Four EHR and IT Cost Control Strategies for Hospitals in 2021 and Beyond

The following is a guest article by Peyman Zand, CFCHE, Vice President at CereCore.

The complete financial impact of the COVID-19 pandemic on our hospitals is yet to be fully understood. But one thing is clear, healthcare executives must take a hard look at costs as they reassess and strategize around recovery from COVID-19. The long-term cost and sustainability of EHRs and related IT infrastructure are key targets in these decisions, especially as expanded telehealth and other interoperability initiatives became solid components of the new normal.

A CHIME survey, collected a month before restrictions were implemented in the United States, showed that EHR/EMR optimization ranked as the top 2020 priority, with patient engagement technologies trailing closely behind. At the same time, 77% of CIOs cited operating cost pressures as the top barrier to progress with IT initiatives. Here are three points to consider with regard to COVID’s impact on EHR costs.

  • EHR solutions are major investments, and it is more critical than ever to examine cost-effective strategies to support the system that is the heart of hospital operations.
  • EHRs underwent much fine-tuning in 2020 to accommodate changes in response to COVID-19 and the integration of new applications to cope with the pandemic.
  • Organizations must now micromanage every cost as reimbursements from elective procedures are down and the need for expensive, on-call nursing support climbs.

Reducing the cost of purchased services such as data storage, user licenses, software, security, disaster recovery and networking is one area where hospital CIOs and technology leaders can look for EHR cost savings—potentially 30% of a hospital’s non-labor expenses.

Here, we discuss strategies for improved sustainability of EHRs and provide examples of real-life results where organizations might find additional EHR and hospital IT savings as they approach 2021.

  1. Conduct Vendor and Contract Rationalization

Focus on a deep analysis of the current spending, including rationalizing vendors and contracts.

In the previously mentioned CHIME survey, 61% of CIOs did not receive the value they expected in more than half of their projects with managed services providers. This points to projects not aligned properly with organizational strategies, or costs not well understood or managed.

In many cases we also find redundant contracts with vendors for the same functionality. Sometimes these redundant services were leftover agreements from legacy environments and at other times from shadow IT endeavors. Contractual terms and conditions also may not be favorable to the organization. In these cases, renegotiating contract terms may provide additional value.

Finally, we recommend zero-based budgeting or ledger-based budgeting for allocating all IT costs to specific departments. One of the primary reasons costs increase is lack of transparency into the total costs of IT. These two budgeting methods help finance executives understand the true cost to the bottom line.

Case in Point: Contract rationalization project for a mid-sized, four-hospital health system.
Result: Savings of over 30% in annual operating cost.

After evaluating over 350 contracts and applications, this organization was able to reduce the number of contracts to 195. The rationalization project resulted in an estimated cost savings of over 30% in annual operating costs. The reduced number of vendor contracts also made way for standardization of processes across departments and better coverage from cross-trained employees. Other IT-focused benefits included:

  • Reduced complexity in a number of interfaces
  • Simplified integration architecture for improved systems reliability
  • Fewer servers in the data center due to the lower number of applications
  • Greater use of cloud-based migration and computing
  1. Reinforce Revenue Integrity Initiatives

Examine the EHR and supporting processes for accurate charge capture and revenue cycle.

Although many hospitals operate effective revenue integrity programs, ensuring there are no leaks in charge capture is easier said than done. The COVID-19 crisis is a strong call to action to ensure that long-standing charge capture processes are tested, audited and reviewed.

If not already in place, use automation to test system-driven orderables. This step saves a tremendous amount of hours over manual audits or personnel testing every potential combination in the EHR system. Automated testing of orderable processes can then serve as a basis for further audits or reviews of potential problem areas. These testing processes are also critical during specific stages of the EHR lifecycle due to their impact on the intricate network of codes and processes. This includes yearly pricing changes, regulatory changes, major upgrades and implementations.

Case in Point: Revenue Cycle Build Review for an Acute/Ambulatory Hospital
Result: $300K in found revenue opportunities

After bringing in a new consulting team to optimize the EHR for the organization, a review of the CDM and billing results located over $300K in overlooked revenue opportunities for the site. Changes applied the previous year had resulted in misaligned and disrupted reimbursement processes that went undetected.

  1. Update Key Performance Indicators for EHR Support Activities

Bring KPIs for IT service and operating levels up to date for EHR support services.

As IT support teams shift to work-from-home models, healthcare organizations must manage productivity in a remote environment while building agility to be remote ready as new emergencies and waves of the pandemic arise. KPIs for IT service, operations and EHR support should all be revisited with a remote or hybrid IT support team in mind. Using the right metrics helps to control costs and improve operating efficiency, including striking the right balance between labor budgets and incidents that inflate IT expenses.

Case in Point: Analysis of EHR support incidents related to A/R in a smaller hospital
Result: From 90 days to near zero in A/R

Many organizations either do not use IT KPIs or may use the wrong metrics to track the relationship between EHR support incidents and departmental business efficiency. Even in smaller organizations, monitoring IT KPIs is beneficial to the organization.

For example, during an ICD-10 transformation project a small hospital system began tracking the number and amount of IT support incidents related to accounts receivable (A/R) as one of their key performance indicators. The lowest level of A/R was 90 days with millions of dollars in uncollectable accounts. Comparing data from the IT support dashboard and revenue cycle system with A/R increases and decreases identified a broken process in the system’s workflow. Equipped with this insight, the IT team fixed the source of the variations and addressed each specific incident. The hospital reduced the outstanding A/R to near zero, a historical low for the organization.

  1. Continue with Smart EHR Transformation and Modernization

Balance EHR modernization and transformation projects (including upgrades) against the long-term costs to support legacy versions.

Many organizations operate under a flawed philosophy that maintaining older versions of the EHR saves money in two ways: 1) lowers cost of maintenance to the vendor and 2) eliminates the need to retrain staff and redesign processes that already work well enough. The challenge with this hypothesis is that newer versions of the applications achieve other critical revenue cycle goals.

  • Offer more efficient workflows
  • Accommodate integration with a larger variety of systems
  • Enhance ease of use for revenue cycle teams
  • Reduce IT time required for support and maintenance
  • Facilitate improved accuracy in the revenue cycle

Finally, organizations that oppose changing their internal work processes to fit new functionality end up making software more custom, less reliable and more costly to maintain over time. The real factors that help with the agility, cost and reliability of the modern software are maintaining the latest code upgrade and minimizing the amount of custom code.

Case in Point: Two healthcare systems, similar scale and same EHR
Result: 60% operating cost savings and 40% productivity gain with modernization

In working with two healthcare systems of comparable size using the same EHR application, one avoided using newer functionality and opted not to upgrade to a newer version. The other organization upgraded and modernized their business processes.  The organization running the older version was tasked to maintain more interfaces which became more unstable over time. This organization experienced significant downtime and higher spending to keep the system running. The organization that chose the newer version had less interfaces to maintain, benefitted from streamlined business processes and a reliable solution for the organization.  As a result, this organization operated with a 60% operating cost savings and experienced an over 40% productivity gain.

On the user side of the equation, older EHR systems often require a tremendous amount of hand-holding by the IT organization or clinical informatics personnel to assist the clinicians. Additionally, we have seen where clinicians and physicians are not well trained or adapted to the legacy technologies in place. EHR modernization is a key factor in boosting physician satisfaction and in some markets can impact physician recruitment and retention.

Moving forward, we must shift from cost adversity to technological advancement. And the only way to do that is with mindful decisions regarding our supporting technologies, along with strong governance and measurement efforts.

About Peyman Zand

Peyman Zand is a health IT veteran having previously served as a vice president at Community Health Systems and regional CIO for Tenet Healthcare. Peyman currently leads the advisory services division of CereCore where he works with hospital and health system leaders to deliver specific and measurable results through a methodical approach to strategic planning and project execution. Peyman can be reached at: