EHR cost savings might depend on proximity to IT firms and talent

The pattern of technology success linked to location is similar in other industries.

By — Posted Sept. 5, 2012

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When asked for a key driver of a physician practice’s success, a real estate expert is likely to say, “location, location, location.” Now, some information technology experts are saying the same thing about a practice’s likelihood for a financially successful electronic health record implementation.

Health care organizations in “IT-intensive markets” are more likely to see a decrease in operational costs after EHR implementation, while those in non-IT intensive markets are likely to see an increase in costs for at least six years, according to researchers from the Kellogg School of Management at Northwestern University in Evanston, Ill.

David Dranove, PhD, professor of health industry management at the Kellogg School of Management and a co-author of the report, said he and fellow researchers were not surprised by the findings. “It’s a pattern you see in other industries,” he said.

The thing that makes the health care industry unique is that many organizations do not view health IT as a process improvement that requires not just the technology but also the know-how, he said. The know-how will be easier to come by in regions populated by tech-savvy people, which tend to be regions with a significant number of technology companies.

The study of 4,231 hospitals, published in August as a working paper by the National Bureau of Economic Research, found that hospitals in IT-intensive markets that adopted EHRs from 1996 to 2009 experienced a 3.4% decrease in costs three years after adopting a basic EHR and a 2.2% cost decrease three years after adopting an advanced EHR. Hospitals in areas with the least amount of IT firms saw up to a 4% increase in costs as long as six years after adoption.

The authors wrote that the productivity impact of EHRs depends on factors beyond the technology itself, “such as the experience of a hospital’s IT staff as well as the labor market for skilled labor and third-party software and support.”

“Imagine getting an iPhone without getting someone to help you use it,” Dranove said. “It seems intuitive, but there’s so many possibilities for its use that to get the best out of it, it helps to have two types of people help you. One would be friends and family who already know how to use it, and the other would be & the technical support that you get from the outside.”

Although the study looked only at hospitals and did not include physician practices in its analysis, Dranove said the findings would apply to all health care organizations. A practice’s success with EHR implementations will rely on its staff’s level of tech-savviness. In non-IT intensive regions, practices will have an even harder time, he said.

“I would have to agree to a certain point with that,” said Jerrilyn Cowper, solutions manager for CTG Health Solutions, a technology and business consulting firm based in Buffalo, N.Y. She said smaller regions with limited IT resources will have the best talent “gobbled up by large organizations.”

Dranove said tech-savviness tends to trickle down over time, so within two to three years, a practice in a non-IT intensive market will start to catch up with their counterparts located in more technology-saturated regions. But Cowper said putting off an implementation until the staff becomes more tech savvy “may not be the best approach.”

She is seeing a trend of practices being bought by hospitals or partnering with other organizations as a means of sharing IT talent.

Cowper and Dranove said physicians must be realistic when it comes to assessing their own and their staff’s level of tech knowledge. They sometimes think they know more than they do. Cowper said she once worked with a physician who considered himself very tech-savvy but couldn’t figure out how to document in an EHR while seeing a patient. He ended up hiring a scribe.

If neither the physician nor the staff are up to the challenge, “they are probably going to fail at their implementation, or they are going to struggle,” Cowper said.

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