Preserving Physician Income in a Low-Margin Environment: EMR Strategy

A frequent concern I hear in my conversations with physicians is that they are challenged by increasingly harsh economic pressures. Healthcare reform, lower—or at best stagnant—reimbursement rates from government and private payers, and the higher proportion of lower-paying Medicare patients are reducing or capping practice revenue. At the same time, overhead costs are escalating unrelentingly, since employees still expect raises and other operating costs continue to rise. While the common perception is that physicians are not businessmen/women, they are in fact running small businesses; and now, more than ever, they need to focus on ways to maintain business viability in light of lower margins.

Physician Income Calculator

The above graph illustrates the economic challenges. Click on it to enter your own practice data and assumptions concerning anticipated growth or decline in reimbursement and expenses, and observe the effect on physician income—the green line. Given that physicians have no control over reimbursement rates, the only way to positively impact that green line is by effecting fundamental changes to practice operations—and the right EMR is critical to this end.

First, it is imperative to significantly reduce overhead—the orange line. Government programs that may, or may not, deliver short-term financial incentives do not address cost structure. What is needed is an EMR that delivers sustainable and significant reductions in the staff-to-physician ratio and more efficient management of all resources—depressing the orange line. Increasing revenue—the blue line—requires increases in physician productivity and patient volume. The challenge here is to wade through EMR marketing hype to identify the EMR that will actually shift the orange line down and the blue and green lines up.

Browser-Based vs. Client-Server EMRs: Productivity is King

Last week’s blog evoked some spirited comments, to which I will respond collectively. I encourage you to keep this conversation going by continuing to share your thoughts on this clearly hot topic.

First, let me clarify some terminology, so that we are all on the same page. Some responses to last week’s post confused browser-based applications with hosted ones. Any application can be hosted—the server can reside anywhere. However, software that runs by opening a browser (like Internet Explorer) and going to a website cannot possibly deliver the speed and crispness afforded by software installed on a PC.

There is no question that there are some advantages to browser-based applications, as was pointed out by readers. A few of these are indisputable, while others are debatable, but the overarching issue is the two models’ very different effects on physician productivity. Rather than debate the merits and drawbacks of the various alternatives, I refer anyone interested to “The Evolution of the Productivity-Focused EMR User Interface,” a white paper that explores those issues and suggests ways to overcome the respective drawbacks.

No matter how you balance the arguments in favor of one approach or the other, the fact remains: there is an undeniable difference in impact on physician productivity. This is something EMR vendors do not want to discuss and Wall Streeters do not take into account, but physicians need to consider it carefully. I’ve talked about productivity many times because of its critical importance to high-performance physicians, particularly high-volume specialists. (See the EMR Straight Talk posts on healthcare reform and government incentives.) A 30-second productivity differential per patient visit can allow a 3-physician practice to generate an incremental $700,000 in patient revenue over 5 years. For a 30-physician practice, the incremental difference climbs to $7 million.* This impact dwarfs the IT-related savings delivered by browser-based applications.

* These results use the Productivity Calculator to estimate the value of 30 seconds for each physician, assuming: 125 exams/week; 24 exam-room hours/week; 47 weeks worked/year; and revenues of $1.1 million/year.

Planning for the Flood

I spent the last few days attending the annual conference of the Medical Group Management Association (MGMA) in Denver, where there was a lot of talk about the financial challenges practices are facing and about the government’s EHR incentives.

Robert Tennant, MGMA’s Senior Policy Advisor, acknowledged that few groups will be eligible for the incentives when the government’s program begins in 2011. According to William Jessee, M.D., President and CEO, the vast majority of practices do not currently have any type of EHR, and despite being pressured by vendors that the time to purchase and implement one is now, physicians are reluctant to commit the resources necessary to do so. He attributed this to the financial effects of the recession—an unprecedented negative growth in practice revenue that is resulting in decisions to postpone capital investments. Add to this the pervasive confusion surrounding the incentives themselves, and the forecast is for wholesale inaction.

All of this has reinforced my belief that it is more important than ever for physicians to make good business decisions, and to do everything they can to enhance—or at a minimum, preserve—productivity. Not only will practices be faced with the financial pressures and declining reimbursements cited by the MGMA, but additional factors will make productivity critical. The impending flood of aging baby-boomers and the newly insured (through healthcare reform legislation)—coupled with a growing physician shortage—will swamp the healthcare system. This increased demand for care creates an opportunity, but only physicians who can leverage EHR technology to boost their productivity will really keep their heads above water.