The Price of Progress: Can Technology Replace Your Staff?

MDNG Psychiatry, August 2007, Volume 9, Issue 7

Prominent among the many benefits touted by proponents of electronic health records (EHRs) is cost reduction.

Prominent among the many benefi ts touted by proponents of electronic health records (EHRs) is cost reduction. The installation of an EHR system, the argument goes, can decrease spending on materials, reduce the incidence of medical errors, and automate activities that would otherwise require paid staff employees to perform.

It is the last of these approaches that has engendered the most controversy. Often, eliminating the cost associated with employee activities means eliminating (ie, firing) employees. Although this idea may produce economically appealing results in theory, in practice, many physicians are reluctant to part with good employees in the name of economics alone. On the other hand, declining reimbursement and the ever-rising cost of doing business have many practitioners scrambling to save money wherever they can. Which brings us to our (literal) $100,000 question of the day: can technology replace your staff ? And our carefully considered, and definitive answer? It depends.

The Origin of Savings

Before elaborating, it will be helpful to describe the specific ways in which EHRs and related technology can theoretically reduce labor-related costs. These points are probably somewhat familiar:

• Transcription: EHRs with built-in speech recognition functionality can allow automatic transcription, reducing or eliminating the cost associated with outside or in-house transcription services. Scott Irwin of the EHR provider NextGen (, who describes transcription as the “low-hanging fruit in the ROI world,” posits that a good electronic record system should be able to reduce transcription costs by 80% in one year and 100% in two.

• Coding, Billing, and Scheduling: Each of these processes can be automated, allowing staff ers to perform more important functions or to be eliminated altogether; if the average physician requires four assistants to handle these and similar tasks, suggests Irwin, an EHR system can reduce that number by one or more.

• Chart Maintenance: Reducing expenses associated with paper chart maintenance—which include the cost of the labor required to pull, file, copy, and maintain the integrity of hundreds of charts each day—is the Holy Grail of the EHR industry. It is in this area that technology has the greatest chance to make an immediate financial (and spatial) impact.

In Victoria, TX, a two-person asthma/allergy practice found itself in the market for a more efficient EHR when its previous provider, digiChart, decided to focus on Ob/Gyn practices. The practice installed an automated telephone system, eliminating the need for a front desk staffer to handle incoming calls. The practice also implemented a new electronic system that eliminated the need for constant handling of medical records and facilitated scheduling, billing/collections, and other tasks.

When two of the six staff members originally employed by the practice left, the practice’s efficiency had increased so dramatically post-EHR implementation that only one part-time employee was needed to replace them. This translated to an annual cost reduction of roughly $70,000. For more on this story, read Carolyn P. Hartley’s excellent article in the June 12, 2006 edition of For the Record.

On a larger scale, Health Management Technology reported on the case of Spokane Internal Medicine, a nine-provider clinic in Washington state that handled nearly 600 patient charts per day. Three full-time equivalents (FTE) were required to manage the clinic’s chart room. Implementing an EHR allowed Spokane Internal Medicine to reassign these three FTE to other roles, and to eliminate extraneous FTE, reducing its FTE-to-provider ratio from 4.4:1 to 2.64:1.

In January 2004, Scott Barlow, MBA; Jeffrey Johnson, MD; and Jamie Steck, MBA, published an analysis titled “The Economic Effect of Implementing an EMR in an Outpatient Setting” in the Journal of Healthcare Information Management. Barlow, et al. conducted a detailed study of conditions at the Central Utah Multispecialty Clinic (CUMC), a nine-location, 59-physician group, in the first year after the clinic adopted Allscripts’ TouchWorks EHR.

Among their key findings:

• Before installation of the TouchWorks system, 10.2 FTE were required to manage the estimated 100,000 charts CUMC handled each day. During the year—although the Clinic added thousands of new patients and doubled the number of physicians on staff — requests to the chart room fell by more than 35%. Th is allowed for the elimination of two FTE, with further reduction expected.

• By creating all new records electronically, the Clinic, with 20,000 new patients per year, would save $160,000/year in labor and supply costs for creating new paper charts.

• RNs and medical assistants working in the Clinic system were able to spend significantly less time (1.2 hours/day) handling paper records using TouchWorks.

Total cost of ownership (TCO) is a financial estimate of the direct and indirect costs associated with a particular piece of hardware or software.

In the case of EHRs, TCO includes the purchase price and maintenance fee, plus training expenses and lost productivity during training, minus any cost saved by the product. There can be little doubt that staff reductions and consequent savings reduce the TCO associated with EHR systems. An important point, as cost is often cited as a barrier to EHR adoption.

The Downside of Downsizing

In a strongly worded 2006 assault on conventional EHR wisdom published in Health Affairs, Jaan Sidorov noted that for staff reduction-related savings to be realized, “staff employment would need to be completely terminated.” He points out that “anecdotes of healthcare systems... offering displaced workers other employment opportunities are commonplace enough to dilute these savings.” Consider: would your colleagues be willing to simply fire half their employees to save on salaries? Would you? For many physicians, this would seem to be the ultimate impersonal move, in a field that some have claimed has grown increasingly impersonal.

On the other hand, the ability of technology to reduce the need for paid administrative staff can be a tremendous boon to growing practices. Note that the CUMC was able to reduce FTE in spite of nearly doubling the size of the system. Similarly, Crystal Run Healthcare in Middletown, NY has been able to grow at a tremendous rate, in part because of its association with NextGen. Says Irwin, “They have gone from 20 to 120 doctors in just two years, because they only had to hire two or three FTE per doctor instead of four or five.” This ability to eliminate prospective employees instead of current ones can also prove useful for those practices in which workload begins to overwhelm existing staff; employees can be diverted from mundane tasks like file management to more important activities that might otherwise require additional help.

However, the automation of certain processes might lead to problems quite apart from cost. A computerized system that directs incoming phone calls may seem useful, but anyone who’s ever had to wait on the phone long enough to “Press 8 for Billing” will recognize the drawbacks. Computerized systems also tend to be inflexible; no matter how complex its algorithm, no automated system can ever apply judgment, creativity, or empathy to a situation. In an era in which patients feel increasingly alienated from their healthcare providers, this is a tremendously important problem, and one that will have to be solved before process automation becomes more common.

Sidorov goes a step further, arguing that “a considerable body of evidence suggests that widespread adoption of EHRs increases healthcare costs [in ambulatory care],” and could do likewise in the outpatient setting. In a response to Sidorov’s Health Affairs article, Joan Duke of HCIC takes issue with this characterization, suggesting that there is in fact a lack of good evidence in this area.

She maintains that what few reports are available deal with poorly implemented EHR systems, and thus do not reflect the true potential of this technology. Physician Arvind Cavale agrees, arguing that the data from the studies described by Sidorov were collected before EHRs became increasingly interactive. More interactive systems, it would seem, are more likely to be effective replacements for human actors.

All the same, it is clear that physicians looking to EHRs as simply a way to save money are likely to be disappointed. “The practices that receive benefits are those that consciously work to obtain the benefits by changing their operations to take advantage of the new technology,” says Duke. “It is not sufficient to simply implement an electronic record; a practice must redesign the way it operates and train the staff to be able to function in this new environment.” In short, the goal is (or should be) to reform healthcare by improving management of cost and quality, including, but not limited to, the cost of labor and the quality of the work it produces.

Frank Ferrara is a freelance writer and former MDNG editor.