Report: Penalties Cost Less Than HIT Improvements

WASHINGTON — The federal stimulus package allots $19.5 billion for health information technology with an incentive plan for physicians to adopt electronic health records, but the costs of implementation for small practice groups could outweigh the savings, according to a recent study.

Researchers with Avalere Health, a Washington-based healthcare business and policy research firm, discovered individual or small group-physician practices would spend a projected $124,000 from 2011 to 2015 to replace current records with EHRs. Those practices would receive $44,000 in incentive payments from the federal government, leaving them with a deficit of $70,000, or $14,000 per year. Those who do not adopt EHRs will face a penalty of $8,500.

“These new incentives are intended to motivate doctors to adopt EHRs, yet for many physicians, the level of incentive may not reflect current financial realities,” says Jon Glaudemans, senior vice president at Avalere Health. “Given this gap, EHR adoption will still require a significant investment by small physician practices. In today’s economic climate, many physicians will struggle with this calculus.” 

more than 50 percent of physician practices have one to three doctors,according to the New England Journal of Medicine. This group could see paying the fine as more cost effective than implementing EHRs right away, the study states.

In 2005, the Agency for Healthcare Research and Quality found the average cost per physician to switch to EHRs was $32,606, and smaller practices could pay as much as $37,204. In addition, training and maintaining use of the EHRs costs an estimated $1,500 per month.

Proponents of health information technology tout its potential to stimulate innovation and generate cost savings through improved care coordination and reduced medical errors. The key to the stimulus strategy is the incentive fund, which would reward physicians that purchase and make “meaningful use” of EHRs, according to the study.

“The new administration has critical design and definitional decisions to make over the coming months, and providers have a short window in which to engage,” Glaudemans says. “Rapid clarification of eligibility criteria relative to ‘meaningful use,’ and timely articulation of technology and interoperability standards are crucial next steps for the new administration.”