Does Your EMR=ROI?

May 15, 2002

Will an EMR save you money or cost you big?

John Gastright, MD, spent a little over $33,000 per physician on his electronic medical record (EMR) that came with all the bells and whistles. A year later, he estimates his three-physician primary-care office, Healthcare Consultants of Charleston (S.C.), saves $60,000 a year in overhead per physician, thanks to the software. That's a positive return of $27,000 in one year.

Better yet, the practice's average net revenue is about $100 per patient/per visit, about 25 percent more revenue per visit than their competitors in the Southeast. Why? "Physicians tend to downcode because of their concern about audits," Gastright explains. To avoid this, his physicians use the EMR from MedicWare, distributed by Companion Technologies, to code appropriately.

Gastright more than recouped his costs in one year, and he thinks other practices can, too. But he is an anomaly; he started a new practice using electronic records. Unlike most, he never faced the hurdle of transitioning from paper records to electronic files. That conversion slows productivity so much that some practices wait years to see the financial payoff.

So if the question of the hour is, "Do EMRs offer a good return on their rather sizable investment?" the answer is, "Yes ... if you ever get that far."

Clear cost savings

Without doubt, once an EMR is fully implemented, it can cut practice costs. "The biggest savings are in labor dollars," says Rosemarie Nelson, a practice management technology expert and Welch Allyn's market development manager.

Many practices can eliminate transcribers and medical records clerks. With an electronic record, physicians can easily "pull" charts themselves and enter notes directly into the system. The average practice spends $6,783 per year, per full-time equivalent (FTE) physician on medical records staff. Another $5,891 per physician goes to transcribers, according to the Medical Group Management Association's "Cost Survey: 2001 Report Based on 2000 Data."

That means a typical savings of over $12,000 per physician each year. Those savings alone can cover the average cost of an EMR: $10,000 per physician. Those numbers play out in the real world, too.

Gregg Omura, MD, cut front-office staff for his five-physician family practice office from 7.5 FTEs to 4.0 FTEs after setting up his EMR from Physician MicroSystems. As a result, he estimates the practice, Primary Care Partners in Grand Junction, Colo., "cut overhead by 6 percent the first year of use of the EMR. We saved about $60,000 per year."

Family Practice Associates of Lexington also lowered overhead. Instead of outsourcing transcription, it pocketed an extra $24,000 a year, according to Susan Miller, the administrator and a registered nurse, who chose a system from Advanced Imaging Concepts (AIC). She also phased out two student file clerks, saving an additional $30,000 a year. "We had two people who did nothing but look for charts," she laughs now.

When calculating how much labor-related overhead an EMR can save a practice, remember that it might be wise to use those labor costs elsewhere, without cutting them altogether. If you eliminate your transcriptionist, for example, use the freed-up funds "to hire another physician assistant so you can see more patients or at least get home on time because of the improved efficiency," Nelson recommends.

Other benefits

While staff cuts represent the most obvious savings, EMRs also generate savings -- and revenue -- elsewhere:

  • Reminders of overdue maintenance appointments. It's not only clinically important to remind patients to come in for checkups, it also provides a chance to boost revenue with more visits. An EMR, for example, can easily remind you to contact a diabetic patient in need of a glucose test and foot exam.
  • Space. When Omura got rid of his paper files, he changed his former file rooms into exam rooms, making it possible to see more patients more efficiently. Similarly, 12-physician Nephrology Associates in Louisville, Ky., is saving $5,000 a year in storage space for its old paper files.
  • Lower staff turnover. Morale at Miller's practice has improved, helping her retain employees. Turnover can cost as much as 200 percent of the lost employee's salary, taking into account lost productivity, time to search for and train an employee, and vacation pay and benefits due to the departing employee. "The benefits [of the EMR] were obvious to the staff," she reports.
  • Improved revenue per visit. When physicians code appropriately instead of downcoding, they can increase revenue without working harder. Gastright's software suggests appropriate coding based on what the physician documents. Moreover, it points out when a physician should perform one or two other services so as to legitimately code higher. Obviously, physicians should only do what's medically necessary, but it's helpful to be reminded to document an exam you've already performed.
  • Improved office efficiency. When it's easy to find charts, physicians and staff spend less time wandering around the office. EMRs also make it possible for more than one staff member to look at a chart simultaneously. "So many people need access to the chart," says Janet Connell, administrator for Nephrology Associates. Schedulers use charts to expedite referrals. Nurses need charts to answer patient questions on the first call, without wasting time on phone tag.

Overall, practices credit their EMRs with smoothing workflow --  and boosting revenue. Nephrology Associates, for example, is "collecting more, quicker," according to Connell. "We are at a point where between 90 and 92 percent of our accounts receivable is 60 days old or less." Most practices can collect only about 50 percent of charges that fast. Improved chart access makes work faster, Connell explains.

The numbers -- and common sense --  show that EMRs can save practices money, despite their relatively high cost. Even if a practice spends the average $10,000 per physician, it can expect to earn that cash back. But not right away.

Possible pitfalls


Even the biggest supporters of EMRs admit that potential savings can get lost or delayed. "Implementation issues are bigger than the application. Features are less important than incorporating the system into the workflow. That's the part no one gets right," Nelson warns. In other words, don't expect to buy software and have the dollars come rolling in.

Transitioning old records into the new system is the biggest problem. Even Gastright, a big EMR fan, admits, "It would be extremely hard to convert an existing practice ... I've seen some practices who went through, that and they really choked on it." The old records --  or at least key parts of them --  need to be entered into the new system, starting with demographics and insurance data. That drains staff time. Only the physician can say what pieces of the medical portion of the record need to be entered.

Say it takes the physician 20 minutes to go through each chart and enter the right information, suggests Michael Pulaski, CEO of Atlanta-based Peachtree Orthopedic Clinic, who was previously part of a team that built its own EMR. That's one or two fewer patient visits per day, a real cut into any practice's bottom line. Pulaski says one EMR vendor told him practices should expect a 25 percent drop in productivity for the first three months when bringing any electronic charting system to a paper-based practice.

Entering the data is not the end of the story. Staff and physicians alike have to become adept at using the new technology. Imagine an early Monday morning with hordes of patients waiting to be seen, the phones ringing off the hook, and a physician who picks up his cool, new palmtop, clicks on it --  and gets the wrong page three times in a row. That physician will grab his dictation machine in a heartbeat, Gastright says.

"I've found it very hard to learn how to use," Gastright says of his technology, especially his wireless hardware. "The learning curve is pretty steep. It's not something where you can watch a half-hour video or read a book. You have to take it everywhere and keep doing it."

It took Gastright about two months to feel completely comfortable, though he admits his "younger and brighter" partners only needed about half that time --  partly because Gastright helped them learn the system. If you throw a new charting method at someone seeing 25 patients a day for example, expect her to drop to 18 patients a day, Nelson confirms.

Also, watch out for tasks that will be added permanently to the physician workload. For example, many physicians find electronic charting faster than dictation, but others will never get used to it. Their productivity suffers indefinitely unless a practice can develop an innovative solution. For example, Nelson visited one ear, nose and throat practice that hired a scribe to sit in on every patient visit and chart for the physician. The costs were cancelled out by the consequent boost in physician productivity.

The bottom line is that most practices can recoup the costs of an EMR, but they should expect it to take some time --  especially if they are transitioning from a paper record. Be realistic and be patient.

Pamela Moore, senior editor of practice management for Physicians Practice, can be reached at pmoore@physicianspractice.com.

This article originally appeared in the May/June 2002 issue of Physicians Practice.