Even small or solo practices can benefit from EHRs

Electronic health records are beneficial for small or solo physician practices, according to researchers from the University of California, San Francisco reporting in the September/October 2005 issue of Health Affairs.

Since more than two-thirds of U.S. physicians work in small practices, the authors sought to determine the costs and benefits of EHRs to this group. Although EHRs have the potential to greatly improve patient care, physicians, especially in smaller practices, have been slow to adopt the technology. Researchers from the Medical Group Management Association recently surveyed its members and found only a 12.5% EHR adoption rate in medical groups with five or less full-time physicians.

The UCSF report provides necessary data to help policymakers formulate both financial and nonfinancial incentives for physicians to increase their rate of EHR adoption and quality improvement benefits, while keeping down costs.

After evaluating 14 practices in 12 states, the authors determined that initial EHR costs were approximately $44,000 per full-time equivalent provider per year and ongoing costs were $8500 per FTE per year (about 19.5% of initial cost). The average cost per FTE provider was $22,038 for software, training, and installation, $13,000 for hardware, and $7473 for revenue losses from reduced visits during training and implementation.

Although this initial monetary outlay may seem substantial for a small group or solo practitioner, the report stated that financial benefits averaged approximately $33,000 per FTE provider per year. Increased coding levels and efficiency-related savings accounted for the financial gains.

It took only 2.5 years for the majority of practices to pay back their initial and ongoing EHR investment and to see net benefits greater than $23,000 per FTE provider per year. Providers also found additional benefits after implementation, including more personal time and the ability to work from home and access records when on call.

Even though data organization, accessibility, and legibility improved, however, overall quality improvement increased only slightly, since few of the practices set specific performance targets and protocols for delivering better chronic and preventive care. Some of the practices encountered financial risks due to billing problems, reduced revenue in the beginning, and system crashes.

The motivating factor for most of the participants who purchased an EHR system was to improve quality of care. Yet the biggest gains were in coding benefits and billing improvements. Because the providers consistently used EHR templates to document and conduct visits more thoroughly, they billed at a higher coding level and received higher reimbursements.

The authors noted that EHRs do provide cost benefits for smaller practices and should greatly improve quality of care. Since the study found only a slight quality improvement, however, the authors recommend that policymakers focus on revenue gains that are quality related rather than coding related in their pay-for-performance initiatives that encourage physicians to purchase EHRs.