Strong ROI or Money Pit?

Perhaps they’re still gun-shy considering the potential penalties of the past. Perhaps the new regulations only serve to muddy the waters further in an already complicated legal morass. But Laurance Stuntz, a partner in the Boston office of Computer Sciences Corp., thinks part of the delay is that the Internal Revenue Service aligned itself with the Office of Inspector General and CMS just this past May, and that hospitals may just need more time; he predicts that organizations will become increasingly active on this front. For hospitals, assisting in this area may offer much to gain, but for now, the benefit of providing such help is hard to measure.

“A few of my clients are planning around what it will cost them so they can figure out how much to charge physicians,” he says. “I haven’t run into anyone who’s looking at giving this to their affiliated physicians free in hopes that they’ll start admitting more at the hospital. It’s not at all clear that the referral volume you get will offset the cost of providing that EMR.”

Meanwhile, Hallmark and Nania believe their joint venture solution bypasses the legal hurdles Stark once presented. They launched it two years ago, and the fact that Stark and anti-kickback were later relaxed was just icing on the cake. The real benefit, to them, comes from tying physicians more closely to the hospital.

Impetus from insurers

Hallmark’s approximately 150 referring physicians didn’t already have an EMR for the same reason most small physician practices don’t have one: They couldn’t afford it. Hallmark had already introduced an EMR for its approximately 60 employed physicians, driven largely by managed care contracts that had “significant performance incentives” built in that relate to implementing an EMR as well as computerized physician order entry, Nania says.

But with such a large group of referring docs, Nania saw an opportunity to tie those physicians more closely to the hospital. What better way to do it than to bring physicians onto an EMR that Hallmark had already paid for?

“We thought: What can we do to get primary-care physicians and specialists more aligned with the hospital?” Nania says. The answer turned out to be deceptively simple: Figure out a way to encourage them to use Hallmark’s EMR and build an integrated database for all physicians that admit to Hallmark facilities—employed and private.

“Essentially this is a physician EMR, and it needs to be a physician-driven enterprise,” he says. “What was attractive organizationally was to do it as a joint venture to pull employed and private physicians together.”

Physician-driven

To avoid violating the Stark and anti-kickback regulations in place at the time, physicians paid the incremental cost of joining the system through the joint venture—board representation for which is dominated by doctors, although Nania and Kevin Hoppe, the hospital’s vice president of managed care, also serve.

Physicians were happy that someone was actually doing something to help them improve their patient care as well as the efficiency and profitability of their practices, Nania says. Hallmark, meanwhile, hoped the increased goodwill from its efforts would translate to improved patient volumes, though both sides were careful not to tie any assistance in the technology arena to such goals. “At a minimum it ought to help us from a retention standpoint to keep the physicians we already have,” says Hoppe.

Because Hallmark already pays for maintenance and much of the capital costs, only incremental costs are passed on to doctors through the joint venture.

Hoppe says getting affiliated physicians to sign on was a “huge marketing effort.” But he possessed a powerful selling point. Because the 150 affiliated physician contracts can be purchased through the joint venture, doctors are able to generate significant discounts from the EMR vendor, GE Healthcare, that wouldn’t be available if they were trying to tie in on their own.

Practice management ties in

Doing it Hallmark’s way was not cheap. It cost between $6 million and $8 million over two years to bring 150 referring physicians into the system. Despite that cost, Hallmark hopes to bring in an additional 50 referring physicians over time.

Hallmark built its EMR system for employed physicians with GE Centricity, one of the two choices for EMRs based on the managed care contract’s incentives. In the joint venture, the board decided to stick with GE because it also offered a valuable practice management component for doctors’ offices.

Even as Hallmark builds on its staff of employed physicians, finding a way to provide more services for affiliated physicians has helped soften the rough edges some referring physicians feel toward hospitals that strive to employ more of their referral base.

“Physicians are spending less time in the hospitals,” says Nania, whose facility faces strong competition from the Boston area’s contingent of academic medical centers. “We hope this will attract other physicians who have only sent a minor part of their business here in the past.”

So is Hallmark just an outlier, or will other hospitals now look to use EMRs as an alignment tool? It’s too early to tell, says CSC’s Stuntz—but he’s not entirely convinced.

“It removes a barrier, but I’m not convinced that it removes the major barrier,” he says. For physicians, cost is perceived as a significant hurdle, so if the hospital sees providing EMR assistance as an opportunity to further its mission, such initiatives will likely become more common. But until some credible studies prove moving to an EMR improves efficiency, many physicians may remain unconvinced. Meanwhile, hospitals must do some complicated cost-benefit analyses to determine whether offering such add-ons helps their bottom line.

“It depends a lot on how competitive the market is and what their competitors are offering,” says Stuntz, adding that offering an EMR to affiliated physician may become a cost of doing business in competitive markets. “It depends on whether the physician is likely to be admitting to all hospitals or whether they would be OK with admitting to just the one that offers the EMR.”

Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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