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Tuesday, February 18, 2014

ROI - Health IT Return On Investment 101

Continuing with the "relative value" riff from my prior post.

A lot of late-mover docs still get "sticker shock" when presented with the nominal costs associated with moving from paper charts to EHRs. It's not as jarring as it was back during the DOQ-IT era, but buying into health IT is still a formidable undertaking, one not to be taken lightly.

Nonetheless, you really need to start with a quantitative assessment of your current state in order to determine, well, "relative value" (marginal differential).

to wit...
Assume the simplest case (solo ambulatory primary care practice). Assume
  • 25 patients per day;
  • 5 days per week;
  • 48 weeks per year;
  • An average chart handle time of just 5 minutes per year, inclusive (pulling, reviewing, updating, re-filing, etc);
  • A blended, fully G&A cost-adjusted average labor expense of $40 per hour (i.e., pay and benefits and full per capita apportionment of all expenses of running the business).
  • 25 x 5 x 48 x 5 = 30,000 minutes per year, divided by 60 minutes per hour.
  • 500 hours, at $40 per hour.
  • That's $20,000 per year simply in labor expense just shlepping charts around the office.
To which you add
  • Cost of the medical folders and associated office supplies;
  • Cost of the clinical square footage and furnishings devoted to chart storage;
  • Cost of photocopying;
  • Cost of secure offsite backup storage for all of those boxes of charts.
etc. Again, this is "101," not meant to be exhaustive. Contact your local REC for help with that.

Now consider two successful, mature (but by no means dated, lock-in "legacy"), well-regarded mainstream ONC-certified EHRs with identical pricing plans -- eClinicalWorks and e-MDs.
$599 per month subscription ("Cloud" model, using the internet and remote data storage). Full systems, replete with "PM" (Practice Management) functionality spanning scheduling to billing. (Note: eCW and e-MDs principal competitors offer similar pricing plans. You can pay more, but you need not, and there are less expensive yet still functional alternatives -- all the way down to "free.")

$7,188 per year per doc (includes support staff user licensing). About a third of what you're paying for your paper operation. But, in fairness, you have to add into that cost of your PCs, laptops, tablets, peripherals, etc, the price of a high-speed T-1 internet connection and secure WiFi installation, costs associated with initial data transition from paper to EHR (i.e., populating your new system with necessary patient data), the expense of staff EHR training, the cost of backup operation capability for times when the internet is down, the cost of vendor support, etc.
Yes, there will inevitably be a "productivity dip" across the transition period. And, again, your REC can help you minimize that pain.

I used to work in profit modeling and credit/operations risk management in a credit card bank. Our CEO, who rose to Prez from being our CFO, made us use his "Spreadsheet from Hell" "Profit Model" for vetting all proposed marketing and ops initiatives. You had to be able to demonstrate a stress-tested 10% or more net profitability across a five-year look-ahead or your little pet project didn't get funded, period. (My White Papers from that era can be found here.)

Similar rigor should apply to vetting the inevitable Health IT transition. But, in the end, you have to ask: is it necessary and reasonable that you spend roughly 4 bucks per chart per year (or less)  -- whatever method you use -- to accurately and efficiently capture, retrieve, and manage the patient information that is the very essence of your business.

I don't see how there can be any rational debate about that. It's maybe 2-4% of your gross revenue.

We'll talk about other aspects of this shortly -- usability implications, workflow improvements, "soft benefits" and so forth.



I've been watching health care workers do this for years, first while tending to my now- late mother during one of her many hospitalizations. I've also stop-watched myself numerous times. ~10 seconds, login name + password.

Recently I had my first visit with my new Primary, at Muir in Walnut Creek. They use Epic. The M.A. came in, and I watched her log in to the wall-mounted terminal, silently counting as she did so.

Ten seconds. OK...
  • 6 logins per hour on average;
  • 8 hours per day;
  • 5 days per week;
  • 49 weeks per year.
That's one minute login time per hour, 8 minutes per day, 40 minutes per week, times 49 weeks (assuming zero login errors).

117,600 seconds of login time. 32.67 hours.
Stay with the $40/hr fully G&A'd labor cost. ~ $1,307.

Provide her with an iPad. Roughly 90% of that time goes away.

Bank the savings.

And, yes, I know there will be other issues, such as lost/stolen iPads, perhaps risking a  HIPAA breach. Enable them with auto-logout and remote "kill switches." They're talking about doing kill switches for smartphones.

Jus' sayin'... The little stuff adds up.



More from the book I reviewed at length on February 6th.

The Business Case and Board Involvement

In addition to putting together his senior executive team, however some had helped make some changes in the Kaiser foundation health plan and hospitals board of directors, adding several seasoned healthcare executives, senior business executives, and consultants. They would be understandably rigorous in their review and oversight of the largest capital project in the history of the organization, an estimated $3.2 billion investment (a figure that grew to over $4 billion) over 10 years for the initial implementation and ongoing maintenance of the EHR system. As Halverson told the board of directors, it truly was a "bet the farm" decision for the organization and would provide major budgetary competition with the already significant investments needed for new facilities and seismically required enhancements for the California hospitals. Very few healthcare organizations had implemented electronic health records to the extent planned by Kaiser Permanente, and none had solid information on the value realized by their systems.

The business case was based partially on assumptions and experience from the Southern California region, and spotty reports of specific savings from outside organizations. In reality, the expanded fully integrated EHR and related IT systems would support almost 80% of the clinical and administrative workflows in the organization, and no one could predict the full nature of the changes, much less the value, that could be gained. Making no assumptions related to increasing member satisfaction, competitive advantage, or growth, a conservative business case made a defensible case that the investment would break even and pay for itself in roughly 8 1/2 years. However some told the board that the actual payback would happen in half that time.

Make no mistake; this was a strategic decision, not one based on return on investment. [emphasis mine] The Board of Directors and the executive management of Kaiser Permanente believed that successful implementation and effective use of any HR would streamline administrative and clinical operations and enhance performance in quality, service, the HR would connect and leverage the Kaiser Permanente care delivery system the seamless information flow across all facilities. At the same time, it would connect to members via the Internet with features that could not be duplicated by its insurance or provider competitors. All of this was reflected in the project name, Kaiser Permanente HealthConnect. and cost.

The board gave KP HealthConnect much more than financial backing. It designated KP HealthConnect the number one priority in the organization's business plan for three consecutive years, and it linked the achievement of development and deployment milestones to every health plan and hospital executive’s performance goals and compensation...
 "[T]his was a strategic decision, not one based on return on investment."

How about that? In other words, deploying Epic was integral to the overall KP strategy and corporate Ends; the "business case" went beyond simple estimated quantification of isolated ROI. You don't "invest" in tools simply as a means of making money -- a nominally "positive ROI." While you don't blindly throw money around and buy a technology that causes you financial grief long-term, your decision should be based on your ethos and goals.

I think KP's results speak for themselves.


Just saw this on Facebook.


On the wires. From Healthcare IT News:
2017 and beyond: When meaningful use winds down, what's next?
Feb 17th, 2014

Although the federal government’s meaningful use incentive program has been a driving force for healthcare IT innovation and adoption, it has also been a distraction—encouraging organizations to invest in technology with certain characteristics and capabilities rather than systems that fully address provider and patient needs.

Come 2017, the MU program will begin winding down, at which point it will be interesting to see what will happen with healthcare technology adoption and innovation. While public funding will dry up, by all accounts, a massive wave of private venture capital funding is on its way. The central question is will the industry be fatigued and resistant to change as in the past or will it embrace further advances?

Entering Uncharted Territory

No other industry has gone through a similar experience, where public policy and law incentivized and then obligated large-scale IT implementation. In fact, prior to Meaningful Use, healthcare IT adoption was slower than in other industries because clinicians were hesitant to change workflows and rally behind automation. MU launched a  swell of technology adoption, pushing the industry to innovate faster—and not always with the best results. In many cases, technology vendors designed systems to meet specific requirements and failed to deliver when it came to system usability and functionality...
Yeah. Good article. If the current SGR Fix bill (HR 4015) gets passed into law, Meaningful Use is essentially done. We shall see.


A nice follow-on the the foregoing. Fellow blogger John Lynn has thrown down an interesting challenge question to the Health IT community.
Here’s the question I asked:
If meaningful use were gone (i.e., no more EHR incentive money or penalties requiring meaningful use), which parts of meaningful use would you remove from EHR immediately and which parts would you keep?

The concept is simple. If there wasn’t some outside influence (i.e., government money) influencing the requirement to do meaningful use, which elements of MU actually provide value to the users of an EHR. Those that provide value will continue to be embraced by an EHR vendor and those that don’t will be removed. Plus, this is the reality of what’s going to happen once the EHR incentive money runs out, so let’s find this info out now...
What do you think? I'll have some thoughts shortly. For starters, I love John's use of the phrase "some outside influence." At least half of U.S. healthcare expenditures are paid for by the "outside influence" of government. Indeed, roughly 40% of U.S. GDP in the aggregate is comprised of public expenditures.

The people, via their government, have every moral and economic right to insist on regulation that may very well "distort" private markets where the public interest is at stake. Whether the regulatory regime known as "Meaningful Use" is a wise and effective thing is a separate question. My irascible views on it are fairly well known. And, while I find some of the Meaningful Use particulars squarely in the Bozo Column, we simply cannot argue that it was for lack of stakeholder input. The regulatory process has been as open and inclusive as one could possibly expect.

I don't know John's politics. He touts himself as a "Health IT entrepreneur." To what extent his "free market" success is directly coupled to ARRA/HITECH spending is probably unknowable to any degree of accuracy, but I would speculate that it's highly significant.

One of the docs who took up John's MU challenge wrote
...Replacement of stable, natural market forces with MU incentives drove immediate, explosive short-term growth in the EMR market.  But these MU-driven EMR purchasers are not like the practices before 2008 that freely chose to purchase a system. These practices had decided against EMR initially, at least partly because they lacked the IT resources to make EMR work for them.   MU coerced them to purchase EMR against their better judgment.

I have spoken with many of these physicians.  They do not share the inspiration and vision of the early adopters.  They are rightly unhappy and cynical, forced by MU to spend huge amounts of money on unproven, underdeveloped EMR products that they did not want and were not prepared to properly use. To these practices the question of EMR’s potential is irrelevant....

The MU program gave EMR vendors what they wanted – legislation requiring hundreds of thousands of providers to buy EMR products, with no need to prove that those products do anything useful.  But here’s the bad news: the Feds got what they wanted as well.  Through MU they created an EMR industry that is dependent on government incentives and penalties to maintain a stream of new customers.  This gives them complete control of the EMR market.  There is more bad news.  MU also destroyed the base of satisfied EMR customers from 2008, replacing it with a much larger base of unhappy, resentful customers.

So what happens as MU payments decrease with each passing year as MU requirements go up?  Who can argue that the market won’t collapse without another EMR stimulus package?  John Lynn’s question is appropriate and timely.  MU incentives will indeed disappear over the next couple of years.  How the EMR market will survive is not clear.
 "Stable, natural market forces"? I am reminded of the words of noted medical economist JD Kleinke from nine years ago:
HIT market failure
...If the state of U.S. medical technology is one of our great national treasures, then the state of U.S. HIT is one of our great national disgraces. We spend $1.6 trillion a year on health care—far more than we do on personal financial services—and yet we have a twenty-first-century financial information infrastructure and a nineteenth-century health information infrastructure. Given what is at stake, health care should be the most IT-enabled of all our industries, not one of the least. Nonetheless, the “technologies” used to collect, manage, and distribute most of our medical information remain the pen, paper, telephone, fax, and Post-It note.

Meanwhile, thousands of small organizations chew around the edges of the problem, spending hundreds of millions of dollars per year on proprietary clinical IT products that barely work and do not talk to each other. Health care organizations do not relish the problem, most vilify it, many are spending vast sums on proprietary products that do not coalesce into a systemwide solution, and the investment community has poured nearly a half-trillion dollars into failed HIT ventures that once claimed to be that solution. Nonetheless, no single health care organization or HIT venture has attained anything close to the critical mass necessary to effect such a fix.

This is the textbook definition of a market failure. All but the most zealous free-market ideologues recognize that some markets simply do not work. Indeed, reasoned free-market champions often deconstruct specific market failures to elucidate normal market functioning...
This was written way before ARRA/HITECH. The notion of stable, beneficent, efficient, and effective "free" markets across all economic sectors is as naive as it is nominally charming to the unreflective. Moreover, assume you could summarily cut back cut back "government spending" by a quarter -- from ~40% to ~30% of GDP. You'd have a national economic collapse of unprecedented severity. A mere 2% federal sequestration has produced visible downturns and gnashing of teeth. Even WalMart is now griping about how the failure to renew extended federal unemployment benefits is negatively impacting their earnings and stock valuation.

People need to get serious and get a Clue.

FYI: below, a worthy website.

More to come...

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