Most providers and healthcare investors are aware of state and federal government incentives available for adopting electronic medical records (EMR) systems. And while the start up costs inherent in EMR adoption can be daunting, the cost savings associated with EMR adoption (which are on top of federal and state incentives for adoption) have also been widely discussed.   But just what level of savings are available and how quickly can those savings be achieved?   

One recent study shows that the adoption of electronic medical records was likely to provide savings for urban hospitals after three years of their use, while rural hospitals faced increased costs for at least six years. In the National Bureau of Economic Research study published in Modern Healthcare, hospitals' proximity to information technology companies and their experience with health IT upgrades were among the biggest determinants of whether the addition of EMRs would lower or increase costs. The researchers examined records for hospitals that adopted EMRs from 1996-2009 and found hospitals in “IT-intensive markets” experienced a 3.4% decrease in costs three years after adopting a basic EMR and a 2.2% cost decrease three years after adopting an advanced EMR. However, hospitals in areas with the least amount of IT firms had up to a 4% increase in costs even six years after adoption of EMRs.

The National Bureau of Economic Research study findings could help to explain the “uneven” adoption of EMRs, the authors noted, despite a federal program to provide $20 billion in adoption incentives and penalties to non-adopting providers.  The findings indicated to the authors that IT adoption's impact on the bottom line in healthcare follows a similar pattern to what other industries experienced when digitizing their data. Specifically, companies that derived profits from technology upgrades were among those that also undertook changes in staff and businesses processes to best use the technology. And such technology staff and business reorganizations were more likely to have occurred when such personnel and knowledge were locally available.

The results from the National Bureau of Economic Research study are similar to those from a 2009 Harvard study of cost savings from EMR, which found virtually no cost savings for the 100 hospitals studied, including hospitals on the “Most Wired Hospitals” list.   And of course, as with any study, there is evidence to the contrary, including several studies showing dramatic cost savings available to certain provider types assuming certain qualities. One such example is the 2003 study published in the American Journal of Medicine by several physicians regarding cost savings available in primary care.   All of these studies address a variety of factors for when EMR-related cost savings can really come to fruition. For providers, asking the EMR vendors to speak to these differences in cost savings opportunities and to stand behind their claims is key. For healthcare investors, the extent to which new EMR technology is factored into future financial projections should be carefully considered in light of the particular provider’s situation, in lieu of applying a universal truth to all providers equally.