Hospitals, docs see $161M payout for health IT investments

Photo | Contributed St. Francis Hospital and Medical Center Chief Information Officer Linda Shanley is leading a multi-million dollar technology conversion at the hospital as it switches its electronic medical records platform. Hospitals are receiving millions of dollars in federal incentives to invest in health IT.

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By Greg Bordonaro

Connecticut hospitals and physicians are raking in millions of dollars in federal incentives for purchasing and using health IT systems, financial records show.

The federal funds are flowing in as part of the Obama Administration's efforts to incentivize healthcare providers to use electronic medical records, which are seen as a key tool in helping improve care quality and reducing costs.

Since 2011, Connecticut healthcare providers have collectively earned $161 million in federal health IT funds, according to the Centers for Medicare and Medicaid Services.

Still, hospital officials say, the money doesn't come close to covering the total costs of investing in technology. So, while the federal funds are providing some financial cushion, hospitals are still seeing overall cost increases that are straining their bottom lines.

And with the federal government threatening to penalize providers that don't adopt electronic medical records by 2015, hospitals and physicians say they have little choice but to make the down payment.

“The incentive program helps, but it only covers a fraction of what it costs to implement the technology,” said John Brady, chief financial officer and vice president of business development at the Connecticut Hospital Association.

Hospitals are receiving the federal funds for meeting so-called meaningful use guidelines.

Meaningful use essentially means providers need to show they're using medical records technology in ways that can be measured in quality and quantity. The term was coined in the American Recovery and Reinvestment Act of 2009, which established incentives and disincentives for medical care providers to implement electronic health records.

Under the law, providers that are meaningful users are eligible to receive temporary Medicare and Medicaid incentive payments. Medicare payment penalties begin in 2015 for providers who fail to achieve meaningful use status.

There are several stages of meaningful use, each with different requirements. In Connecticut, 28 acute care hospitals have achieved stage one, which requires things like electronic prescribing and sharing information with other providers' electronically.

Bristol Hospital, for example, earned $1.3 million in federal incentives for meeting meaningful use standards in fiscal 2012. The small community healthcare provider was one of the first hospitals in Connecticut to have completely paperless records, said Dave Rackliffe, the hospital's assistant vice president for information services.

But it didn't come without a cost.

In 2011, Bristol Hospital embarked on a $10 million health IT program, which included buying new software, having it installed, and integrating it into the work culture. So far, federal incentives covered only about half of the costs.

What many people don't understand, Rackliffe says, is that implementing electronic medical records is a major cultural shift for providers that disrupts workflow and requires a whole new way of doing business.

“You can't just plug it in,” Rackliffe said. “You have to develop it and make sure it works properly.” Bristol Hospital ended up losing $2 million in the first quarter of fiscal 2012 because they had to hire extra staff to help implement the technology. Doctors were also seeing fewer patients as they needed time to adjust to using electronic medical records.

The investment, however, was worth it, Rackliffe said, because it has allowed the hospital to become much more efficient.

Now all departments within the hospital can share patient information almost instantaneously. Doctors are spending less time writing things down, and more time actually talking to patients. And it's helping reduce medical mistakes and duplicative procedures, which are two major cost drivers in the health care system, Rackliffe said.

For many hospitals, the investment in health IT is a continual process. St. Francis Hospital and Medical Center, for example, is embarking on a multi-million dollar technology conversion as it switches its electronic medical records platform.

Linda Shanley, St. Francis' chief information officer, said the hospital currently has 34 different health IT systems being used within the hospital by various departments, which creates added costs and inefficiencies. Since the goal of meaningful use is to allow information to flow freely from one caregiver to the next, the hospital is converting to one health IT platform shared by every department within the hospital.

The integrated approach, Shanley said, will make it easier to manage patients, and also save the hospital $60 million over the next 10 years by allowing them to consolidate health IT operations.

“There is less redundancy of data and better accessibility to all providers,” Shanley said. “It provides a more tech savvy solution.”

St. Francis, which received $4.7 million in meaningful use incentives in fiscal 2012, will go live with a health information exchange this fall, allowing patient data held by hospital providers, to be shared with community doctors.

Brady, of the hospital association, said all Connecticut hospitals are working to meet the second stage of meaningful use, which includes several new objectives. It requires, for example, the automatic tracking of medications from order to administration and the recording of electronic notes in patient records.

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Health IT incentive payouts

EHR incentive payments