Financial Evaluation Of Implementing An Electronic Medical Record (EMR) System At Somerset Medical Center

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Financial Evaluation of Implementing an Electronic Medical Record (EMR)System at Somerset Medical Center"Analyzethe financial viability of implementing an Electronic Medical Record (EMR) system atSomerset Medical Center. Discuss the projected cost savings, initial cost estimates, and thereturn on investment (ROI). In your analysis, consider both the direct and induced costsassociated with the transition from a manual system to an EMR system. Based on the provideddata and sensitivity analysis, evaluate whether the project is financially sustainable in the longterm. Your answer should be between 800 to 1000 words."

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Financial evaluationAccording to the HealthUSNews,“Somerset Medical Center is a general medical andsurgical hospital in Somerville, NJ, with 250 beds. Survey data for the latest year availableshows that the hospital had a total 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 Somerset Medical 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.While it wasdifficult to get the actualproductcostsfromelectronic medical records software providers,-ouranalysiswerecompleted bycollectingthe informationfrom differentmedical publications, as well asEMRcomparableinternet resources.Theestimateswerebased on thesesources.While it was difficult to get the actual productcosts from electronic medical records software providers,-our analysis were completed bycollecting the information from different medical publications, as well as EMR comparableinternet resources. The estimates were based on these sources.Whilethe accuracy of the estimatecan be challenged,wepreparedthesensitivity analysisNevertheless;the methodology of theanalysis is sound and supports the conversion by the hospital.“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:-

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•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 reduce.Accordingto thearticle“Study of the cost-benefit analysis of electronic medical record systemsin general hospital in China.”,(http://www.ncbi.nlm.nih.gov/pubmed/22212632), “Benefits fromusing EMR accrue primarily from savings in new medical record creation, decreased full-time-equivalent (FTE) employees, saving of adverse drug events (ADEs) and dose errors, improvedcharge capture and decreased billing errors” (Li K,Naganawa S, 2012)….The payback period graph presented hereunder shows that this period isless than 4years.-$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

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The most prudent financial model forcalculating viability of any project isreturn oninvestment. In absolute figures, the below presented ROI graph clearsthat the project haspotential:-SummaryIn 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 chartcan 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 eventsanddrug 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,make this project financially viable.-$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 estimateThere are two categories of costs associated withEMRimplementation.The firstcost isthesystem costs andthe second isinduced costs (Table 1). Systemcosts 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)Cost ComponentsBase 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.

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