• Study shows EMRs savings determined by complementary factors

    Author | Date September 10, 2012
    New research out of the Kellogg School of Management at Northwestern University provides insight into the return-on-investment (ROI) conundrum for hospitals that is the adoption of electronic medical record (EMR) systems. According Dranove et al., healthcare systems and organizations can realize the purported cost-savings associated with EMRs so long as sufficient systems and resources are available to complement them.
    While so much of the debate surrounding the economics of EMR and electronic health record (EHR) systems focus on the costs of the system themselves, the authors contend that the debate as a whole disregards external forces. According to Dranove et al., these forces are more likely to affect whether an EMR system truly can become form of savings:
    Because important business process innovations occur on a large scale, they typically involve a range of investments, both in computing hardware and software, and in communications hardware and software. They also involve retraining of employees, as well as redesign of organizational architecture, such as its hierarchy, lines of control, compensation patterns and oversight norms.
    Hospitals that are capable of leveraging internal and external resources tend to have more success in demonstrating the benefits of EMR systems. EMR can succeed when the necessary complementarities are present and the complementary components are in place. Until then the results, at best, can be only mixed,” the authors claim.
    So what are these complementary factors that have so much influence over the EMR ROI? They are knowledge experts and the availability of their expertise. And the ability to use the former hinges on the latter:
    However, this effect is mediated by the availability of technology skills in the local labor market. Specifically, in strong IT locations costs fall sharply after the first year of adoption to below pre- adoption levels.  In weak IT locations, costs remain above pre-adoption levels indefinitely. Overall, hospitals in high skill markets enjoyed a statistically significant four percent decrease in costs two years after adoption basic EMR and no increase in costs two years after adoption of advanced EMR.
    This revelation would explain why those hospitals in urban centers and technologically-rich areas outpace their counterparts. And this reality would seem to further the gap between the haves and have-nots in terms of ROI. However, the authors argue that the balance of resources should even out in the years to come: “Over time, these complementarities are expected to become more widely available, and the various components more widely deployed.”
    Although the availability of external resources plays a significant role in the cost-savings of EMRs, it figures less significantly than a hospital own internal staff and technology. This difference becomes clear in how hospitals move forward with future adoptions of health IT. “Complementary skills can also be found in the hospital itself,” explain Dranove et al., “We also expect enterprises with existing IT facilities will be more likely to adopt frontier IT than establishments without an extensive operations. Having more resources elsewhere in the organization means that lower cost resources can be tapped, or loaned between projects of the same firm.”
    In the end, the ROI of an EMR or EHR system depends on how effectively an organization uses its resources. With larger, more resourceful hospitals able to access a wider range of resources, they are more likely than remote and less resourceful hospitals to reap the benefits of their systems. Although Dranove et al. believe expertise will become more widely available soon, it could prove too late for hospitals already struggling to retain staff while implementing EMR and health IT systems. And if incentives aren’t enough to offset these shortages, then what’s the worth of adopting costly system?
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