to invest between $173,750 and $296,000 over two years to purchase and maintain an EHR system. Individual physicians, not practices, can receive up to a total of $44,000 each for adopting certified EHRs. Like hospitals, the penalties may be severe enough to motivate compliance with government-certified systems.
"The stick, even more than the carrot, makes a fiscally compelling argument for adopting electronic health records," said Daniel Garrett, managing director of PricewaterhouseCoopers' health industries technology (HIT) practice. "It's a small carrot compared to the amount of resources it will take to deploy this technology over the next five years. If an organization wants to have an enterprise-wide EHR up and running by 2011, they've got to start now. The incentives eventually go away and the stick will only get bigger."
According to PwC, one of the more problematic aspects for providers is that while they may realize some return on their EHR investment, the primary return on investment is expected to mostly accrue to private and public payers. The federal government estimates that the conversion to digital records will save $12 billion in healthcare spending over 10 years, which presumably would be seen in lower Medicare and Medicaid outlays. Since hospitals are the biggest beneficiary of government health spending, they are most likely to experience the biggest reductions.
"Some of the hardest work to be done in healthcare reform is still undone, that of an overall alignment of financial incentives from acute care and disease to wellness and prevention," said David Levy, M.D., PricewaterhouseCoopers global healthcare sector leader. "Ultimately, technology may enable the capture, analytics and transparency required to make a patient-centered health system a reality."
The amount an individual hospital will receive in health IT stimulus funding has nothing to do with how much it spends on the technology. The funding hinges on its Medicare, Medicaid and charity care volumes, which can differ radically from hospital to hospital.
- Health IT is moving from a voluntary initiative over the past decade to a highly regulated one with new rule-making government committees, stricter privacy laws and more onerous fines.
- With billions in new funding and government regulations, the health IT market will balloon far beyond the provider segment, providing new opportunities for health plans, pharmaceutical companies and other vendors.
- The Office of the National Coordinator will have broad new powers and $2 billion in funding. Nearly all of the funds will flow to those that are already using systems in a strategic and government-certified way.
A full copy of the report "Rock and a Hard Place" is available at www.pwc.com/EHRs.
The survey of hospital CIOs was conducted by PricewaterhouseCoopers and the College of Health Information Management Executives (CHIME) between March 2 and March 23, 2009. Sixty percent of respondents were from community-based hospitals, 13 percent from academic medical centers and 26 percent from hospitals affiliated with large health systems.
About PricewaterhouseCoopers' Health Research Institute
PricewaterhouseCoopers' Health Research Institute (http://www.pwc.com/hri) is an unparalleled resource for health industry expertise. By providing cutting-edge intelligence, perspective and analysis on issues impacting the health industry, HRI assists executive decision-makers and stakeholders worldwide in navigating their most pressing business challenges. PricewaterhouseCoopers is one of the only firms with a dedicated global healthcare research unit, capitalizing on fact-based research and collaborative exchange among our network of professionals with day-to-day experience in the health industries. .
About PricewaterhouseCoopers' Health Industries Group
PricewaterhouseCoopers' Health Industries serves as a catalyst for change and is the leading advisor to organizations across the health continuum, including payers, providers, health sciences, biotech/medical devices, pharmaceutical and employer practices in the public, private and academic sectors. With a distinctive approach that is collaborative, multi-disciplinary and multi-industry, PricewaterhouseCoopers draws from its broad perspective and capabilities across and beyond the health industries to help solve the array of emerging complex problems health organizations face, lead cultural and clinical transformation, and create a new sustainable model for care delivery that is quality-driven, patient-centered and technology-enabled.
PricewaterhouseCoopers' Health Industries' clients include both 40 of the top 100 hospitals in the United States and 16 of the 18 best hospitals as ranked by US News & World Report; all 20 of the world's major pharmaceutical companies; all of the top 20 commercial payers in the U.S.; municipal, state and federal government agencies and many of the world's preeminent medical foundations and associations.
PricewaterhouseCoopers has a network of more than 4,000 professionals worldwide and 1,200 professionals in the U.S. dedicated to the health industries. Our health industries professionals include a cadre of physicians, nurses, ancillary health providers and some of the nation's leading minds in medicine, science, information technology, operations, administration and health policy.
About PricewaterhouseCoopers
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