Beyond the EHR money pit

A few years ago, WellStar Health System switched each of its hospitals onto a single electronic health record platform as it moved deeper into care coordination for patients. It was a significant and costly overhaul for the Marietta, Ga.-based chain. The $38.3 million in implementation costs reduced its 2014 operating surplus by 41%.

While that process has now been completed and the system's balance sheet looks stronger, demands for more spending on technology hasn't ebbed. “One of the myths people have is that you do an install and then you're done,” said Dr. Jon Morris, WellStar's chief information officer. “That's not true. As healthcare's use of technology has progressed … the requirements of technology have continued to escalate.”

Across the country, health systems that made significant investments in upgrading their information technology infrastructure and installing EHRs—sometimes spending hundreds of millions of dollars—are finding their technology needs are continuing to snowball. Not only do EHR systems require constant updates and maintenance, but the healthcare industry is undergoing another kind of digital revolution.

It's no longer adequate to have an EHR system and collect data electronically. Systems need to employ sophisticated data analytics to reduce the cost of care and improve quality. They're also looking for ways to increase their digital interactions with patients, whether that's through telemedicine, remote patient monitoring or online bill pay and appointment scheduling.

WellStar has five legacy hospitals and earlier this year acquired five more Atlanta-area hospitals from Tenet Healthcare Corp. It also recently merged with West Georgia Health, a single-hospital system in LaGrange.

It will need to bring those facilities onto its single EHR platform, which the system purchased from Epic Systems Corp. That switchover must be done in addition to meeting its other IT goals. “They'd rather do other things with the money,” Morris said about WellStar's IT spend. “Health systems (have) to pick the projects that are going to be most favorable for the population.”

These demands are coming at a time when health systems are trying to get some relief from heavy IT investment, which put pressure on their income statements in recent years. “There is definitely fatigue in the marketplace,” said Bret Schroeder, a healthcare expert at PA Consulting Group. “EHR spending is absolutely down … because there was such a big emphasis on it a few years ago.”

The top spending priorities now are information security, analytics and patient experience, he said. Organizations also tend to be more cautious in an election year when there's uncertainty about the outcome and, to some extent, the future of the Affordable Care Act.

“My sense is overall budgets are flat,” Schroeder said. “You see a lot of IT groups wanting to do the cool thing. But unless they're solving a business problem, they're going to have a hard time.”

Seven years after the Health Information Technology for Economic and Clinical Health Act offered providers incentives to adopt EHRs, many systems have completed their big push. Only a small group of providers say that EHRs are still contributing to higher IT expenditures.

A February survey from IDC Health Insights, which looked at acute-care hospitals with more than 200 beds, found that 40% of respondents had increased their IT budgets in 2016. Only 25% of that group attributed the growth to EHRs.

Lifespan, a four-hospital system based in Providence, R.I., is completing the last year of a $100 million, three-year Epic implementation, its largest IT investment ever. Moody's Investors Service cited the costly EHR installation as a prime reason for downgrading the system's credit rating in 2014.

In the wake of that huge capital expenditure, which primarily addressed clinical functions, pent-up demand for other IT needs have bubbled to the surface, particularly for administrative tasks like payroll, attendance and recruitment. “Everything administrative needs a refresh,” said Dr. Cedric Priebe, the system's CIO.

Requests for add-on software for its Epic system as well as upgraded telehealth and video capabilities are lower on the priority list. “Rhode Island hasn't yet embraced reimbursement” for telehealth, Priebe said. “We're not seeing that much upside.”

While Lifespan is scaling back on new capital projects in IT, the demands on its operating budget haven't eased. The technology department will likely have to cut back on its discretionary spending, including on training, travel and food, Priebe said. It also is looking at opportunities to outsource certain functions so it can better manage its head count. “We'll need to find savings,” Priebe said.

The spending fatigue also is coming at a time when the number of technology vendors has exploded with a growing number of small and innovative companies seeking to disrupt the healthcare industry. Many may find an increasingly inhospitable environment.

It's not that major systems aren't interested in innovation. Rather, they are trying to rationalize the number of vendors they're working with, particularly in the highly fragmented digital health space. “If you're providing a service to a hospital, you need to show that you're reducing costs, and it's not just hypothetical,” said Luke Duster, a managing director at CRG, a healthcare investment firm. “It's simple in concept, but it's hard to deliver.”

A number of large health systems, meanwhile, are dabbling in new technologies through their venture arms, rather than their IT operating budgets, said Jeff Elton, who heads the predictive health intelligence group at Accenture.

Technologies that can create immediate cost savings are the ones hospitals are most likely to be adopting now.

University of Colorado Health in Aurora has been on a major building spree and this year announced plans for new hospitals in Greeley and Highlands Ranch. But it also is using technology such as scheduling software to smooth patient flow without adding capacity.

The IT department also is looking at ways to improve its use of data to keep patients healthy and transition to value-based payment contracts, said Steve Hess, the system's CIO. While it's difficult to show a return on investment from an EHR platform alone, the system has been seeing financial results from investing in analytics, telehealth and mobile technologies for its clinicians and staff, he said.

“Implementing the EHR was hard, was complex, but was not really interesting,” Hess said. “We're actually doubling down. The EHR was laying the highway, and now we're investing in better vehicles.”