Healthcare IT incentives fall short for physician practices

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Healthcare IT provisions in the recently passed stimulus bill suggests that new financial incentives will still leave many physicians in small practices facing significant up-front implementation costs, according to an analysis by healthcare business strategy and public policy research firm Avalere Health.

The report said that up to half of physicians (those practicing solo or in small groups) may perceive themselves better off financially by forgoing an investment in healthcare IT. 

Using EHR adoption costs published by the Agency for Healthcare Research and Quality (AHRQ), Avalere researchers found that a solo or small group physician practice will spend an estimated $124,000 over the five year period of 2011-2015 to adopt EHRs, and will receive up to $44,000 in federal incentive payments. The resulting financial deficit would be $70,000, or an average of $14,000 a year. This represents about 8 percent of this physician's annual Medicare receipts, contrasted with the legislation's provisions to impose an $8,500 penalty on non-adopters. 

According to the New England Journal of Medicine, more than 50 percent of physician practices consist of one to three doctors. In 2005, AHRQ found that the average EHR implementation cost per physician was $32,606, but noted for smaller practices that could rise to $37,204 per physician. On top of those costs, AHRQ estimates a monthly $1,500 upkeep and training cost 

"These new incentives are intended to motivate doctors to adopt EHRs, yet for many physicians, the level of the incentive may not reflect current financial realities," said Jon Glaudemans, a senior vice president at Avalere. "Given this gap, EHR adoption will still require a significant investment by small physician practices.  In today's economic climate, many physicians will struggle with this calculus." 

Avalere said that proponents of healthcare IT are heralding the Obama administration's recent $19 billion investment, noting its ability to stimulate innovation and eventually generate cost-savings through improved care coordination and reduced medical errors. Central to the stimulus bill's strategy is an incentive fund to be paid to physicians in return for the purchase and "meaningful" adoption of EHRs. 

"The new Administration has critical design and definitional decisions to make over the coming months, and providers have a short window in which to engage," Glaudemans said. "Rapid clarification of eligibility criteria relative to meaningful use, and timely articulation of technology and interoperability standards are crucial next steps for the new administration as it seeks a way to encourage [healthcare IT] adoption strategies by physicians, hospitals, technology vendors and other stakeholders.  Absent this guidance, even the most enthusiastic provider may defer investments indefinitely, given the cost of implementation and the relatively modest subsidy levels."