American College of Physicians: Internal Medicine — Doctors for Adults ®

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Group purchasing puts EHRs in small offices

Physicians find strength in numbers when negotiating with technology vendors

From the March ACP Observer, copyright 2006 by the American College of Physicians.

By Gina Shaw

Physicians in several practices in Rhode Island are about to get a new electronic health record (EHR)—at prices up to 30% off what they might have expected to pay. They've discovered one way to overcome what can be an insurmountable cost barrier: the power of shared negotiation.

Given the high costs of establishing an EHR, it's no surprise that smaller practices aren't able to make the EHR leap without some sort of incentive or strategy. According to a Medical Group Management Association (MGMA) survey published in the September 2005 issue of Health Affairs, the average purchase and implementation cost of an EHR system was $32,606 per physician, with $1,500 per physician per month in additional maintenance costs.

Shared negotiation may be happening in only a few states, but it's working. Small and medium-sized internal medicine practices are coming together—either as bigger incorporated groups or as clinical competitors—to negotiate with vendors, gaining price leverage and a better shot at establishing local interoperability. Other groups are taking an incremental approach, finding ways to electronically share information as a first step to negotiating as joint purchasers.

"We are beginning to see clinicians organizing around the group purchase of EHRs," said Janet Marchibroda, chief executive officer of the eHealth Initiative, an advocacy and education organization that aims to drive quality improvement through information technology. "It's going to be a growing trend—not just to save money through discounts, but also for physicians to gain greater confidence in their EHR purchases."

Collaboration, not competition

One of the most evolved of these still-fledgling efforts is Electronic Health Records of Rhode Island (EHRRI), a for-profit corporation formed by five different physician organizations: Coastal Medical Inc., Lifespan/Physicians Professional Services Organization, Thundermist Health Center, and the physician-hospital organizations at Women and Infants Hospital and Kent County Memorial Hospital, which are part of the Care New England integrated health care system.

Those practices are still separate clinically. But beginning in 2002, leaders of all five groups began participating in the Rhode Island Quality Institute (RIQI), a statewide initiative of major health care stakeholders. By 2004, the state of Rhode Island—on behalf of the RIQI—had received a $5 million data-sharing grant from the Agency for Healthcare Research and Quality.

"We wanted to bring physician leaders together to talk about moving things forward by at least decreasing the variation in the number of electronic health records that come into Rhode Island," said RIQI's director, Laura Adams.

But the physicians didn't stop there. Instead, the doctors—representing groups that continue to compete clinically—decided to take a giant step forward by creating a group for EHR purchasing.

EHRRI is now in final negotiations with an EHR vendor to establish a single EHR system for all the groups' affiliated physicians. The organization hopes to get 125 physicians online with the new record by the end of this year and then roll out the EHR to all participating practices and physicians over the next four to five years.

"It became clear that being able to engineer a volume discount through a group purchasing plan would be the best way to overcome the cost barrier," said Mark D. Jacobs, ACP Member, president and chief executive officer of Coastal Medical Inc. and chair of EHRRI's board of directors. "We realized that if we pooled our resources and agreed on one record, we could go to that vendor with 1,200 physicians—over half of the state's practicing doctors—and pressure them to give us a volume discount."

Could such efforts be duplicated elsewhere? "I'm sure they could," Dr. Jacobs said. "Numbers speak very loudly to software vendors."

But it gets a little more complicated. The degree of discount they're seeking, Dr. Jacobs added, would end up generating a loss for the vendor. The group has decided to make up that gap with subsidies from major stakeholders who stand to benefit from physicians' use of information technology, such as workers' compensation insurers, medical liability carriers, large self-insured employers and state health plans.

"We're looking to raise several million [dollars] in contributions from those stakeholders, which then will allow us to sell this particular product at anywhere between a 15% and 30% discount."

Win-win negotiations

Other groups of individual practices are taking a page from the managed care playbook of the 1990s and actually incorporating into larger groups to reach the critical mass they need to negotiate a purchase.

In Florida, for example, Family Care Partners of Jacksonville has used its EHR to attract several formerly independent practices to come together under the Family Care umbrella. Three years ago, Family Care consisted of two sites and approximately 20 staff; today, they've expanded to six sites with some 40 providers. "And we've just started," said William Carriere, MD, one of the group's physicians.

"Three practices that joined us had EHRs that were unworkable," Dr. Carriere said. "One had spent $80,000 on theirs and was able to implement only the scanning function."

The big advantage of gaining critical mass, he pointed out, is centralized system support. "We have our own internal help desk and template-building staff," he said. "Because we're committed to really growing this, we have a staff of five IT people." (See "Massachusetts collaborative launches EHR pilots.")

While that sounds expensive, the infrastructure actually saves the practice money. "It's improved our workflow and overhead so much that we don't worry so much about cost anymore." Prior to adopting the EHR, Family Care Partners' biggest overhead item—non-clinician personnel, or support staff—ate up 38% of revenue.

That percentage has now dropped to 28% and is still falling. "What people don't realize," Dr. Carriere said, "is how incredibly inefficient it is to chase down paper charts."

Family Care Partners is now using its EHR experience to bring seven specialty practices together to purchase and implement an EHR. It is also forming a physician-led regional health information organization (RHIO) with other community stakeholders. (See "RHIOs: building blocks to a national network.")

"If we do that and have compatible systems, we can negotiate with third-party payers together," Dr. Carriere said. "That's a big advantage because ours is a huge managed care community. The goal is to get into win-win negotiations with third-party payers."

Information portals

Other groups are taking a different route to EHRs. They're first pursuing Web-based portals to facilitate information sharing and price leveraging.

In upstate New York, for instance, about 500 doctors in two Hudson Valley counties have formed a cooperative called the Taconic Health Information Network and Community, which has established a Web-based central database. For a monthly subscription fee of between $500 and $600, doctors can log onto a secure Web site to check lab and imaging results and send prescriptions electronically to participating pharmacies. This year, the cooperative will introduce a comprehensive, interoperable online electronic health record.

And in Connecticut's Middlesex County, Middlesex Professional Services Inc. (MPS), a network of 300 physicians, has received a $1 million foundation grant from the Physicians' Foundation for Health Systems Excellence. That foundation was established as a result of the class-action suit settlement with Aetna Inc. on down-coding and delayed payment issues.

The idea behind the MPS is to create an information portal that includes a patient registry, a laboratory interface, and a means of communicating lab and imaging results between primary care physicians and subspecialists. The group will use the "continuity of care record"—a standard specification being developed jointly by several state and national medical societies—as a basic EHR that can be shared and updated by all treating physicians.

"We're not actually buying electronic record systems with the grant, but through it we hope to put together a large group of physician organizations to negotiate and bring the price way down on EHRs and other related technologies," said Douglas S. Arnold, MBA, MPS' executive director. How low? Probably one-third to one-fourth of the average per-physician cost for an EHR startup, he said. (See "E-prescribing: New ACP guide tells you what you need to know.")

Is it legal?

In most cases, even group-purchasing collaborations between competing medical groups are able to steer clear of antitrust and anti-kickback regulations. That's because the antitrust laws allow physician practices and other providers to integrate through what's called clinical integration.

"The providers don't have to share the risk in the same way that they do when they economically integrate, but they can go ahead and negotiate third-party payments as a collective and not merge their practices," explained Bruce A. Johnson, JD, a consultant with the MGMA and an attorney with Faegre and Benson LLP in Denver. "The EHR has become almost a necessary prerequisite to that, in that you have to have a common system to implement pathways, clinical practice protocols, and all the other bells and whistles of a clinical integration project."

As long as providers are obtaining EHRs at a commercially reasonable market rate and not "getting something for nothing," Mr. Johnson said, such arrangements can be crafted to meet applicable Stark and anti-kickback laws.

"There may be a cost saving on the 'list price,' so to speak, because of economies of scale," he said, "but they're still buying the record."

And new rules that could be finalized later this year would create a more substantial safe harbor. Last year, both the Office of Inspector General (OIG) and the Centers for Medicare and Medicaid Services proposed similar rules—one under the Stark law, the other under anti-kickback rules—that would create exceptions to facilitate the broader adoption of EHR software and related technologies.

"They're still in proposed form, but they would create an exception to deal with non-monetary 'compensation,' " Mr. Johnson said. "They would allow certain organizations, like hospitals and group practices, to provide physicians access to certain items of technology that will allow electronic prescribing, as well as certain components related to EHRs."

In comments to the OIG, ACP strongly advocated for not placing any caps or limits on the amount of technology that could be donated to physician groups.

Michael S. Barr, FACP, the College's Vice President for Practice Advocacy and Improvement, pointed out that while broader safe harbors would certainly be welcomed, "they won't take the place of other financing mechanisms, like grants and tax credits, to help physicians make these substantial investments." In the meantime, he said, "group purchasing arrangements are a good place to start."

Gina Shaw is a freelance health care writer based in Montclair, N.J.

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Massachusetts collaborative launches EHR pilots

What began in 2004 as an effort by Massachusetts providers to pool resources and develop a statewide electronic health record (EHR) is about to go live. Soon-to-be launched pilot projects are part of a systematic plan by the Massachusetts eHealth Collaborative to connect community health care professionals and facilities by implementing EHRs.

Three finalist communities have been selected to serve as pilot sites: Brockton, a large, culturally diverse community with more than 400 physicians; Newburyport, an intermediate-sized suburban community with about 100 physicians; and Williamstown/North Adams, a small rural community with between 50 and 75 physicians.

The collaborative is an incorporated nonprofit made up of about three dozen state health care organizations, which represent physicians and other providers, hospitals, insurers, consumers, government and business. It grew out of an information technology summit convened by ACP's Massachusetts Chapter in March 2004. Its goal is to create a statewide interoperable EHR system with decision support that links physician practices with all the other providers throughout the state.

"It's a very ambitious project," said Allan H. Goroll, FACP, Governor for the Massachusetts Chapter and chair-emeritus of the nonprofit's board of directors.

"We've done the hard preparatory work, and the community has remained very strongly committed." In fact, pilot communities are approaching a "remarkable" 100% physician participation rate, he said.

Each pilot site has been offered the all-expense-paid services of collaborative-approved EHR vendors in return for participating in a two-to-three year evaluation of the costs and benefits of a community-wide interoperable EHR. Vendors were selected on the basis of their ability to meet the collaborative's interoperability and service standards, Dr. Goroll explained.

Those standards incorporate the collaborative's participation in national efforts, including the National Health Information Initiative. The collaborative has also hooked up with MassShare, a nonprofit that is establishing infrastructure to transmit EHR information between communities.

"We are like the intracommunity 'last mile' provider, while they provide the 'power line' that makes the intercommunity connection possible," explained Dr. Goroll, who is professor of medicine at Harvard Medical School and physician of the medical service at Boston's Massachusetts General Hospital.

A plan to evaluate the project is already in place: David W. Bates, FACP, chief of general internal medicine at Boston's Brigham and Women's Hospital, has received a $3 million matching grant from the Agency for Healthcare Research and Quality to evaluate project results, Dr. Goroll said. The pilots themselves are being funded by a $50 million unrestricted grant from Blue Cross Blue Shield of Massachusetts.

The next phase, Dr. Goroll said, is to "expand the effort exponentially," with the state expressing interest in active participation. "The momentum," Dr. Goroll said, "continues."

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E-prescribing: New ACP guide tells you what you need to know

With its dizzying number of new formularies, the Medicare Part D drug plan is giving a big push to one affordable information technology platform: e-prescribing. The ability to write and check prescriptions electronically, then transmit them to a pharmacy without handling a written prescription, is being touted as the solution to both better patient safety and fewer prescribing hassles for physicians.

As more e-prescribing vendors enter the market, ACP's Practice Management Center has put together a new guide to help College members make informed choices about different systems. The free new "Electronic Prescribing: What you should know" brochure covers the informational gamut from choosing the right service package to avoiding hidden pitfalls in e-prescribing vendor contracts.

"E-prescribing, if implemented correctly, can provide a legible medication history and identify potential drug interactions, while alerting physicians to drug contraindications," said Michael S. Barr, FACP, ACP's Vice President for Practice Advocacy and Improvement. At the same time, however, "poor implementation will produce less than expected results. If you choose a system with the wrong functions or updates, errors will start to occur—just as they do in a paper-based system."

According to the new guide, here are considerations to keep in mind when choosing a system:

  • Staffing concerns. What type of access should your staff have to an e-prescribing system, and how much training will staff need on the new system?

  • Choosing a vendor. Does the vendor provide support services? Does the vendor have agreements with other parties—like health plans or drug companies—to share your prescribing data?

  • Implementation. What are different costs and licensing requirements? And what do you need to know about upgrading your Internet speed and integrating an e-prescribing system with other information technology?

The guide is online in the ACP members-only section.

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RHIOs: building blocks to a national network

An electronic health record (EHR) is only as good as the information that's in it.

"The EHR itself is an empty vessel," said Janet Marchibroda, chief executive officer of the eHealth Initiative. "Once you have an EHR, it has to be populated with lab test results, medication histories and all the rest. Otherwise, all it will have is what you put in it yourself."

That's where regional health information organizations (RHIOs) come in. These state, regional and community-based health information exchanges are a fast-growing information model designed to build local and regional frameworks to exchange health information data. Right now, that data reside in many different places, including medical groups, pharmacies, labs and hospitals.

The basic goal of RHIOs is to electronically exchange health information in a secure format—and ultimately, to provide the building blocks for a national network of interoperable medical records. According to a recent eHealth Initiative survey, there are more than 100 health information exchange initiatives across the country. About half of those are established corporations, while the rest are loose collaborations.

"In some markets, they're actually helping physicians [adopt] EHRs by facilitating the exchange of health information into the record," Ms. Marchibroda said. Last month, the initiative released its "Connecting Communities Toolkit," a free, downloadable set of materials to help guide the technical, financial and clinical exchange of information.

"Health information exchange collaboratives are very good for doctors," Ms. Marchibroda said. "You need to have a trusted source at the community level working with patient information—and physicians need to have confidence that it's a neutral body and that patient privacy will be protected."

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