Physician Practice EHR Price Tag - WordPress.com · 2011. 1. 27. · Cite as: CDW Healthcare Physician Practice EHR Price Tag 6 Soft Costs – Fewer Patients = Less Revenue Just 32

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Physician Practice EHR Price Tag

December 13, 2010

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Study Intent and Purpose

With Meaningful Use incentives scheduled to start in 2011, physician practices are actively assessing the costs and benefits associated with implementing an Electronic Health Record (EHR). To aid these analyses, CDW Healthcare wanted to provide:

•  A baseline understanding of the concerns that physician practices have with specific regard to EHR adoption

•  A market-wide understanding of the current Information Technology (IT) infrastructure in place at physician practices

•  A complete, up-to-date and comprehensive cost model for implementing an EHR in a physician practice – including recurring and soft costs

•  Insight on minimizing adoption costs and maximizing value following adoption

In support of these objectives, the following study combines research data from associations, physician practices and CDW Healthcare’s own database of product and customer information.

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Methodology – Calculating the Cost

Establish a Baseline • CDW Healthcare surveyed 200 physician

group practices not currently using an EHR to establish the current infrastructure, EHR plans and expected impact of adoption:

Develop a Cost Model • CDW Healthcare developed a cost model

based upon a typical medical practice implementation using:

» Components from prescribed solutions on the CommunI.T. Web site and CDW.com

» Medical practice information from the University of Virginia, the Medical Group Practice Association and the American Congress of Healthcare Executives

» Cost benchmarks from CDW Healthcare customer implementations

• CDW Healthcare applied the averages from the survey to the cost model to determine the average EHR adoption cost

Element Small Office

Sample Average

% of Sample 54% 100%

# of Physicians 1-3 6

# of Patient Records 4,185 5,470

Have Selected a Solution 16% 26%

Investigating EHR Options 84% 74%

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Baseline – Concerns About EHR Adoption

What, if any, are your primary concerns regarding EHR adoption? (Choose the top three)

66% of the 200 survey respondents cite the cost of hardware and software as their top concern with the adoption of EHR

The top three concerns are the same for practices with three or fewer physicians.

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The Impact of Adoption Speed Improving the pace at which physician practices are able to adapt to new processes and patient workflow by just one month would prevent $8,440 per physician in lost revenue while adding as much as $12,660 per physician in revenue gained through new efficiency – more than four times the cost of hardware and software.

* Source: ChannelPro-SMB, January 2010

Return EHRs could increase the number of patients seen by as much as 15 percent*, adding $151K per physician in annual revenue once the system is fully implemented and adopted.

Investment The total cost – both outlays and lost revenues – will be just shy of $120K per physician in year one, with annual recurring costs of $30K per physician per year.

Based upon the physician practice responses input into cost model

Investment, Return and the Speed of Adoption

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Soft Costs – Fewer Patients = Less Revenue

Just 32 percent of respondents listed Downtime/Loss of Revenue as a primary concern, yet on average, the same respondents believe that patient encounters – beyond time lost to training – will drop by an average of 10 percent in year one.

Approximately what percentage of your billing and patient encounter workflow do you estimate will change as a result of your practice’s

transition to EHRs?

44% Of respondents’ workflow will

change during the transition to EHR

38% Of respondents expect to see

patient encounters drop 25% or more in the first year

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Calculating the Impact of Lost Productivity

Daily Patient Encounters Per Physician

Average Revenue Per Patient Visit

Days of Revenue Per Year Productivity Loss

25* $150** 270 10%***

As a percentage of costs associated with EHR adoption, loss of physician productivity is by far the largest component. Looking at conservative estimates of daily patient encounters, revenue per visit and productivity lost, consider the following:

$101,250 Revenue lost per physician in year one based upon lost productivity

*Physicians Practice, “Patients-per-day Norms,” January 1, 2008 **American College of Healthcare Executives, Congress on Healthcare Leadership, Poster Sessions 2009 ***Survey average Note: Because they are calculated based upon patient flow, per physician soft costs do not vary significantly by office size

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What EHR Could Mean For You Long Term

Daily Patient Encounters Per Physician

Average Revenue Per Patient Visit

Days of Revenue Per Year Productivity Gain

25* $150** 270 15%***

Physician productivity is a two-way street. Once fully implemented, EHR systems have been shown to improve patient workflow and reduce physician downtime between patient visits.

$151,875 Revenue gained per physician in

subsequent years based upon enhanced productivity

*Physicians Practice, “Patients-per-day Norms,” January 1, 2008 **American College of Healthcare Executives, Congress on Healthcare Leadership, Poster Sessions 2009 ***Source: ChannelPro-SMB, January 2010 Note: Because they are calculated based upon patient flow, per physician soft costs do not vary significantly by office size

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Hard Costs – Year One Summary

Hardware and software costs are the top concern about EHR adoption among responding physician practices, yet recurring costs and soft costs represent most EHR-related outlays.

+All costs are generic-solution estimates based on prices from August 5, 2010

•  Hardware: $ 7,040 $ 5,100 •  Software: $ 5,350 $ 3,900 •  Services: $ 630 $ 130 •  Telecom: $ 670 $ 670 •  Environment*: $ 620 $ 110 •  TOTAL: $14,310 $ 9,910

Cost estimates are based on a six-physician practice *Environment includes power and cooling components

Inclusive of services, CDW Healthcare estimates that year one hardware and software costs will

be just

12%

of total EHR adoption costs

Hard Costs per Physician – Year One

Hosted/Cloud Computing Thirty-eight percent of all respondents (33 percent of offices with three doctors or fewer) indicate that they are considering a cloud computing model. For these practices, hard costs could be cut by $4,400 per physician.

Internal Hosted

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Hard Costs – Existing Infrastructure

•  Average workstation age < 3 years

•  20 percent of workstations are less than one year old

•  82 percent of physician practices already managing one or more servers

•  62 percent of physician practices use server-based storage

Many responding physician practices have some infrastructure components already compatible with an EHR implementation. Workstation, server and storage infrastructure might not require a year-one upgrade.

By using existing workstations and then refreshing the infrastructure on a five-year cycle, physician practices can save $4,700 in year one on hardware and $1,240 in year one on software.

Using Existing Hardware

A Snapshot of Existing Infrastructure

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Hard Costs – Significant Security and Network Concerns

•  64 percent of respondents use cable, DSL or even dial-up connections

Network Bandwidth

While making more information digital, physician practices will need to significantly improve their security. In addition, managing data files will require more network bandwidth than is currently in use.

Security Infrastructure •  30 percent do not have basic anti-

virus software protection

•  34 percent do not use firewalls

•  Just 28 percent encrypt wireless or hard-wired networks

Physician Practice Security and Network Responses

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Additional Costs – Things Not to Forget

Training & File Conversion Recurring Costs

Physician practices will also need to incorporate time for staff training (training services are often included in EHR packages) and file conversion expenses into their cost estimates. In addition, practices must also budget for annual recurring costs.

•  22 percent of physician practices will experience more than 10 hours of staff downtime and 40 percent will experience at least six hours of downtime

•  Survey respondents had an average of 5,470 patient files requiring conversion from paper to digital and 52 percent plan to scan files in-house

•  58 percent of practices will use both internal and third-party services to support their EHR

•  Physician practices must budget to regularly replace infrastructure, adding $1,800 per physician per year to costs

•  Many EHR packages require monthly subscriptions, adding $750 per physician per year to costs

Smaller Office – Bigger Burden Fifty-four percent of respondents came from practices with three or fewer physicians. Because many costs in an IT infrastructure are fixed, these smaller offices will see a higher per-physician cost of adoption. Hardware and software investment may require as much as $19,000 per physician for practices with three or fewer physicians.

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Conclusions – Focused on the Wrong Things

•  Although 66 percent of respondents cite the cost of hardware and software as their primary concern with EHR adoption, these costs comprise just 12 percent of per physician costs in the first year of EHR implementation

•  Just 32 percent of respondents cite loss of revenue as a primary concern. Yet, all respondents expect to experience a 10 percent loss of productivity while reworking an average of 44 percent of their patient encounter workflow

•  In the adoption year, physician practices may lose as much as $101,250 in patient revenue because of workflow disruptions. Once fully implemented, however, patient workflow efficiencies could deliver as much as $151, 875 in additional annual revenue to adopting practices

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Less Pain, More Gain – Accelerating Adoption

Hardware and software acquired to support EHR systems may also have value in other functions around the office, including back-office efficiency, improved information sharing and new revenue streams. To get the most value for every dollar spent, consider the following: •  Upgrade vs. Replace: The average age of physician practice workstations is less than

three years, with 20 percent less than one year old. As such, practices may achieve better results by upgrading existing workstations with system memory, drive space, backup processes and wireless access points to extend the lifecycle of existing workstation deployments

•  Protect yourself: Notably, 30 percent of respondents did not use antivirus software and 34 percent did not use network firewalls. To protect IT investments and patient information, physician practices moving to EHRs will need to significantly improve their security and business continuity profiles

•  Train and train some more: Twenty-two percent of survey respondents indicate that they will spend at least 10 hours training staff to use the new EHR system. Because training programs are included in the cost of many EHR software packages, practices should take advantage of every training opportunity as a way of accelerating adoption

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Thank you. For all media questions and inquiries, please contact:

Kelly Caraher CDW Healthcare

847-968-0729 [email protected]

Andrew H. LaVanway O’Keeffe & Company

703-628-2503 [email protected]