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We're All "Meaningful" Now: Expect a Busy Fall for Electronic Health Records

Get ready for lots of news flow on "meaningful use" this fall. The government has set an ambitious yearend deadline for establishing a formal definition, a critical step in its effort to spur electronic health record (EHR) adoption.

"Meaningful use" refers to the way in which the government will expect providers to use electronic health record systems — whether in an appropriate manner or not.

At stake for the provider community are billions of dollars in incentive payments. Starting in 2015, the government expects providers to have adopted and be actively utilizing an EHR in compliance with the meaningful use definition or it will subject them to financial penalties under Medicare.

To defray the cost of EHRs — often tens of thousands of dollars — the government has promised big subsidies ($44,000 per physician), though not without strings attached. It will pay the first incentives in 2011 based on prior performance. A provider not following meaningful use of a certified EHR could risk not receiving any government funding. The American Recovery and Reinvestment Act of 2009 provided a minimum of $19 billion in funds to kick start EHR adoption. Media sources now report a funding level nearly twice the size at $36 billion.

According to the government's website, "The focus on meaningful use is a recognition that better health care does not come solely from the adoption of technology itself, but through the exchange and use of health information to best inform clinical decisions at the point of care." Broadly, meaningful use will encompass different parameters, including patient communication, diagnosis, device usage, patient encounters, specific patient information, laboratory tests, medication usage, physical exam findings, and procedures.

Just recently, the Obama administration announced it would provide $1.2 billion in grants to create 70 HIT centers around the country. David Blumenthal, the president's HIT czar and head of the national EHR effort for the Department of Health and Human Services, meanwhile, has stated that he expects a formal definition of meaningful use by the end of the year. The process began in June.

To put the cost savings opportunity in perspective, about half of health care expenditures constitute waste, whether dollars spent on preventable conditions, redundant tests or back office processing. About half of this waste relates to poor patient behavior: obesity, smoking, non-adherence. A quarter represents clinical inefficiency: readmissions, poorly managed care, medical errors, treatment variance, unnecessary ER visits — the primary target for EHRs.

The remaining quarter reflects operations, or the back office. Of this, claims processing accounts for about half, and ineffective IT a third, staff turnover and paper-based prescriptions the rest. (Note: We have sourced these estimates from a 2008 report by the consultancy PriceWaterhouseCoopers. Click here to view.)

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If we exclude from this waste calculation patient behavior, the practice of defensive medicine (more a payment issue than an IT issue) and claims processing (not directly a clinical issue), then we would assume that EHRs would impact about a third of all wasted dollars spent.

In a $2.4 trillion dollar industry, where $1.2 trillion is waste, EHRs could theoretically address about $400 billion of this. A substantial number, it would roughly equal the entire prescription drug market at half this level.

Let’s not forget, too, that each of these numbers is growing at 10% per year. In seven years, $400 billion becomes $800 billion, although — presumably — effectively deployed EHRs would slow this growth rate.

With such a substantial business opportunity at hand, it's no wonder many different organizations are now targeting health IT, and EHRs specifically — including not just traditional technology vendors such as Intel, IBM and Microsoft, but also managed care organizations, plan sponsors, and dozens of venture-backed firms.

Despite this, many problems exist, ranging from cost to lack of a common standard. Even though, for example, several different EHR systems may operate within a single provider setting, one system does not necessarily communicate with another. And for small practices, implementation costs can be prohibitive.

While nearly 40% of physicians report using a full or partial EHR system, only 4% indicate they use a certified, fully functional system, according to a survey by the Centers for Disease Control and Prevention.

Enter the government, and Dr. Blumenthal's mandate to make everything work together. But for EHRs to recoup even the expenditure the federal government is prepared to make, all the different stakeholders must first agree on a definition of meaningful use.

No one anticipates an easy process.

What happens, for instance, if the government defines meaningful use too narrowly — or too broadly? How does the government change the definition? And when?

Providers will also need to submit data that qualifies them for incentives. What does this process entail? How much of a time burden does it create? Also, to what extent will provider inertia drag down future returns?

And none of this includes issues pertaining to the certification process and privacy concerns. Who, for example, owns the data?

In its scoring, the Congressional Budget Office has not allowed significant savings for EHRs simply because the opportunity, while massive, remains highly speculative. Even if the government adheres to its aggressive timeline, EHR savings on a national scale would not occur until well after 2015.

Stay tuned for a busy fall.

Disclosure: No Positions