Financial analysis projects clear returns from Electronic Medical Records: Demonstrating the economic benefits of an electronic medical record is possible with the input of staff who can identify the technology's benefits - Statistical Data Included

Healthcare Financial Management,  Jan, 2002  by Karl F. Schmitt,  David A. Wofford

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A major cost of most EMR implementations is a temporary reduction in physician productivity during the transition to the new system. In this case, a reduction in productivity was not factored into the EMR's cost analysis because the EMR implementation was scheduled to be phased in over a six-year period.

The final cost estimate reflected the vendor's proposed prices, which were later negotiated to a substantially lower amount. Although the vendor's pricing estimates are confidential and cannot be provided in detail, total costs for the seven-year period were estimated to be approximately $19 million.

Benefits

The cost-benefit analysis indicated that anticipated benefits would far outweigh the cost of implementing and maintaining the EMR. The EMR was projected to produce tangible financial benefits in a variety of operational areas. Although the most significant benefits are discussed here, a wide variety of other, less significant benefits also were identified but were not included in the analysis. Because the combination of these benefits would have been quite substantial, the analysis is intentionally conservative. Exhibit 1, page 54, summarizes the approach to projecting these benefits and their estimated annual dollar value once the EMR is fully operational.

Laboratory/radiology order entry. In a paper-based system, laboratory and radiology orders require manual procedures for placing the order at the clinic/hospital unit and in processing the order at the ancillary service site. With the EMR, orders would be placed by the physician at the workstation and automatically transmitted to the appropriate ancillary department. This procedure would eliminate the need for clinic, hospital, and ancillary staff to clarify, transcribe, and manually enter orders into the ancillary department's information system, for a total projected annual benefit of about $1.1 million.

Pharmacy order entry. The EMR would provide immediate feedback if a physician attempts to order a medication that is clinically contraindicated or improperly dosed and would eliminate many of the adverse drug events related to illegible drug orders. In addition, the EMR contains logic to help physicians adhere to formularies and select the most cost-effective medications for the patient's condition, resulting in significant savings. Finally, the elimination of manual procedures involved with placing medication orders would reduce the need for pharmacy staff in the same manner as previously described for laboratory and radiology Total projected annual benefit would be about $3.1 million.

Documentation. Much of the information that is dictated and manually transcribed is redundant, such as social and past medical history, allergies, current medical conditions, and medications. Because the EMR would make this information readily available, transcription would not be needed each time a physician dictated, thereby reducing transcription costs. The team determined, however, that during the transition to on-line documentation, transcription costs temporarily would increase. Total projected annual benefit would be about $1.0 million.