2012 National Patient Safety Goals and National Priorities Partnership Goals addressed in this case study

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1 (ROI) University of California Davis Health System 2315 Stockton Blvd., Sacramento, CA Noel Sousa Finance Director Michael Smith Financial Analyst David Whitley Manager, Decision Support Services Michael Minear Chief Information Officer Core Item Return on Investment 2012 National Patient Safety Goals and National Priorities Partnership Goals addressed in this case study Number NPP Goal Goal Remove waste and achieve effective affordable care Executive Summary The Electronic Health Record (EHR) and associated technologies have had a dramatic impact on the UC Davis Health System (UCDHS). UCDHS has realized significant returns on the clinical technology investment in the form of enhanced revenues and reduced costs. The organization has invested an estimated $160 million in capital costs from 2002 to 2013, and saved an estimated $63 million in hard dollars for this same time period. There are many other soft savings gained and costs avoided in the past few years and in the future due to the EHR such as CMS EHR meaningful use penalties. UCDHS has shown that once the core elements of an EHR are deployed and an organization is actually using the software to support all of its care, it starts to think very differently about clinical content and clinical processes. The new perspective and approaches enabled by UCDHS EHR are driving improvements in clinical quality and cost reduction. There is no question that these new tools will enable dramatic improvements in care delivery and care quality that were simply not possible in the legacy fragmented paper-based care processes.

2 1. Background knowledge In 2002 the University of California Davis Health System (UCDHS) chose EpicCare as the EHR the organization would deploy, and became one of the first care providers in California to start implementation of a comprehensive electronic health record (EHR) across all venues of care. UCDHS leadership had the vision of electronically managing all aspects of care through one EHR system. As an integrated academic health system, UCDHS has a strong culture of collaboration across the organization, and this was a critical element in the successful deployment of the EHR. UC Davis was five years into its EHR deployment when ARRA and HITECH were passed and was well positioned for the new regulations. The Epic product quickly met the new EHR certification requirements, and the vendor continued to add substantial functionality and enhancements to the product. The early investment and efforts to deploy the EHR paid off for UC Davis, where many other care providers had to change vendors to meet the new regulatory challenges or start from scratch to choose and deploy an EHR under great time pressures. 2. Local problem being addressed and intended improvement The local problem was essentially one of recognition that the paper-based patient record was inefficient and ineffective in supporting quality improvement initiatives. At its highest organizational levels, UC Davis recognized these problems, and clinical and executive leadership committed to the implementation of the EHR in order to provide the needed technology infrastructure. Top leadership made their decision to move forward in light of 21 st century healthcare management requirements and, more importantly in light of the potential to improve patient care and save lives. They were confident that organizational efficiencies and the teaching and research agenda of the institution would be advanced with the implementation of the EHR. More importantly, they knew that UCDHS could not advance in its mission if a fully implemented electronic health record were not available. The return on investment would follow in saved lives, improved patient safety and more efficient processes of organizational management and clinical care. Another challenge for UCDHS and most care providers was extensive use of legacy software systems that were often not created to share patient data with other clinical software. When many niche systems operated in a hospital or clinic and paper charts were still in use, it was difficult for clinicians to find and access the patient data needed, and there were massive delays in moving and sharing patient data; thereby creating complexity and delays to clinical workflows and processes. 3. Design and Implementation UCDHS had a clear goal to deploy the EHR across all venues of care (inpatient, emergency department, ambulatory clinics, home health, and Telehealth encounters). Other key goals included secondary use of clinical content, leveraging EHR data to support transitions of care, and to provide better access to clinical data for patients. The EHR implementation and associated technologies were selected to eliminate an inefficient and cumbersome hard copy patient record and replace it with a more complete and easily accessed electronic version. The EHR has created numerous operational efficiencies throughout the organization that support better patient flows and patient satisfaction. All workflows and tasks that involve the use or sharing of data at UCDHS have been positively impacted by the EHR. By 2010, significant amounts of niche software had been replaced by the EHR, and the rest of the niche clinical software still used by the organization performed functions not supported by most 2

3 EHRs (such as radiation oncology, laboratory, and cardiology) were interfaced to the EHR. This eliminated the last material source of internally generated paper clinical reports. As each source of clinical content was replaced with the EHR or interfaces connected niche software to the EHR, the shared clinical record became more complete and costs were incrementally reduced. UC Davis uses a wide variety of technology to support clinical care. The primary software applications used to drive clinical workflow change and improve outcomes are the EpicCare EHR, the TheraDoc infection control assistant, and an innovative Tethered Meta Registry created at UCDHS to transform quality management processes. The organization has also deployed a growing list of specialized health exchange technologies that securely move patient records within UC Davis, and share data with other care providers in the community. 4. How was Health IT Utilized? Clinical care improvement was the primary driver of the UCDHS commitment to the EHR. In order to achieve this, the UC Davis EHR supports a broad array of clinical encounters. For example: CPOE: 94.6% of clinical orders entered via CPOE (TPN orders will go online within a year) Electronic order sets: 761 online EHR clinical order sets in use EHR-based protocols: 212 EHR based chemotherapy protocols support 575 patients on active protocols Clinical documentation templates: o Over 528 EHR clinical documentation templates in use o 93% of inpatient & 91% of ambulatory clinical notes created through EHR templates Voice recognition: Over 335 physicians use voice recognition to create documentation in the EHR TheraDoc Infection Control: Supports real-time electronic surveillance and CDS tools 5. Value Derived/Outcomes When weighing and considering many factors, UCDHS leadership has realized significant returns on the clinical technology investment in the form of enhanced revenues and reduced costs, directly attributable to the EHR implementation. The organization has invested an estimated $160 million in capital costs from 2002 and planned through 2013, to deploy clinical information technology, and has already saved an estimated $63 million for the same time period. These are only the hard dollars related to the EHR to date. In addition, many types of soft savings and other costs avoided, such CMS EHR meaningful use penalties are not included in these estimates. UC Davis leadership has seen a return on investment of approximately $65 million dollars in hard return on investment as result of the implementation of the EHR. Hard return on investment stems from efficiencies, EHR Incentive Program incentive payments, and increased revenue from improved documentation and coding. 3

4 Estimated Savings or Revenue Generated Total Chart room file clerks (21 FTE)* $ 4,173,939 Chart room file clerks (4.5 FTE)* $ 2,261,178 HIM staff overtime $ 1,026,164 Supplies paper chart file rooms $ 3,562,167 Off Site storage of paper charts $ 182,000 Workers compensation injuries $ 162,000 Transcription costs $ 16,115,407 Radiology film costs $ 10,414,255 Revenue from improved documentation & coding $ 9,150,000 Subtotal EHR Savings $ 47,047,111 Revenue from EHR Meaningful Use ** $ 16,136,000 Total Savings $ 63,183,111 Estimated EHR Capital Cost 2002 to projected 2013 $ 160,000,000 * Includes 5% increases from prior year ** CMS EHR meaningful use revenues booked for first tw o years of program, current UCDHS revenue estimate for total EHR incentive program is $25.7 million Summary of primary cost reductions and revenue increases due to EHR use. For the EHR cost and savings numbers that UCDHS has identified and modeled, the organization has invested an estimated $160 million from 2002 through 2013 and saved a projected $63 million. Projected soft savings and other costs such as avoiding CMS EHR meaningful use penalties are not included in these estimates. Examples of hard savings related to the EHR: Paperless Savings In 2006, UCDHS was manually pulling and delivering over 723,000 paper charts and filing over 3.2 million loose pieces of paper to the paper chart annually, and spending approximately $835,000 on supplies. The EHR has evolved from a traditional medical records department providing the core services of: file room, patient ID (Medical record number assignment), transcription, coding services, and release of information, into a technology based system supported by the EHR. The EHR implementation resulted in file room staff reductions (25.5 FTEs) totaling $4 million in accumulated savings. HIM transcription costs have been reduced by over $16 million In almost every area outside of the HIM workflows and tasks that involve the use or sharing of data at UCDHS have been positively impacted by the EHR. In Radiology converting to the use of digital imaging has reduced film costs by $1 million/year while making the images instantly available within the EHR. Real time access to imaging within the EHR has reduced radiology image search time from 16 minutes to 2 minutes has saved approximately 21.5 physician years, or about $1 million / year. Because the EHR has provides better coding documentation an estimated $9 million/ year in additional Medicare revenues due to a.20 CMI increase. Examples of soft savings related to the EHR: Preventing Costly Privacy Breaches The strongest return on investment (ROI) for a privacy and security program is the avoidance of material privacy breaches. To date, UCDHS has had no material breaches of information that posed significant risk of financial, reputation or other harm to patients. A November 2011 study by the Ponemon Institute found that 96% of the 72 surveyed healthcare organizations had a least one data breach in the last 24 months; with an average annual impact of $2.2 million (Ponemon, 2011). Other breach cost 4

5 estimates range as high as $13 million dollars per incident (MarketWatch, 2012). In the Sacramento area, one care provider was served with a $1 billion dollar class action lawsuit in November of 2011 from the theft of a single computer that stored over 4 million unencrypted patient records. Reducing Malpractice Claims There are many factors that impact malpractice claims and rates. An ongoing Massachusetts based study found the rate of malpractice claims when EHRs were used was about one-sixth the rate when EHRs were not used. This study adds to the literature suggesting that EHRs have the potential to improve patient safety and supports the conclusions of our prior work which showed a lower risk of paid claims among physicians using EHRs (Quinn, et al, 2012). Since adoption of the EHR in 2002, UCDHS has seen a dramatic reduction in medical malpractice lawsuits (See appendix for a graph showing UCDHS malpractice claims trends compared with major EHR functionality deployment dates.) While UCDHS cannot establish cause and effect between the Epic implementation and this reduction, this data seems to indicate the EHRs impact on patient safety results in fewer adverse events, and accordingly fewer malpractice claims. Computerized Physician order entry (CPOE) Implementing CPOE has been an industry goal since the 1999 Institute of Medicine report To Err is Human. UC Davis deploying CPOE in 2008, and currently, 94% of inpatient clinical orders are entered via this technology (the last paper order type, total parenteral nutrition TPN orders will go online within a year). UCDHS routinely audits its CPOE functionality and clinical rules using the Leapfrog group s CPOE Evaluation Tool for medication orders, and the current UCDHS score is fully implemented, the best score possible. If deployed correctly, CPOE can positively impact and support clinical ordering decisions, and helps improve patient safety. A core goal of medication CPOE is to reduce or prevent medication errors and preventable adverse drug events (ADE). AHRQ found that the average total hospital costs a single ADE was $10,100 (AHRQ, 2004). UCDHS has been working to define the cost savings from CPOE, and is cautious in making cause and effect assumptions or specific return on investment estimates. However the UC Davis EHR data would support that online clinical knowledge elements and CPOE functionality is having a positive impact as intended, and that some level of potential ADEs are being caught and prevented. The following table shows that 22,603 medication orders were changed by UCDHS ordering physicians after CPOE knowledge-based warnings were presented in the EHR supported clinical ordering workflow, with 37% of orders changed after drug drug warnings were given, and 7% of orders changed after drug allergy warnings. With the high cost for ADEs it seems clear the EHR is helping to save material dollars, but UCDHS will study this process and data further before estimating any specific savings. Inpatient CPOE Medication Order Discontinued After Warning July 2011 to June 2012 Type of CPOE Warning # % Drug Drug 15,774 37% Drug Allergy 6,829 7% Total 22,603 Examples of value from Health Information Exchange (HIE) UC Davis has been an early and successful adopter of technologies to share patient data with other hospitals and physicians in the community. An average of 61,400 patient records of some type is shared each month, and the numbers are increasing dramatically. UCDHS is sharing significant numbers of EHR records with other hospitals sometimes saving the need for additional costly 5

6 clinical tests, in all cases helping clinicians move to diagnosis and treatment quicker. The experience at UCDHS seems to indicate that in some cases, clinicians are ordering fewer tests when relevant and recent outside clinical records are available. The organization is working to measure and assess financial savings from health information exchange, as is the entire healthcare industry at this time. Another type of HIE are clinical images created by one care provider but shared and re-used by providers in other organizations. UC Davis has been a leader in loading outside clinical images created by other care providers and brought to UCDHS encounters by patients on CDs, and has loaded over 132,378 outside image exams since 2008, an average of 2,498 per month. Given this volume of outside images loaded there are strong indications that UC Davis (and health insurance companies) has saved significant costs in imaging. UCDHS continues to evaluate these changes before making a formal financial projection. There is little literature yet available to prove the financial return from sharing patient data. But one study by Aaron Sodickson, MD, PhD, Jonathan Opraseuth, MD and Stephen Ledbetter, MD, MPH Department of Radiology, Brigham and Women s Hospital, found that sharing clinical images among emergency department transfer patients has the potential to save significant numbers of image examinations. Among emergency department transfer patients, CD import of outside images from the sending institution into the receiving institution s picture archiving and communication system (PACS) decreases the rates of subsequent imaging utilization in the first 24 hours by 17% (from 3.30 to 2.74 examinations per patient) for all imaging examinations (P,.001) and by 16% (from 1.41 to 1.19 scans per patient) for CT scans (P =.01) (Sodickson, 2011). 6. Lessons Learned When UC-Davis began its EHR journey 11 years ago, there were no ROI targets identified. Organizational leadership made the decision to invest in the EHR as the cost of doing business. Although it was an expensive decision, it was the right thing to do and the data now available to the leadership validates significant improvements to quality of care provided at UC-Davis and to our patient safety efforts. In recent years as capital for enhancements to the EHR and other HIT initiatives has become limited, the need for ROI calculation has become more important. With that said, ROI is not always easy to calculate on an EHR and we have learned to: Measure the hard ROI where you can Document the soft ROI Push departments to focus on ROI, document changes, and embrace process change. It is important to measure all the improvements in patient care. The following is critical: Build clinical champions to document and show outcomes of process changes (i.e., sepsis) Continuously report to leadership on the clinical impacts of having made the EHR investment. 7. Financial Considerations UC Davis Medical Center has invested an estimated $160 million in capital costs from 2002 and planned through 2013, to deploy clinical information technology. 6

7 Capital Costs (in Millions) Hardware $ 75 Software $ 38 Capitalized internal Staff $ 32 External Consulting $ 15 Grand Total $ 160 UCDHS EHR and Clinical Software Investment Summary UC Davis Medical Center estimates yearly operational costs at approximately $31 million in FY13, with an increase to $35 million by FY15. Estimated Annual Cost of EHR: FY13 FY14 FY15 Direct Costs: Wages & Benefits 16,173,187 16,658,383 17,158,135 Maintenance - Base 2,262,230 2,330,097 2,400,000 Maintenance - Volume Increases 200, , ,000 Ongoing Staff Training & Travel 300, , ,000 Business Objects Licenses 233, ,333 Total Direct Costs 19,168,750 19,488,480 20,991,468 Indirect/Support Costs: Customer Service 287, , ,888 Business Operations 383, , ,362 Infrastructure 6,328,704 6,518,565 6,714,121 Applications 2,705,158 2,786,313 2,869,902 HIM 254, , ,355 Research 1,056,969 1,088,678 1,121,338 Physician Hosting 1,086,813 1,119,417 1,153,000 Total Indirect Costs 12,102,901 12,465,988 12,839,966 Grand Total $ 31,271,651 $ 31,954,468 $ 33,831,434 6

8 UC Davis Health System Davies Enterprise Award Submission Appendix Page 1 Providers Hospital Providers Hospital UCDHS EHR Meaningful Use Status Medicare # Registered & Attested % Eligible Providers Revenue Received Total % 89% $4,601,133 $4,287,095 $8,888, % 100% 1,953,740 1,953,740 Medicaid # Registered & Attested % Eligible Providers Revenue Received Total % 27% $956,250 $85,000 $1,041, % 100% $3,689,170 $2,213,502 $5,902,672 Total Revenue Received Total Providers $5,557,383 $4,372,095 $9,929,478 Hospital $3,689,170 $4,167,242 $7,856,412 Total $17,785,890 Cost Reductions and Revenue Increases from the EHR Trend showing annual cost reductions and revenue increases The five year bump in CMS EHR meaningful use revenues from FY12 to FY16 shows the impact to UCDHS of federal EHR meaningful use incentives

9 Endnotes UC Davis Health System Davies Enterprise Award Submission Appendix Page 2 Outside Clinical Images Loaded 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Total Outside Image Studies Received Studies Exported to Clinica l PACS Digital clinical images created by one care provider are often not yet sharable by other providers, so imaging tests are often repeated. Most HIE organizations to date don t support the exchange of digital clinical images. In November 2008, using the vendor product PACSGEAR, UCDHS created the ability to load outside clinical image exams to its Radiology PACS created by other care providers and brought to UC Davis visits by patients on CD ROMs. 160,213 Image Exams loaded between November 2008 and March 2013 Average of 2,762 per month UCDHS Malpractice Claims and Suits by Fiscal Year Date of Loss 2001 through 2012 With Major EHR Functionality Deployment Dates Legend There are many factors that impact malpractice claims and rates. An ongoing Massachusetts based study found the rate of malpractice claims when EHRs were used was about one sixth the rate when EHRs were not used. (Quinn, et al, 2012). UCDHS continues to track EHR usage and malpractice claims, but can t establish cause and effect between EHR usage and claims at this time. AHRQ, Center for Delivery Organization, and Markets, Healthcare Cost and Utilization Project, Nationwide Inpatient Sample Quinn MA, et al, The Relationship Between Electronic Health Records and Malpractice Claims, Research Letter, Archives of Internal Medicine, doi: /archinternmed , Ponemon Institute, December Study on Patient Privacy and Data Security, retrieved July 31, 2012 from study 2011/ MarketWatch, July Hospitals Lack Data Breach Protection and May Not Even Know It, retrieved July 31, 2012 from lack data breach protection and may not even know it Sodickson, et al, August Outside Imaging in Emergency Department Transfer Patients: CD Import Reduces Imaging Utilization in Emergency Transfer Patients. Radiology: Volume 26: Number 2

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