Electronic medical records: A surprising short-term prognosis for cost savings

August 06, 2010

From knowIT, August 3, 2010

It is a widely accepted assumption in the healthcare and information technology industries that electronic medical records in hospitals help reduce costs and enhance the quality of patient care. But new research on the subject by three W. P. Carey information systems professors contradicts that conventional IT wisdom. And that has surprised and disappointed many in the healthcare and IT fields -- including the researchers themselves.

The research by Assistant Professor Michael F. Furukawa and Associate Professors Raghu Santanam and Benjamin Shao started with the assumption that electronic medical records positively impact hospital costs and patient care. From there, they set out to determine the extent to which healthcare IT is accomplishing those efficiencies.

Their conclusion: hardly at all. In fact, they found that the use of IT in a group of California hospitals actually has resulted in higher costs, higher levels of nurse staffing and higher patient complications. Their unexpected results have helped intensify the national debate over the effectiveness of hospitals converting to computerized patient records.

But the W. P. Carey researchers stress that the problems they discovered are short-term. They continue to believe that if paperless medical records systems are correctly implemented, they will be successful in the long run in improving patient safety and, to a lesser extent, reducing healthcare costs.

"The healthcare industry shouldn't feel discouraged by the short-term negative impacts," Shao says. "It will take time for hospitals to fully implement it and learn how to effectively use it. Along the way there are going to be bumps. But eventually they are going to enjoy the benefits."

Reduced mortality rates

The study's findings, published this August in the journal Health Services Research, alsoidentified a link between electronic record-keeping and reduced mortality. The hospitals in the study experienced lower patient death rates for certain conditions, most likely because the electronic medical records systems helped cut down on medication errors.

"These systems are good at flagging these things," Furukawa says. "Medication errors that result in adverse drug effects are a leading cause of mortality in hospitals."

In conducting their research, the W. P. Carey professors analyzed 10 year's worth of data from more than 300 California community hospitals that adopted some form of electronic medical records.

They decided to conduct the research because the push for hospitals to convert to electronic records systems has intensified in recent years, largely because a 2005 RAND Corporation study found that America's healthcare system could save more than $81 billion annually and improve the quality of care if it were to broadly adopt computerized medical records.

The RAND study also recommended that the federal government consider financial incentives, including increasing Medicare payments to providers who use approved electronic records systems and providing grants to institutions that embrace the technology. The Bush and Obama administrations endorsed the idea and, more recently, $19 billion in federal stimulus money was committed to computerizing medical records.

Exaggerated findings

But the RAND study was controversial, and many in the healthcare IT industry consider its findings to be greatly exaggerated. Since then, other studies have found that the cost savings and quality benefits are not as great as were predicted by the RAND study. But those newer studies have been based mainly on anecdotal information and reports by individual hospitals.

There have been no definitive studies that have analyzed large numbers of similar hospitals. That's why the W. P. Carey professors decided to study a group of California community hospitals that were using computerized records systems.

"We wanted to do a more representative study," Furukawa says. "We wanted to look at a group of hospitals so we could compare their experiences."

The main focus of their research was the potential cost savings through reductions in patient hospital stays, nurse staffing, administrative expenses for medical records, and redundant or inappropriate diagnostic tests and medications.

Disconnect between theory and reality

In theory, implementing electronic medical records should shorten hospital stays by reducing delays in the ordering process for services, streamlining discharge planning, and minimizing complications from preventable errors. Likewise, automating manual tasks, streamlining documentation, and enhancing communication among caregivers through computerized records was expected to improve nurse efficiency and result in reduced staffing requirements.

The research by the W. P. Carey professors found just the opposite: hospital stays grew longer, patient complications increased, and higher levels of nurse staffing were required.

"There's a disconnect in the policy world that assumed that with all of the records moved into the computer system, nurses and other hospital personnel could spend less time running around looking for charts and that they would have more time to spend with patients," Santanam says. "While some documentation time was reduced, a lot of time at computers may have been added, especially at organizations just learning to implement the new technology in a likely transition period. Higher levels of nurse staffing were really needed."

Another unintended consequence of shifting to computerized medical records is that more highly educated nurses are required to efficiently use the new systems, which could worsen the nursing shortage in some areas. Hospitals with computerized records systems would be able to recruit and retain skilled nurses, potentially making it more difficult for hospitals without such systems to attract enough nurses.

"This could have real implications for the labor market nationwide," Shao says. "Some areas already have registered nurse shortages, and that problem could be exacerbated with the implementation of electronic medical records."

Identifying "never events"

As to the increase in patient complications, the researchers say that could simply be the result of the computerized system identifying problems that were already there but had been overlooked. The increased reporting of these "never events," or events that never should have happened, could have a negative impact on hospitals because Medicare refuses to pay for them. Some private insurance companies also have adopted such a policy, the researchers say.

Despite the negative findings in their research, Furukawa, Santanam and Shao still support healthcare IT and they believe that in the long run electronic medical records will achieve the expected efficiencies. In fact, their research found that hospitals saw better results from the use of electronic medical records as their implementation and techniques got more advanced.

They also note that in the 1980s and '90s, when most other industries were shifting to computerized systems, they spent a lot of money but saw no immediate benefit. That led critics to question the value of IT.

"Ten years later, everybody realized that the benefits were real," Shao says. "Now, nobody questions IT's value in enhancing productivity."

Health care slow to adopt IT

The W. P. Carey researchers say that the healthcare industry has lagged other industries in the implementation of IT systems, partly because it is a conservative and highly regulated industry and because its main focus is taking care of patients. Aside from the large, well-funded hospitals, most institutions don't have adequate IT staffs to implement and operate such systems efficiently.

Another reason many hospitals might not be seeing benefits from IT is that they have only partially implemented the new systems. That means that some records are computerized, while others are still on paper, resulting in gaps and inefficiencies that could be creating even more work.

The positive effects of electronic records systems also can be blocked if hospitals fail to improve their processes. If a process is flawed before the system is computerized, it will remain flawed afterward. They are just computerizing inefficient processes.

"We need to rethink what we do in hospitals and then determine how technology can help get us there," Santanam says. "Technology alone is not the answer. This study points to the need for IS research to look more deeply into how IT is being implemented in hospitals and what types of processes need to be changed to achieve that return on investment."

The researchers, who currently are working on another electronic medical records study on the national level, caution hospital administrators not to expect any major short-term benefits. In the long term, they can expect to see improvements in patient safety and quality of care before they experience any major cost savings.

"Our conclusion was kind of a cautionary tale of moving to healthcare IT," Furukawa says. "Long term the benefits are there. Patient safety will probably be the biggest benefit. But don't over-expect changes."

Bottom Line:

  • Despite the widely accepted assumption that healthcare IT reduces costs, improves efficiency and enhances quality of care, researchers found that the use of IT actually has resulted in higher costs, higher levels of nurse staffing and higher patient complications, in the short term.
  • Hospitals using IT systems experienced lower death rates for certain conditions, most likely because the electronic medical records systems helped cut down on medical errors.
  • Many hospitals might not be seeing benefits from IT because they have only partially implemented the new systems and because they haven't improved flawed and inefficient processes.
  • Hospitals shouldn't expect any major short-term benefits from electronic medical records systems. But in the long term, they can expect to see improvements in patient safety and quality of care before they experience any major cost savings.