Electronic Health Records: What’s Wrong With a $6.5 Billion Medical Gold Rush?

Today, Americans can video chat with people across the globe, manage their March Madness brackets, pay their bills, email photos, and send messages to the Twitterverse easily and all in one place — their phones. The widespread use of cellphones and their ability to interface with different brands and software has created a network so broad that the United States and its territories now contain more cell phones than people.

However, the same isn’t true of American health records, by a long shot. In fact, according to a recent study, only 12.2% of the physicians in the United States can affirm “meaningful use” of electronic health records (EHRs), as defined by the Centers for Medicare & Medicaid Services. This is problematic, as doctors will face penalties if they can’t demonstrate meaningful use by 2015. That means that of the 691,000 practicing physicians in the United States, 613,000 more still need to adopt EHR systems in the next two years.

Why are doctors having such trouble?

EHRs are records used by hospitals, academic medical centers, and private practice physicians to electronically store data about prescriptions, diagnoses, clinical notes, and laboratory orders and results, ostensibly to make the health system more convenient, more efficient, and safer by increasing ease of use and reducing medical error. While the government has given out $6.5 billion in incentives to implement the technology, doctors are still slow to adopt digitized medical records, citing high cost and drops in productivity from learning the less-than user-friendly interfaces.

In recent years, with the help of government funding, digitizing health records has increasingly become big business. According to a New York Times article by Julie Creswell, some of the biggest players in the EHR world, such as Allscripts Healthcare Solutions, saw annual sales in excess of $1.44 billion last year.

Creswell goes on to describe the intense lobbying efforts by these medical records companies to include EHR-industry funds in the 2009 stimulus bill, which bolstered well-established companies and subsequently made it hard for smaller, newer companies to break into the field and innovate. This perpetuated what Creswell likens to a gold rush in the electronic medical records industry. After the legislation was passed, the annual sales of Allscripts have grown by 162% since 2009.

There are several troubling things in this emerging picture. Allscripts alone makes $1.44 billion dollars in sales off its portion of the 84,000 physicians who currently use EHR systems. It costs $15,000-$70,000 per provider to purchase and install EHR equipment. Because government incentives for physicians don’t kick in until they can demonstrate “meaningful use” of EHR systems, this cost is picked up by doctors in the meantime.

On top of this, EHRs have not lived up to their promise of efficiency, cost-savings, safety, and convenience that has so long been espoused in their name. Critics cite rises in billing fraud made easier through electronic systems, the lack of compatibility with other EHR software, and privacy and safety issues of digitized health information. Doctors fear a drop in productivity while learning to use these systems, while others say they are still too expensive. Still others claim that the current software causes IT-related and end user-related medical errors.

Nearly a decade after George Bush pushed for widespread adoption, around 1 in 6 doctors use EHR systems, in large part due to the fact that the software still costs too much and it is not yet user-friendly enough to stave off fears of medical errors and a loss of productivity. Not to mention that for want of market shares, most companies do not have an incentive to become compatible with other EHR software.

Nine years after George Bush advocated for their use, how did we get here? With an abundance of stimulus funds and government incentives, surely market pressures should have begun to work out these problems by now.

The problem is, the health care market doesn’t necessarily behave like a normal market. Steven Brill, a writer for TIME, illuminated the cost inflation rampant within the American medical system in an article last week. When buyers are forced into the health care market because of illness, there is restricted choice among providers and treatment, both geographically and due to a lack of transparency in the cost of care. Due to this, and a number of other reasons, the health care market is distorted, so treating it like a normal market leads to an inflation of costs. It doesn’t help that third parties pay many health care costs, meaning the consumer often doesn’t feel the full cost of care. A combination of these factors has led health care spending to balloon to 10 times what we spent in 1980, rising to $2.6 trillion in 2010.

So what do we do about it? Electronic health records are expensive, and government money and mandates haven’t seemed to alleviate the problems of cost, usability, or the slow pace of uptake.

Brill pins the answer on rate-setting. His account of medical bill horror stories, including $77 for a box of gauze, highlights the arbitrary nature of cost-setting and just how quickly these costs can grow unchecked. If we can find out the market value for aspirin, why can’t we find the real cost for EHR systems in order to arm physicians with a transparent metric? If knowledge is power, simply providing consumers (both doctors and patients) with real-value rates or mandating a rate range for services and products — such as gauze, EHR systems, or even hip replacements — will go a long way in balancing out some of the health care market distortions.

Providing stimulus funding on the basis of interoperability and user-friendliness will increase physician adoption of EHR systems, while also creating a better product and ultimately, a more efficient health care system. With innovation and cost-controlling, we will be closer to those long-sought savings that have yet to be realized, even in the wake of a medical business boom and government-sponsored gold rush.

We have to try, and we have to try now. Because the thing is, the gold will eventually run out.