Healthcare Business News

Hospital EMR reimbursements at risk: HIMSS

By Joseph Conn
Posted: May 21, 2010 - 12:45 pm ET

A majority of clinics and a minority of hospitals risk not qualifying for full federal reimbursements for electronic medical-record systems under the American Recovery and Reinvestment Act of 2009, and the clock is ticking for aging financial-software systems, according to a new IT market survey by HIMSS Analytics.

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The market-research arm of the Chicago-based Healthcare Information and Management Systems Society released its Essentials of the U.S. Hospital IT Market—5th Edition on Tuesday. HIMSS Analytics says it offers “a current overview and future projections of the U.S. hospital information technology market.”

Under the ARRA, also known as the stimulus law, only hospitals and office-based physicians that install and “meaningfully use” a certified EMR will qualify for federal IT subsidy payments through Medicare and Medicare Advantage. The bulk of the funds is expected to flow from these programs. Payments will start in October.

“We believe that between 30% and 40% of current U.S. hospitals may be at risk financially and operationally for not meeting meaningful-use criteria,” the report's authors note. Furthermore, they say, even though the government will establish regional extension centers to help office-based physicians get their subsidized EMR systems up and running, “We believe that more than half of all independent clinics will be at risk for not meeting meaningful-use criteria, even with regional extension center (REC) assistance,” the report said.

The good news is that the 2009 survey shows that more than half (51%) of all U.S. hospitals are at Stage 3 of the HIMSS EMR adoption model—up from just 36% in 2008. The model attempts to present an apples-to-apples comparison of the level of sophistication and intensity of hospitals' healthcare IT use, with Stage 0 being the lowest level of IT adoption and use and Stage 7 the highest.

Stage 3 means the hospital has computerized systems for nursing documentation, picture archiving and communication outside of the radiology department, and advanced error-checking and clinical decision-support functions. Stage 3 hospitals also have in place all of the lower capabilities of Stage 2 and Stage 1 systems.

Stage 2 hospitals, which accounted for 17% of the market in 2009 (down from 31% in 2008), have a clinical data repository, a controlled medical vocabulary, limited clinical-decision support and the capability for health-information exchange via a continuity-of-care document format, plus all Stage 1 IT systems and functions. Stage 1 hospitals, representing 7% of hospitals in 2009 (12% in 2008), have lab, radiology and pharmacy systems in place.

Just 14% of hospitals were at Stage 4 or higher in 2009, according to the HIMSS Analytics report, but that's more than double the 6% that had reached that level in 2008.

John Hoyt, vice president of healthcare organizational services at HIMSS, said the survey data confirm what the industry has long suspected: A digital divide exists between larger and more-urban hospitals and smaller and more-rural facilities. The national financial crisis has contributed to the problem, Hoyt said.

“I have been a COO for a small, rural hospital,” Hoyt said. “They're very dependent on local banks. A 40-bed hospital in rural Kansas is not going to Wall Street and when the small banks are not freely lending, it's going to have an impact on smaller hospitals. We have seen that happen, smaller hospitals saying, ‘I can't get a loan.' ”

He added: “The smaller hospitals are a little bit farther behind in their allocation of capital to IT. Their first allocation will always go to patient care.”

Because the stimulus law provides for reimbursement of expenses that have already occurred and only a portion of the estimated total costs of a complete IT system, “The ARRA fundamentally assumes you have access to capital and that's clearly an issue for the smaller, rural hospitals to this day,” Hoyt said.

Hospitals' IT spending on applications as a part of total capital spending is projected to increase through 2015, in large part because of stimulus-fund support, Hoyt said. HIMSS Analytics projects a 2% increase in hospital capital spending for IT application solutions in 2010 as compared with 2009. According to the report, hospital capital spending for software applications is projected to be between 46.5% and 48.3% of total IT capital budgets this year.

“The message there is the IT capital budget is growing,” Hoyt says. “What's getting shrunk, if anything, is in other places in the hospital.”

Although the stimulus law, with estimates of up to $27.3 billion available for clinical IT systems, has been getting most of the attention, the need is growing within the healthcare industry to replace its aging fleet of financial systems.

Hospitals face what Hoyt described as the “unfunded mandates” to adopt the X12, Version 5010 administrative data transmission standards and ICD-10 clinical code sets in the next few years—5010 by Jan. 1, 2012, and ICD-10 by Oct. 1, 2013. These federal requirements will force vendors to upgrade or drop support for their older revenue-cycle management systems, defined by HIMSS as involving patient registration, scheduling, billing and collections, and electronic-data interchange.

“We researched the HIMSS Analytics data, asking how many hospitals out there have revenue-cycle system components that are 10 years old or more,” Hoyt said. “East of the Mississippi, it's more than 1,400 hospitals. West of the Mississippi, that number is approaching 800.

“It is our opinion that something's got to give,” Hoyt said.



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