Best of ECT News


Electronic Health Records: Big Business, and Getting Bigger

This story was originally published on May 14, 2010, and is brought to you today as part of our Best of ECT News series.

The title of the sweeping and controversial healthcare reform proposal signed into law last March — “Patient Protection and Affordable Care Act” — is a reminder that the focus of all healthcare is not institutional, but individual: the single patient.

Each of the millions of persons currently covered by health insurance, and each of the millions more who will become covered as a result of the new law is a single person, with a unique identity.

And a unique medical record.

Keeping track of patient records has become a big business in the world of electronic commerce. In the next few years, that business will become even bigger. Huge IT investments will be made by healthcare providers, insurance firms, and governments at all levels to expand and maintain the use of electronic health records (EHR). For technology firms engaged in hardware, software, support services and consulting, the national push to automate medical records will provide a huge market potential.

“It’s a big opportunity. Never before have you seen this much money being made available for this type of IT application. It presents a great incentive for information providers to get into this,” Jason Hess, general manager of clinical research at KLAS Research, and the author of a recent study of health record IT vendors, told CRM Buyer.

Expenditures for EHR in the U.S. reached US$1.34 billion in 2009, according to a market report issued by BCC Research. This robust level of funding was in place — and growing — even before a new federal health records program was authorized by the American Recovery and Reinvestment Act of 2009 (ARRA).

“Virtually none of the EHR spending for 2009 was funded by the ARRA. The government did not even adopt a rule establishing funding criteria until late in 2009,” Andrew McWilliams, an analyst at BCC Research, told CRM Buyer. BCC Research produced a market report on health records IT last year.

Feds Want Better Health IT

The federal program will provide a major boost for investing in EHR. The 2010 health reform law itself carries a number of provisions that involve the adoption of health information technology in a range of activities from streamlining health insurance enrollment to patient care.

However, the major federal effort in patient records technology began with the 2009 ARRA program. The law contained a separate section, entitled the “Health Information Technology for Economic and Clinical Health Act,” or HITECH, aimed specifically at accelerating the use of electronic medical records. The HITECH program involves federal grants coupled with a combined Medicare and Medicaid IT initiative. The money from the grants program began to flow earlier this year.

In a matter of weeks, between early February and early April, the U.S. Department of Health and Human Services (HHS) shelled out more than $1 billion in grants to promote the adoption of electronic health records. HHS awarded $548 million to individual states or state affiliated organizations to facilitate health information exchange (HIE) programs at the state level. The agency also awarded $375 million to nonprofit organizations to support the development of regional extension centers (RECs) that will aid health professionals as they work to implement and use health information technology.

In addition, HHS awarded $84 million to 16 universities and junior colleges to support the training and development of more than 50,000 new health IT professionals. Another $60 million was awarded to four advanced research centers to focus on solving current and future challenges that present barriers to the adoption and meaningful use of health IT.

That’s just the beginning. The $923 million awarded to the states and regional centers is designed to facilitate the implementation of the Medicare and Medicaid health IT initiative that could provide billions more in federal support for health information technology.

“States play a critical leadership role in advancing the development of the exchange capacity of healthcare providers and hospitals within their states and across the nation. Health information exchange will enable eligible healthcare providers to be deemed meaningful users of health IT and receive incentive payments under the Medicare and Medicaid electronic health record incentive program,” said David Blumenthal, M.D., M.P.P., national coordinator for health information technology at HHS.

The $30-Billion Program

The Medicare initiative utilizes a carrot-and-stick approach. Doctors will be able to receive as much as $44,000 each in bonus payments from Medicare to implement EHR programs. Support is staggered, however, with early adopters eligible for the maximum funding, while those who delay participation may only receive $29,000 each. In addition, hospitals will be eligible to receive multiple millions of dollars for the same purposes.

After 2016, doctors and hospitals won’t be able to obtain any IT assistance from the Medicare program. That’s when the “stick” mechanism kicks in. Instead of receiving support from Medicare, healthcare providers who do not meet minimum EHR requirements will be penalized by a reduction in their Medicare reimbursement payments.

The federal HITECH program also includes a separate Medicaid IT initiative that involves the payment of bonuses to healthcare providers dealing with the Medicaid community who implement EHR programs. The estimated net investment of the Medicare/Medicaid EHR initiative, after accounting for incentive payments, less penalties for noncompliance, would come to $30 billion between 2011 and 2019, according to the Congressional Budget Office.

Yet even this massive federal support will not be sufficient to sustain the continuous implementation and maintenance of EHR programs. For example, the nearly $1 billion in grants awarded earlier this year is just a down payment to states and related agencies for their roles in promoting EHRs.

Under the state HIE cooperative agreement program, states will be required to come up with matching funds. The matching funds can come from sources other than state general revenues. With the REC program, the expectation is that the federal funding will not be sufficient to totally operate the program.

Sustainability Needed

“In both instances, additional funds will be required during the initial two-to-four year phase of federal funding, as well as after the federal funding terminates. Groups will need to work to find sustainable business models, which is a challenge. Federal funding is helpful in the development stages, but long-term sustainability will rely on strategic initial investments,” Diane Jones, vice president of policy and programs at the eHealth Initiative, told CRM Buyer. The eHealth Initiative is a coalition representing health IT providers, clinicians, patient groups, employers, medical products vendors, public health agencies and others.

The substantial support from the federal government for developing EHRs and facilitating health information exchange should accelerate adoption of automated patient records. As with so many federal programs, however, government support also comes with government strings. In the case of electronic medical records, the federal government wants to make sure that patient records are used properly in terms of privacy and related considerations. In addition, the government is interested in promoting data quality standards and functionality, including inter-operability among users.

To that end, several federal initiatives have been launched, notably the government’s “meaningful use” requirements for electronic medical records. These initiatives will not stymie the impetus provided by federal financial support — but they could delay implementation and create uncertainty for IT developers seeking to introduce health IT products.

The Big Business of Electronic Health Records, Part 2

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