Tax credits for EMRs

The new AMA policy aims to address cost concerns that have kept many physicians from buying health information technology.

Posted Dec. 10, 2007.

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That the push is on for physicians to adopt electronic medical records is clear. The many health information technology bills in Congress, the newly announced Medicare EMR demonstration project, and large employers' and health insurers' IT and quality improvement initiatives leave no doubt.

Unfortunately, it is also abundantly evident that many doctors can't possibly pay for the technology that private payers and government agencies are increasingly asking them to embrace.

Recognizing the problem, American Medical Association delegates at their November Interim Meeting approved a policy calling on the Association to seek a full, refundable federal tax credit or equivalent financial mechanism to indemnify physician practices for the cost of purchasing and implementing clinical IT, including EMRs. An October/November AMA Member Connect survey of 4,800 physicians found that 79% of members support this approach.

Physician EMR adoption has been growing in the past few years, but widespread use would require financial help for doctors, especially physicians in solo or small practices.

About 12.4% of office-based physicians used a comprehensive EMR system in 2006, according to an October Centers for Disease Control and Prevention report based on the results of the National Ambulatory Medical Care Survey. That figure fell to 7.1% and 9.7% for solo and two-physician practices, respectively. By comparison, 26.6% of practices with 11 or more doctors used a comprehensive electronic system in 2006.

It's no wonder that small practices are slow to adopt the technology. Initial EMR costs averaged $44,000 per physician, and ongoing costs averaged $8,500 per doctor each year, according to a September/October 2005 article published in Health Affairs.

Physician practices of all sizes are hard-pressed to find that kind of money. This is especially true when average Medicare payments are set to drop 10.1% next year and powerful health insurers constantly squeeze payment. According to a May 2007 AMA Member Connect survey, 67% of physicians will defer the purchase of information technology if the 10% Medicare reimbursement cut goes into effect.

Many doctors want to adopt EMRs to make their practices more efficient and because they believe in their potential to improve the quality of care they provide. But while physicians would bear the brunt of EMR costs, they aren't the big winners financially. The AMA estimates that for every $1 of cost savings attributed to health IT, doctors would see just 11 cents. The remaining 89 cents would go to others -- private insurers, government programs, laboratories and patients.

It's only reasonable to help physicians defray the costs. Already, some efforts are under way. In August 2006, the Dept. of Health and Human Services published exceptions to the Stark self-referral rules and safe harbors under the federal anti-kickback statute that eased restrictions on hospitals and other entities donating health IT to physician practices. Then in May, the Internal Revenue Service released guidance making it clear that nonprofit hospitals making such donations wouldn't risk losing tax-exempt status.

Physicians at the AMA Interim Meeting voted to assist doctors interested in such efforts. They adopted new policy directing the Association to develop contracting guidelines for physicians considering accepting or donating EMR systems from or to hospitals and health care systems.

But there is a larger role for the government to play than supporting private-sector efforts through regulatory reform. In March testimony, the AMA encouraged Congress to ensure that physicians are not disproportionately burdened with the cost of developing and maintaining a national health IT network that would benefit all sectors of the industry. That's where a federal tax credit program would help by giving doctors the direct financial assistance they need to go electronic.

To be sure, the issues surrounding health IT are complex -- from protecting patient privacy to setting standards and ensuring interoperability. With that in mind, AMA delegates also reaffirmed several policies to address these concerns. Together, the old and new policies aim to make sure that in the march toward an electronic health system, patients' and physicians' needs are met.

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External links

American Medical Association health information technology resources (link)

"Electronic Medical Record Use by Office-based Physicians and Their Practices: United States, 2006," Centers for Disease Control and Prevention, October, in pdf (link)

"The Value of Electronic Health Records in Solo or Small Group Practices," abstract, Health Affairs, September/October 2005 (link)

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