Who Should Pay for EHRs?

During the 2008 Presidential campaign, Candidate Obama promised an EHR for every American by 2014. The goal was to improve quality of care, reduce disparities and contain costs of health care. When the HITECH act became law in 2009, physicians found themselves under increased pressure to purchase an EHR. Many took action, went out and bought an EHR for their practice, and these are now well positioned to collect the financial incentives put forward by the HITECH act. Many more did not. EHRs are by and large a complex and expensive proposition and the HITECH incentives are not covering the average cost of purchasing and maintaining an EHR. In survey after survey, physicians consistently rank cost associated with EHRs as their top concern when considering transition from paper charts to electronic medical records. This is a bit disconcerting, since physicians have no problem buying other expensive tools and paying for human resources in their practices. How are EHRs any different?

Non physicians usually attribute this reluctance to computerize medical records to technophobia or a perverse need to keep patients uninformed in order to maintain power and perhaps even financial advantages. Physicians on the other hand, mostly argue that EHRs do not benefit them directly and therefore they should not be expected to use them, let alone pay for them. Since there is no evidence of physician technophobia in any other areas of medicine (or private life) and since there is no measurable benefit to doctors in keeping their patients in a subservient position, the question then becomes: who is benefiting from EHRs?

There are three primary stakeholders in health care: those who receive care, those who provide care and those who manage the financial aspects of health care, and no, we are not getting into the quintessential argument of whether there should be only two primary stakeholders. There are several secondary stakeholders as well: those who manufacture medical goods, those who provide ancillary services and those engaged in medical research.

Historically, an EHR has been defined as a software tool, used by health care providers to collect, analyze, display and exchange clinical information with others. The content collected in an EHR was exclusively generated by health care providers or by traditional ancillary service providers (e.g. labs, imaging, etc.). There is however a new type of ancillary service providers aiming to provide services directly to patients, mostly through mobile devices, who are clamoring for the right to become an accepted partner to the EHR clinical information exchange network. And of course patients, whether through these new ancillary service providers or directly, are also increasingly voicing a desire to be included in clinical information exchange. These developments are altering the classic definition of an EHR and changing the focus from tools to provide care to broad content management, which is more in line with Candidate Obama’s vision. In reality all these functions are still in their infancy, but the direction is fairly clear, and it is worth noting that unless all functions are optimally performed, there is not much benefit accruing to any stakeholder. Various constituencies may derive more value from one particular function rather than the others, but as long as that value exceeds what is made available by a paper system, someone should be willing to pay for it. Let’s examine our stakeholders, and their willingness to pay, from the bottom up.

Secondary Stakeholders – Here we find the drug and device manufacturers and the bewildering array of diagnostic facilities. Most of these companies are largely indifferent to what EHRs do and some stand to lose revenue when EHRs shine bright lights on spending patterns. They are not likely to consider paying anything for widespread EHR adoption. On the other hand, the mushrooming mobile health and personal health application providers, who base their entire existence on the availability and successful use of EHRs, show no willingness to share in the cost of computerizing medical records. Needless to say that medical research centers which have been habituated to mostly free access to data sources, may be willing to pay data aggregators, but would never consider participation in infrastructure investments.

Health Insurance Providers – The largest health insurance provider in this country is the Federal Government through the Centers for Medicare and Medicaid Services (CMS), and CMS is proposing to bear a rather hefty portion of the costs of EHR deployments. Obviously CMS is expecting to see great financial rewards from a fully functional EHR network. Whether CMS is placing onerous or misguided requirements on the technology is a completely different question and one has to keep in mind that CMS is primarily a payer and its primary concern must be proper stewardship of tax payer funds. To do that, CMS needs data, and lots of it. You don’t usually pay a mechanic to take a look at your car – you pay him to fix it. CMS is now paying health care providers to treat people and it would much rather pay them to fix people and keep them under warranty, and it would also prefer that this is done via a fixed price contract, instead of the current time & materials model. EHRs are the tools by which quality assurance is performed and deliverables are accounted for and measured.

What’s good for the goose should be good for the gander, and private insurers figured out that paying for EHRs may not be such a bad idea after all. I am not 100% certain, but I would suspect that financing EHRs for physicians in order to improve quality of care falls under the medical expenditures rubric and can be deducted from the federally imposed Medical Loss Ratios (MLR). Since private insurers have historically ran much tighter ships than CMS, I would expect that in return for their Stark exempt contribution to EHR expenses, private insurers will ask for at least as much data as CMS and probably a lot more.

Health Care Providers – These folks are as diverse as the patients they serve, but their interests in EHR are most closely correlated to their size, which ranges from the solo doc in a micro practice to integrated delivery networks serving millions of patients. For large providers who operate multiple and varied facilities of care, EHRs are a tool to effectively manage their business. They were always willing to pay for them and they are continuing to do so now, in spite of the constant rumbling about CMS regulations. At the other end of the spectrum, the small providers, mainly physicians in private practice, who are more financially strapped than ever, see no good reason to take on debt and pay for tools with no demonstrated ability to provide tangible returns. Keep in mind that using paper-based tools to manage a few hundred customers who purchase one of a handful of services between 9 and 5 four days a week, is not nearly as onerous as managing millions of customers purchasing thousands of different services around the clock all day every day. Nevertheless, even these small providers are starting to buy EHRs. As EHR software gets better, some manage to find efficiencies never before contemplated and others are just trying to keep up with the Joneses and survive. Reluctantly and grudgingly, with lots of hard feelings building up, they too are willing to pay.

Patients – All stated goals of EHR adoption ultimately benefit patients. Some may stand to benefit more than others, but in aggregate we will all benefit from improved quality, reduction in disparities and cost containment of medical services. Whether directly or indirectly, through taxation, premiums, wage reduction, increased prices of goods and plain old cash, patients pay for the entire enormity we call health care costs, which includes cost of actual care delivery, overhead and profit margins for all other stakeholders. EHR software is part of that overhead and so are the costs of analyzing, displaying and exchanging information collected by EHR software. When CMS and private insurers and even health care providers write checks for EHR software vendors, somewhere down the line this translates into a little bit less health care for each patient and/or a little more money needed to obtain care. So although we pay for all EHR expenses, we as patients, find ourselves in the perplexing situation where we are forced to lobby, argue, advocate and practically beg for access to the work product of EHR software. And that work product is our life story. It is the record of our birth, the narrative of our childhood successes and mishaps, a document of our education, sexual activity, fears, hopes, marriages, new children, career choices, residence, divorce, widowhood, disease, death and everything in between. In other words: Data. We are paying for this data to be collected, exchanged and analyzed. We are paying for people to decide if we should have a right to opt-in or opt-out of such activities. We are paying for media campaigns to convince us that what we are already paying for is worthwhile.

So here is one suggestion: instead of paying for EHRs indirectly, while allowing all stakeholders to complain about the expenses as if the fees came out of their own pockets, how about patients paying for EHRs directly? There is no difference in aggregate and we are not talking about a lot of money for each individual patient. A yearly fee of something between $5 and $10 per patient, per facility, should suffice. Call it EHR fee, or EHR subscription. Once we explicitly pay for it, we own it; not the software, not the hardware, but the Data itself. And this is how it should be.