The New England Journal of Medicine, on July 3,2008, published eye-opening research regarding the rateof electronic health record (EHR) adoption in the UnitedStates. The study revealed that fewer than 20% of physi-cians have implemented EHRs to date.1 Not surprisingly,those least likely to convert from paper to electronicrecords are smaller, independent practices or those notaffiliated with a large health system.

The two most significant barriers to EHRutilization are “fear” and “funding.”

The study—and anecdotal evidence—reveals thatthe two most significant barriers to EHR utilization are“fear” and “funding.” Many physician practices fear thatthe conversion will be too difficult and disruptive. At thesame time, they are concerned about how they will beable to fund the investment, as well as the impact the tran-sition will have on their bottom line.

The fear factor must be addressed internally. Whenpractice leaders determine that the time has come for EHRadoption, they must undertake disciplined implementationplanning and launch change management initiatives to sup-port the effort. Workflow processes must be reengineeredbecause even the best manual system will fail within an au-tomated environment. Reasons for the transition must beclearly communicated, while physician and nurse champi-ons must be identified to serve as liaisons with the end user.Staff time must be dedicated to ensuring that the imple-mentation is well considered and well executed.

What may not be readily known is thatresources to address funding concerns areavailable not only internally, but externallyas well.

What may not be readily known is that resources toaddress funding concerns are available not only internally,but externally as well. When undertaking the transitionfrom paper to electronic records, practices need to be awareof opportunities for financial support and assistance, andunderstand which strategies and tactics will increase their

Investigate Funding Alternatives to SupportSuccessful EHR Implementation

Charles W. Jarvis, FACHE*

ational studies show that electronic health record adoption hasbeen sluggish at best, with the two greatest barriers being “fear”(of change) and “funding” (budgets can’t accommodate a sig-nificant outlay). While change management must be addressedinternally, funding assistance is available from a wide rangeof sources. After conducting a comprehensive cost and return oninvestment analysis, physician practices must investigate op-

tions and determine which ones “match” their needs and priorities best.Among the available sources are grants or support from federal, state, and lo-cal governmental entities; private foundations, payors, and pharmaceuticalcompanies; health information technology vendors; and hospitals and healthsystems. Seven key considerations can guide practices as they evaluate fund-ing sources to ensure their goals can be achieved.

Key words: Financing EHRs; funding; grant resources; HIT investment.

N

*Assistant Vice-President Healthcare Industry Services and GovernmentRelations, NextGen Healthcare Information Systems, 795 Horsham Road,Horsham, PA 19044; e-mail: cjarvis@nextgen.com.Copyright © 2009 by Greenbranch Publishing LLC.

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likelihood of being successful in qualifying for these finan-cial opportunities.

CONDUCT COST ANALYSIS

When assessing financial resources that might beneeded for a transition to automation, the first step any prac-tice should take is to conduct a thorough cost analysis. It isvital that both administrative and clinical leaders educatethemselves about the true expenses associated with EHRadoption—and about the value it can provide. Too often,physician practices look only at the price tag of a particularsoftware and hardware solution. This kind of limited analy-sis puts them at a distinct disadvantage for two reasons:1. They are relying upon how the vendor (health infor-

mation technology, or HIT, provider) frames the costof its product, which may or may not be inclusive ofrelated expenses, rather than coming to an objectiveconclusion about what the bottom line cost eventuallywill be. When presenting an estimate, for example,some HIT providers include only the installed price ofthe software—which is the “tip of the iceberg” andmay represent 50% or less of the entire project cost.Practices, however, also must factor in expenses relatedto hardware purchases, infrastructure upgrades, paperrecord scanning or abstraction, staff training time, anda temporary decrease in productivity.

2. By focusing on software license “price,” practices mayoverlook “value.” As with many other pieces of equip-ment, “cheap” does not always translate to a “gooddeal.” Practices need to consider which features willallow them to increase efficiency and improve out-comes, and consider how the technology will supportthem over the long term. They must recognize thatthey are not purchasing an EHR system just for today,but for tomorrow and the tomorrow after that.

CALCULATE LONG-TERM ROI

It is also vital before making a purchasing decisionto calculate return on investment (ROI). Many HITproviders will supply an ROI tool to assist in the process,often available on their Web sites so that practice leaderscan undertake the exercise at their own convenience.

There are a number of factors that practices shouldconsider when calculating ROI relative to EHR adoption:• Current transcription expenses: The EHR system will

eliminate these costs almost immediately after imple-mentation. The savings will continue to accrue over time.

• Cost of paper supplies and manual processing: Prac -tices will no longer need to purchase charts and forms,and will reduce staff time invested in pulling, finding,and re-filing charts.

• Office space dedicated to paper records: These areaswill be freed to be used for revenue-producing activities

like additional exam rooms, laboratory facilities, etc.One Midwestern practice added seven new exam roomsin the space previously occupied by medical records,transforming a cost center into a revenue center.

• Back office personnel: Some larger practices (e.g.,more than three providers) will be able to reduce med-ical records staff or redeploy them in other areas such ascollections to strengthen the bottom line.

• Charge capture: EHRs ensure all charges are capturedand the correct level of E/M code is billed. This in-formation is automatically forwarded to the practicemanagement system for faster billing and timely pay-ment. The typical result is somewhat higher, and def-initely timelier, payments.

• Productivity: Physicians no longer need to set asidetime for dictation and can therefore see more patientsduring office hours.

CONSIDER EMERGING PAY-FOR-PERFORMANCE IMPLICATIONS

Besides cost reduction and increased productivity,practices need also to consider the effect EHRs mighthave on pay-for-performance (P4P) participation—andhow it can impact ROI due to increased revenue.

These initiatives are emerging at an ever-increasingrate. The Centers for Medicare & Medicaid Services(CMS) has taken the lead in this arena, beginning withDoctor’s Office Quality–Information Technology (DOQ-IT) project to support the effective use of informationtechnology to improve quality and safety for Medicarebeneficiaries. This program, while not offering financialbenefits, did form the basis for what has emerged morerecently: the launch of the Physicians Quality ReportingInitiative (PQRI) and an enhancement of DOQ-IT calledthe Medicare Care Management Program (MCMP).Private payors have followed suit, while communities andemployers have entered the game with initiatives like theBridges for Excellence program. CMS likewise launcheda five-year demonstration project in spring 2008, open to1200 physician practices and providing financial incen-tives to those using certified electronic health records tomeet specific clinical quality measures (based upon indi-cators from the MCMP program).

At the heart of these efforts is data collection andanalysis. Practices relying upon EHRs and automation areable to capture necessary information in a wide variety offormats, plus the veracity of the data is virtually unim-peachable. Some P4P programs require use of an EHRsystem and increase the level of reward payment for prac-tices adopting these systems.

Currently, many P4P programs are voluntary andrepresent “bonus” income. In the future, however, in-dustry leaders anticipate that as much as 30% of practiceincome will be derived from P4P pay. Further down the

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line, practices will be penalized for opting out or notmeeting minimum quality standards. A prime example isthe new CMS e-prescribing incentives, which go into ef-fect January 1, 2009.

INVESTIGATE FUNDING SOURCES

Why is it so important to invest significant effort ona cost and quality analysis?

Once practices have analyzed the true costof various EHR systems and weighed themagainst expense reduction, revenue oppor -tunities, ROI, and the ability to provide moreeffective care, they have formed the basis tounderstand what their true investment willbe and how to approach outside organi -zations to help them fund their investment.

Because once practices have analyzed the true costof various EHR systems and weighed them against ex-pense reduction, revenue opportunities, ROI, and theability to provide more effective care, they have formedthe basis to understand what their true investment will beand how to approach outside organizations to help themfund their investment.

Several years ago, when the EHR trend was young,grants became available (and, in fact, still are today) fromfederal, state, and local programs. Healthcare is currentlyseeing a trend toward public and private nonprofit foun-dations interested in offering research grant opportunitiesto demonstrate improvements in care. Often, phy siciangroups have developed partnerships with pharmaceuticalcompanies and private insurers who are willing to helpfund HIT investments. These later relationships will comewith a “price tag,” requiring recipients to provide data inareas like pharmaceutical usage as it relates to clinical out-comes and patient satisfaction. However, if physicians sat-isfy themselves that there is no compromise to privacy andsecurity of patient data in these instances, the financial ben-efit can be significant.

More and more, practices are working with areahospitals and health systems to support EHR implemen-tations. In the not-so-distant past, Stark rules regulatingself-referral activities disallowed significant hospital par-ticipation in these purchases, limiting their contributionto $500. These regulations were relaxed in 2007, how-ever, as policy makers recognized that collaboration wasvital to widespread adoption of HIT systems. Hospitalscan now fund up to 85% of the EHR system purchasedby a community physician practice. In addition, they cantake advantage of a one-time federal tax break in 2008 towrite off some of the cost.

MATCH PRACTICE NEEDS WITH FUNDER REQUIREMENTS

To increase the likelihood of a mutually beneficialrelationship between funder and practice, consider theseseven tips:1. Recognize up front that most funders will require that

the EHR system purchased has been certified by theCertification Commission for Health InformationTechnology (CCHIT) within the past 12 months. Thismeans practices must make sure that the EHR systemthey select is compliant—or intends to soon becomecompliant—with the most recent CCHIT standards.

2. Keep in mind that the EHR purchase is, in reality, aninvestment in total practice transformation. Imple -mentation of an EHR system alters the workflow of vir-tually every process and will impact the day-to-day du-ties of every staff member. It is essential that planningfor process reengineering be thorough and that staffmember buy-in is achieved throughout the conversion.This commitment needs to be clearly laid out in fund-ing proposals so the potential funders are comfortablethat the medical provider has made a commitment andis not simply trying to “mechanize their paper prac-tice”—a sure sign of trouble.

3. Be very clear about what the funding organization re-quires in return. A pharmaceutical company may askthat practices track the frequency that select types ofdrugs are prescribed (e.g., medication to treat atten-tion deficit hyperactivity disorder or ADHD). Othersmay want to capture data to populate databases re-flecting incidences of specific diseases (e.g., rheuma-toid arthritis or diabetes). If your practice does nottreat patients using these drugs or who suffer fromthese conditions, the relationship will not be benefi-cial to either party. (Parenthetical note: The automa-tion available through the recently funded EHR willultimately allow the practice to fulfill these require-ments. Automated documentation of quality im-provements will form the foundation for any metricsthe practice provides to the funder in order to validatethe ROI the funder is receiving from its investment.)

4. Consider hiring a grant consultant or writer if you aregoing to approach federal, state, or local municipalities,or public and private foundations. Grantors operate un-der a specific set of rules and expectations with whichmedical personnel are unlikely to be familiar. Likewise,grant-writing is a specific talent, one that might not beamong the core skill sets present in either administrativeor clinical staff.

5. Do not view the funding process as a single event. Con -tinually be on the lookout for new opportunities.Patient advocacy groups are playing an ever-increasingrole, for instance, particularly in the development ofpersonal health records. Likewise, malpractice carriers

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view EHRs as a viable strategy to reduce exposure torisk. One Ohio practice, for example, used its EHRsto negotiate a 50% reduction in annual premiums—from $400,000 a year to $200,000.

6. Don’t go to the other extreme with funding either.Practices should not view funding as the sole means ofHIT purchase assistance, but rather as a partial meansof support. Internal resources may be applied to thetotal cost, and in some cases, leasing may prove to bea viable option.

7. Find out what kind of help you can get from your HITprovider in implementing your funding strategy.NextGen Healthcare, for example, has developed aFunding Assistance and Grants Resource Center. Dedi -cated professional staff members are available to guideclients and selected prospects through this funding ac-quisition process. Center personnel support a practiceas its funding search gets underway, connecting thepractice with grant writers and editors, for instance, orcommunicating via e-mail about new re sources. In fouryears of activity, the NextGen Center has helped clientsgain more than $35 million in funds for clinical careimprovements through automation, money that

typically is disbursed directly to medical providers toinvest as they wish.

There is little question that EHRs are here to stay.Industry leaders recognize the vast potential they offer toincrease quality of care, improve patient safety, streamlineoperations, and enhance successful participation in P4P. Itis time—if not well past—for practices of all sizes and spe-cialties to begin investigating strategies to speed imple-mentation and to put the barriers of fear and fundingbehind them.

But, like any idea that is just about to come of age,the early adopters have greater control over their destinythan do those who follow. Funding automation today isregarded as an opportunity, but the market signs indicatethat these funding “opportunities” may soon turn to “fi-nancial penalties” if EHRs aren’t adopted. Forward-thinkers would do well not to wait for this inevitabilitybefore they act. ■

REFERENCE

1. DesRoches CM, Campbell EG, Rao SR, et al. Electronic healthrecords in ambulatory care: a national survey of physicians. NewEngl J Med. 2008;359:50-60.