Financial Evaluation And Cost-Benefit Analysis Of EMR Implementation At Somerset Medical Center

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Financial Evaluation and Cost-Benefit Analysis of EMR Implementation at SomersetMedical CenterBased on the financial evaluation and cost-benefit analysis provided for the implementation of anElectronic Medical Record (EMR) system at Somerset Medical Center, discuss the following:1.The expected cost savings after the implementation of the EMR system in terms of chartpulls, transcription, drug events, and administrative expenses.2.The ROI calculation, including the payback period and net benefit analysis over the 5-year period.3.How the sensitivity analysis affects the overall financial viability of the project.Please provide a detailed analysis, including both quantitative and qualitative aspects of the EMRimplementation,andcriticallyevaluatewhetherthehospitalshouldproceedwiththeimplementation based on the findings.Word Count: 1,500–2,000 words

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Summary“Somerset Medical Center is a general medical and surgical hospital in Somerville,NJ, with 250 beds. Survey data for the latest year available shows that the hospital had atotal of 15,417 admissions”. (http://health.usnews.com/best-hospitals/area/nj/somerset-medical-center-6221340)We believe that the implementation of a new EMR system at SomersetMedical Centerfrom the present paperwill result in significant cost savingsfor them.The financial evaluation ofthisproject needstoconsiderallfactors whichwillresult inthesaving of cash for the hospitalonce the implementation has been completed.“Computers have made the world a small place. Due to their speed, accuracy, memoryand other characteristics, computers are used in all spheres of life. These machines are used alarge scale in different sectors, including hospitals.”(http://www.kish.in/effects_and_benefits_of_ computerisation_in_different_spheres/).Implementation of EMR will provide cost savings through the following ways:-•Will result in lesser number of clerks, office space and storage area•Significant saving in stationery•Reduction in adverse drug events and saving in transcription cost•Clinical decision support system will help in saving in drug utilization, laboratoryutilization and radiology utilization•Improvement in charge capture to certain extent•Due to real time and better internal control, prevailing billing errors will reduceIn the manual system, the hospital is incurring certain costs which can be easilycontrolled after EMR implementation. The cost of Chart pulls, which is estimated as $7 per chart

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can be reduced to nil. The cost involved in transcription can be reduced by 28%.(http://www.ehealthdc.org/meaningful-use/benefits-of-ehr-adoption/#_ftn1)The implementationwill also result in decreased cases of adverse drug events and drug utilization cost can becontrolled. Utilization of laboratory and radiology can be optimized resulting in cost reduction.Charge capture can be improved and billing error can be reduced to a great extent. EMR will alsoresult in reduction of administrative expenses. The saving in all such expenses, which make up atotal of $65,070,makesthis project financially viable.The actual dollar savings for the hospitalover a five year period will amount to $2,491,574 after taking into account the reduction instaffing and all fixed costs relating to office space and other equipment reductions.While it was difficult to get the actual product costsfrom electronic medical recordssoftware providers,-our analysis were completed by collecting the information from differentmedical publications, as well as EMR comparable internet resources. The estimates were basedon these sources. While the accuracy of the estimate can be challenged, we prepared thesensitivity analysis. Nevertheless; the methodology of the analysis is sound and supports theconversion by the hospital.****************************************************************************Financial evaluationAccordingto thearticle“Study of the cost-benefit analysis of electronic medical recordsystems in general hospital in China.”,(http://www.ncbi.nlm.nih.gov/pubmed/22212632),“Benefits from using EMR accrue primarily from savings in new medical record creation,decreased full-time-equivalent (FTE) employees, saving of adverse drug events (ADEs) and doseerrors, improved charge capture and decreased billing errors” (Li K,Naganawa S, 2012)….The payback period graph presented hereunder shows that this period isless than 4years.

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The most prudent financial model forcalculating viability of any project isreturn oninvestment. In absolute figures, the below presented ROI graph clears that the project haspotential:--$80,000-$60,000-$40,000-$20,000$0$20,000$40,000$60,000$80,000$1,00,000Year 0Year 1Year 2Year 3Year 4Year 5PAY BACK PERIODCumulative cash flow-$60,000-$40,000-$20,000$0$20,000$40,000$60,000$80,000Initial CostYear 1Year 2Year 3Year 4Year 5TotalRETURNONINVESTMENT

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Initial cost estimatesThere are two categories of costs associated withEMRimplementation.The firstcost isthesystem costs andthe second isinduced costs (Table 1). System costs include the cost of thesoftware and hardware, implementation, training, ongoing maintenance and support. Inducedcosts are those involved in the transition from a paper to electronic system.Initial cost estimate has been done using the information availablefrommedicalpublications(http://www.ncbi.nlm.nih.gov/pubmed/22212632,and from certified EMRtechnology consultanthttp://www.emrapproved.com/cost-estimate-tool.php. We also contactedAll Scripts Healthcare Solution Inc. and American Medical Software to gain an understanding ofcost.Table 1. Costs of Electronic Medical Record System (Per provider in 2013 in US Dollars)CostComponentsBase costSensitivityReferenceSoftware license (annual)$7,188$3500-$14000*Implementation$8,500+*Support, audit and reviews$4,000$2000-$8000*Hardware$8,000$4000-$16000*Temporary Productivity loss$35,000$18000-$50000+Annual costs$62,688* http://www.emrapproved.com/cost-estimate-tool.php+ 20% in first month, 10% in second month and 5% in third month+* For initial data immigration $5000 and training $3500The very first cost for the implementation of such system is the cost of the software.There are manyEMRsoftware providers in the US such asAllscripsHealthcare solutions Inc,Partners HealthCare,Acrendo Software, New Wave Software, Inc, American Medical Software,eClinicalWorks, MedQuest, LLC, JMJ Technologies, Inc., MD Logic, Evolution EMR,OfficeEMR™,ZipChart, InteGreat etc.Ourresearchshowsthatbased on work with more than

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