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How Do You Justify Spending $50 Million on an EHR?

March 4, 2014
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Lakeland HealthCare spent time identifying cost savings, key performance indicators

How do you justify to a hospital board spending up to $50 million to implement an enterprise Epic EHR over five years?

If you are four-hospital Lakeland HealthCare in St. Joseph, Mich., you build benefits measurement and key performance indicators into the implementation process. In one of the more detailed and valuable presentations I saw at HIMSS 14 in Orlando, Lakeland executives described how they identified more than $5 million in first-year savings, not including meaningful use incentives or elimination of legacy systems. When those numbers are added in, the ROI estimate exceeds $10 million in the first year.

Norma Tirado, Lakeland’s vice president of human resources and health information technology/CIO, and Karen Kinyon, director of clinical transformation & analytics, said their board wanted to see the value of the investment beyond the fact that it was mandated by meaningful use requirements. If you don’t want to be seen as just another cost center, Tirado said, you must evaluate and report on investments in IT. “But one area of expertise we didn’t have in house,” she said, “was in identifying the value we want to get out of our EHR system, so we hired a consultant to help us identify areas of focus.” Lakeland execs talked to people from other health systems, developed a governance structure and identified key performance indicators approved by the leadership team.

Just implementing the EHR may deliver some savings by itself, Tirado added, but it is engaging health system partners in process improvements that is going to make a big difference in improving care and saving money.

Lakeland, which has achieved the Stage 7 award from HIMSS Analytics, created a team to look at both clinical and financial returns on investment. The team meets regularly and reports to the board every quarter. It started by capturing baseline data and creating a dashboard for measuring change over time, both clinical and financial, on several measures. For instance, CPOE adoption had an immediate cost impact because it reduced the need for transcriptionists. That alone led to a savings of over $1 million in the first year.

In terms of care improvements, Lakeland was able to use its EHR to flag 32 patients who were at risk for radiation exposure. It improved communication with patients in the ambulatory setting and patient follow-up care. CPOE and bar code scanning have reduced liability and decreased medication errors, Kinyon said. Lakeland can measure how bar code scanning leads to fewer medication errors.

Improvements in sepsis care have saved 32 lives, she added.

Tirado said the KPIs are fluid and evolving constantly. The team had to overcome initial fears from providers reluctant to commit to the savings. “There was a fear of not meeting KPIs,” she said.

That is why it is important to develop a governance structure for creating realistic goals and to do the measurement, she said, and to get executive partners to put an emphasis on it.