Introduction
Healthcare has been a crucial component of humanity for a long time. However, healthcare organizations have consistently experienced problems with their balance sheets (Mannino, 2009, p. 3). These problems are caused by several factors but partly, the increased costs of healthcare and lower rates of reimbursements are attributed to be the main causes. Healthcare quality projects are not unique to these, dynamics. Most of these projects are subject to operational risks which may significantly affect initial project budgets. Cost escalations, project errors, and project mismanagement are some of the factors that cause an unfavorable return on investment for healthcare quality projects.
An unfavorable return on investment may lead to several unwanted financial damages on a hospital’s balance sheet. More so, an unfavorable return on investment may lead to the failure of achieving the desired return on investments for a healthcare quality project (Mannino, 2009, p. 3). It is crucial for healthcare institutions to operate within the confines of a favorable return on investment (Mannino, 2009, p. 3). Equally, it is important for such institutions to understand that they are striving to achieve a favorable return on investment. This objective requires the correct assessment of a project’s return on investments. Finally, it is also important for such institutions to realize a return on investment that is tailored to their hospital or project objectives. Incidentally, this requires the use of a correct technique to ascertain the return on investment. Most healthcare institutions have resorted to adopting new technologies which may significantly reduce the huge costs associated with operations (Mannino, 2009, p. 3). Equally, many technology companies have come up to offer solutions for limiting hospital operating costs. However, this paper focuses on three solutions for limiting hospital operating costs. They are electronic medical records, accountable care organizations, and the health information exchange program. They will be discussed in detail.
Electronic Medical Records (EMR)
The electronic medical record was introduced to improve administrative responsibilities in healthcare service delivery and healthcare project management. The ultimate goal for the electronic medical record system is to improve patient care, but how well it does so is determinant of its impact on the return on investments (McKesson Corporation, 2007, p. 1). There have been many concerns regarding how the EMR system reduces medical costs because it is believed to have a high initial setup cost. For instance, research shows that small physician clinics always shy from adopting the EMR system because it is expensive to adopt, and it requires a lot of technical manpower to maintain. However, the journal of Health Affairs (cited in McKesson Corporation, 2007) notes that, for small physician practices, about $23,000 is saved annually from improved efficiency (after the implementation of EMR). The cost of the initial set-up is estimated to be $44,000. It is also believed that the EMR system requires about $8,500 to maintain (annually) (McKesson Corporation, 2007). These costs are often recouped in about two and a half years. The soft ROI for the EMR model bears the same significance as the financial savings accrued from the same. This observation is true because most of the soft ROI (derived from EMR) is transformative. For instance, with the adoption of EMR, there are fewer medical errors to be reported. In the same manner, EMR ensures a high patient safety standard is observed and physicians focus on performance enhancement goals.
The EMR system offers several advantages to the evaluation of healthcare quality projects. For instance, it ensures there are no chart pullouts since all hospital records can be accessed from one location (Skolnik, 2010). There is also a lower chance of losing medical records if the EMR system is used. This advantage increases the efficiency of operations.
The ability of the EMR to improve the efficiency of patient care occurs in several ways. For instance, since EMR improves the efficiency of operations, more time may be allocated to improving patient care. Experts observe that the average time that can be saved in documenting a visit (if the EMR system is used) is about five minutes (Carter, 2001). This saved time improves the quality of healthcare processes. Monetarily, this saving could be translated to about $50 per patient and $200 for every hour. Cumulatively, it is estimated that doctors can save up to $78,000 annually if they adopt the EMR system.
The EMR system is also identified to improve the process of data collection. More so, the EMR system is known to provide a through coding system where patient information (such as family history, allergies, social history and the likes) are included. Initially, healthcare practitioners were known to under-code patient information because they feared repercussions (e-MDs, Inc., 2009). The losses associated with under-coding evaluation and management values are estimated at $40,000 to $50,000 every year (e-MDs, Inc., 2009). The EMR system acts as a remedy to save these costs because it gives correct evaluation and management values (plus a documentation evidence to back up the same). For instance, northwest diagnostic clinic did a reimbursement study in the year 2000 and its values compared to the Blue Shield of Texas. From the comparison, it was determined that, the values for the reimbursement study shifted towards higher values (codes) and an increase of 20% in reimbursements (when the EMR system was used) was realized (e-MDs, Inc., 2009). Monetarily, Northwest Diagnostic clinic was able to increase its reimbursements by $9.01 per visit due to several advantages offered by the EMR system (but the most notable one being the increased efficiency of documentation). The advantages of the EMR system have however been compared to other quality assurance tools such as the accountable care organization.
Accountable Care Organization (ACO)
The accountable care organization is a conglomerate of several stakeholders (including physicians and hospitals) who are involved in patient care and patient service provision. The ultimate goal of the accountable care organization is to provide a coordinated platform for the provision of quality patient care for those subscribed to the program. Most organizations are not part of such a system because the ACO model requires a new structural makeup to implement. The cost of constituting the ACO model is estimated at $1.73 million (Donovan, 2011). However, the cost benefits for implementing the model surpass the initial set-up costs. The ACO model is also known to inculcate a culture of accountability and cost-saving in the organization. This advantage is a soft ROI noted in most cost saving models, but the beauty of the ACO model is enshrined in the fact that, the culture of efficiency and cost savings is spread across several stakeholders.
The accountable care organization is a measure designed to guarantee quality patient care. The quality patient care is guaranteed through a disbursement method of payment which encompasses several payment methods, including capitation, fee-for-service and other modes of payments (Donovan, 2011). There are several parameters that are checked before any payments are disbursed. These include: patient care-giver experience of care, care coordination, patient safety, preventive health and at risk population (or frail elderly health) (Donovan, 2011). The accountable care organization does not only guarantee high quality care for patients, it also guarantees the same for third parties as well. However, in guaranteeing quality, several other parameters, like appropriateness and efficiency of healthcare services, are also checked.
The accountable care organization is very flexible because it operates under three core pillars. The first pillar is centered on the provision of quality primary care for patients. The primary care ought to be provided with reasonable costs. The second pillar is centered on the payment of quality services as the main criteria for payment. Payment for shoddy patient care is therefore not guaranteed. The last pillar is the development of a sophisticated quality measurement system that aims to save money through the provision of quality patient care (Donovan, 2011). This is the ultimate pillar that defines how the accountable care organization strives to save money. The accountable care organization has been implemented with huge success and many organizations and programs can attribute their success to it. The Medicare program alone is said to save up to a maximum of $960 million in healthcare costs through the implementation of the accountable care organization system (Donovan, 2011).
Comprehensively, the accountable care organization focuses on the needs of patients by pegging payments on results and coordinating the activities of physicians, patients and care providers. This framework strives to provide an incentive to care givers and doctors because it rewards institutions and individuals who work to reduce healthcare costs (but improve the quality of services all the same.) Therefore, instances of patients receiving duplicate medical care; experiencing medical errors and failing to get medical care at all is significantly reduced through the accountable care organization. These advantages reduce the cost of healthcare, improve the quality of healthcare, and offer a higher return on investment.
Health Information Exchange
The health information exchange program is a seamless way of transferring medical information across several locations (Newman, 2011, p. 2). The retrieval and access of medical information in a safe, reliable and efficient manner forms the framework which health information exchange saves medical costs. Compared to the EMR system and the ACO model, the cost of setting up the health information exchange model is deemed to be “moderate”. It is estimated that, it would cost $40,000 for a physician to implement the health information exchange model (Colpas, 2010, p. 9). However, the initial set-up costs are nothing compared to the cost savings realized from the model. The cost saved from the health information exchange model is however subject to the patient environment. Colpas explains that, soft ROI associated with the health information exchange “improve the rate of scheduled referrals from 30 to 60 percent, reduced no-shows from 30 percent to less than 5 percent, and increased total number of incoming referrals by 100 a day (about ten percent)” (Colpas, 2010, p. 9). If the soft ROI is quantified monetarily, it is estimated that, every client will get a cost saving of $6.5 million per year.
Within the same framework of cost saving, the health information exchange program is known to eliminate instances of document duplication; reduce instances of loss of patient information; eliminate costs associated with medical records documentation and facilitate the recovery of missing patient information (Melvin, 2010). These advantages are known to lead to reduced medical operating costs.
Comprehensively, health information exchange acts as a one-stop shop for the access of medical information, such as, laboratory reports, imagery results, discharge summaries (and the likes). This feature significantly leads to increased costs savings (Donovcost-saving. 14). The practice of calling several medical departments to gain access to different pieces of patient information is also eliminated in the same manner and its associated costs saved.
The cost-saving mechanism of health information exchange has been tested in many places. For instance, in the US, the health information exchange program was very useful in helping Hurricane Katrina victims because it aided in the sharing of patient information, thereby improving the quality of patient care during that period. American Health Information Management Association (2007) explains,
“The Department of Veterans Affairs found that more than 2,300 users exchanged electronic healthcare data across 48 states in the month following the disaster. Laboratory data represented just two percent of all data requests. Text-based reports including demographics, discharge diagnoses, immunizations, and health summaries were the most commonly requested reports” (p. 1).
From this assertion, it is correct to observe that, the goal of the health information exchange program is to provide patient information wherever it is needed. The measure of value for the health information exchange program stretches across various factors. However, the scope of information available in health information exchange is usually broad, and therefore, information users can effectively use such information for the improvement of patient standards (Glaser, 2011). The efficiency associated with this advantage improves the quality of care and comprehensively reduces the costs associated with the provision of patient care.
Conclusion
Comparing the health information exchange program, electronic medical record, and the accountable care organization, we see that, the three concepts strive to reduce the costs of patient care by making the process of achieving quality patient care more efficient. The use of technology is pivotal in this analysis because it offers increased cooperation and coordination among healthcare agents. The resultant effect of this intervention is seamless cooperation among medical agents, thereby reducing the cost of care and improving the quality of patient care. This paper also cites instances where the accountable care organization, health information exchange program, and the electronic medical records have been used. These examples show that these tools have a high level of success in practical application. Consequently, the return on investment is significantly increased.
References
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