Strong ROI or Money Pit?

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The Office of Inspector General and the Centers for Medicare & Medicaid Services relaxed the Stark and anti-kickback laws in August 2006 in an effort to increase electronic medical record adoption by allowing hospitals to assist affiliated physicians. But the new rules haven't affected Jim Nania much. The chief financial officer of Hallmark Health in Boston, Nania wasn't waiting for the feds to act; Hallmark formed a joint venture two years ago to spur EMR adoption-and that was before the laws were relaxed. Still, despite the elimination of a regulatory barrier, many hospitals remain cautious about providing financial help in this area.

Why haven't more hospitals followed Hallmark's lead?

Perhaps they're still gun-shy considering the potential penalties of the past. Perhaps the new regulations only serve to muddy the waters further in an already complicated legal morass. But Laurance Stuntz, a partner in the Boston office of Computer Sciences Corp., thinks part of the delay is that the Internal Revenue Service aligned itself with the Office of Inspector General and CMS just this past May, and that hospitals may just need more time; he predicts that organizations will become increasingly active on this front. For hospitals, assisting in this area may offer much to gain, but for now, the benefit of providing such help is hard to measure.

"A few of my clients are planning around what it will cost them so they can figure out how much to charge physicians," he says. "I haven't run into anyone who's looking at giving this to their affiliated physicians free in hopes that they'll start admitting more at the hospital. It's not at all clear that the referral volume you get will offset the cost of providing that EMR."

Meanwhile, Hallmark and Nania believe their joint venture solution bypasses the legal hurdles Stark once presented. They launched it two years ago, and the fact that Stark and anti-kickback were later relaxed was just icing on the cake. The real benefit, to them, comes from tying physicians more closely to the hospital.

Impetus from insurers
Hallmark's approximately 150 referring physicians didn't already have an EMR for the same reason most small physician practices don't have one: They couldn't afford it. Hallmark had already introduced an EMR for its approximately 60 employed physicians, driven largely by managed care contracts that had "significant performance incentives" built in that relate to implementing an EMR as well as computerized physician order entry, Nania says.

But with such a large group of referring docs, Nania saw an opportunity to tie those physicians more closely to the hospital. What better way to do it than to bring physicians onto an EMR that Hallmark had already paid for?

"We thought: What can we do to get primary-care physicians and specialists more aligned with the hospital?" Nania says. The answer turned out to be deceptively simple: Figure out a way to encourage them to use Hallmark's EMR and build an integrated database for all physicians that admit to Hallmark facilities-employed and private.

"Essentially this is a physician EMR, and it needs to be a physician-driven enterprise," he says. "What was attractive organizationally was to do it as a joint venture to pull employed and private physicians together."

To avoid violating the Stark and anti-kickback regulations in place at the time, physicians paid the incremental cost of joining the system through the joint venture-board representation for which is dominated by doctors, although Nania and Kevin Hoppe, the hospital's vice president of managed care, also serve.

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