Congress’s wrong approach to healthcare IT

Both houses of Congress currently are considering the EMEDS Act of 2007 (H.R 4296 and S. 2408). This Act is intended to facilitate the use of electronic prescription by Medicare providers primarily by creating incentives for adoption.

The EMEDS Act enjoys bipartisan support and many see the passage of such a measure as the first step in broad adoption of electronic medical records, or EMRs. Current thinking indicates that broad use of EMRs would increase the quality of care in this country and decrease costs. While the measure represents a much-needed action in the area of healthcare IT, the planned incentives may have an adverse affect on innovation and adoption.

The EMEDS Act provides a one-time bonus to cover start-up costs of implementation.  These bonuses are as follows:

• $2,000 for providers who adopt e-prescribing in the first two years after passage of the act;
• $1,500 for adoption in the third year; and
• $1,000 for adoption in subsequent years.

The problem with the incentive program is that it views the start-up costs the same for every provider. Analysis reveals that these costs may vary.

In order to examine costs, it is necessary to make several assumptions. Based on a survey of available literature, a complete e-prescription system includes the following capabilities: searchable medication lists, refill authorization, patient health plan eligibility, patient formulary, medication history, and clinical alerts of potential adverse reactions. The primary stakeholders in any e-prescribing network include: the provider, the pharmacy, the pharmacy benefits manager and possibly pharmaceutical companies.

Providers can be divided into four categories. The first category includes providers who have an EMR system and plan to integrate a commercially available e-prescribing product into the EMR system. The e-prescribing product in this case would most likely be an Internet-based service. The second category would include providers who have an EMR system but choose to develop their own custom e-prescribing software. The e-prescribing software would include the costs of developing the software. For both groups, we assume that necessary networking equipment is present.

The third category would be those providers with no EMR and choose a commercially available e-prescribing product. Again, this product would most likely be an Internet service. The final category includes providers who have no EMR and choose to develop custom software. Again, the e-prescribing software would include the software itself as well as necessary network equipment such as servers and firewalls.

A parametric cost assessment of these implementations yields interesting results.  The implementation that requires the most effort is for those providers who decide to create their own e-prescribing system. The primary drivers of the cost are the development of the software and the integration of the networking equipment.

The next most expensive implementation is for those providers with EMRs that decide to develop and integrate their own e-prescribing software. The primary driver of cost in this case is the expense of developing software. Providers with EMRs who use an e-prescribing service constitute the next most expensive group. The primary cost driver is the need to write “glue code” to integrate the e-prescribing system into the pre-existing EMR system.

The least expensive implementation will be those providers with no EMR who subscribe to an e-prescribing service. These results have strong implications for the proposed reimbursement method under the EMEDS Act.  

By utilizing a flat reimbursement bonus, the federal government will effectively “punish” those who were early adopters of technology. The providers who made the decision to use EMRs prior to any mandate will receive less of a net benefit than those who did not implement EMRs. As the analysis indicates, providers who have EMRs and choose the most efficient option of using an e-prescribing service will pay more than providers without EMRs that choose an EMR service. Of course, providers with EMRs could choose to maintain e-prescribing separately but would sacrifice any efficiency gains.

The signal that the EMEDS Act sends to providers is to wait for congressional action or risk having to shoulder more costs. Thus, the EMEDS Act may prove counterproductive in encouraging widespread EMR adoption. A better alternative might be to offer a subsidy or credit that is proportional to the cost of adoption of e-prescribing. This course of action would facilitate the use of e-prescribing while not discouraging the further adoption of EMRs.

Ultimately, Congress is trying to take much-needed action in the field of health IT through the EMEDS Act. However, Congress is approaching the problem in the wrong way. Congress must consider alternative courses of action if it hopes to achieve its immediate objectives without creating negative long-term implications.

Ingemi is an executive consultant with PRICE Systems. He specializes in IT cost estimation and business analysis for the healthcare sector.