Small practices fuel sales of EMR systems

Five years ago, colleagues in small practices had zero interest in hearing Dan Heslinga, MD, discuss his electronic medical records system, or watching him enter progress notes on a computer while doing rounds.

"Now, people will walk up to me, look over my shoulder from time to time, quietly observe, shake their heads and say, 'I know I'm going to have to do that one of these days,' " said Dr. Heslinga, a family physician at a four-doctor practice in Kaneohe, Hawaii. "I get a tremendous amount of probing questions -- how do you do that, which product are you using, how did you get it set up, who can I talk to?"

This change of heart has analysts expecting that small practices -- and nearly 78% of physicians in private practice are in groups of eight or fewer doctors -- are going to start spending money like crazy on EMRs.

EMR sales to physician practices should go up from $816 million in 2003 to about $1.4 billion in 2008, predicted Forrester Research Inc., a Cambridge, Mass., market research firm. During that same time, small practice spending is expected to more than double, from $366 million to $829 million. By next year, Forrester said, sales to small practices (projected to be $622 million in 2005) for the first time will be larger than sales to larger practices ($585 million in 2005).

There are many reasons for greater small-practice interest in EMRs, Forrester said, including mounting pressure to use the technology to boost patient safety. Other emerging trends include insurers offering pay-for-performance initiatives or financial incentives to compel or encourage doctors to use computerized records, growing sentiment among physicians that information technology can improve productivity and efficiency, and the fact that the technology has gotten better and less expensive, said Eric Brown, an analyst at Forrester.

Some observers say they already have seen an increase in the number of doctors buying and an even larger number asking about the technology.

"They are sort of being forced to do that because of [certain] pressures," said Vinson Hudson, a consultant in Austin, Texas, who surveys vendors and offers technology consulting services to physicians. He estimates that 5% to 6% of physicians in the ambulatory environment have EMRs.

For example, the Institute of Medicine and employer groups are pressuring doctors to use computerized physician order entry systems to reduce medication errors.

Pressure also is emerging on the legislative front. Last month, U.S. Sen. Hillary Clinton (D, N.Y.) announced plans to introduce legislation to encourage development of a national health information infrastructure, including adopting electronic records.

In his State of the Union address, President Bush praised computerized records as a way to avoid medication errors, cut costs and improve care.

The AMA has not commented on Clinton's or Bush's plans. But during last year's debate over Medicare reform, it opposed mandatory electronic prescribing out of concern that small practices couldn't afford the systems.

As a result, the new Medicare reform and prescription drug package does not require that doctors use e-prescribing, but it does provide grants to encourage small or rural practices to adopt the technology.

Insurers and employers are also encouraging greater use of EMRs.

Pay-for-performance programs are becoming more common, and doctors are being asked to "demonstrate quality outcomes or consistent compliance with clinical best practices," Forrester's Brown said. "Well, typically the only way you can do that is to have an EMR."

But perhaps the most important factor that will drive physicians to adopt EMRs is third-party funding.

Last month, WellPoint Health Networks said it would spend $40 million to give handheld electronic or desktop systems to 19,000 doctors in California, Georgia, Missouri and Wisconsin. The insurer is targeting contracted network doctors who aren't prescribing or submitting claims electronically.

BlueCross BlueShield of South Carolina, Blue Cross and Blue Shield of Massachusetts and Tufts Health Plan also have launched programs to subsidize the cost of e-prescribing.

Physician groups also are trying to make the technology more affordable. The American Academy of Family Physicians and the Massachusetts Medical Society have struck deals in which members can buy EMR and e-prescribing systems at substantial discounts from participating vendors.

Last December, the 728-doctor Hawaii Independent Physicians Assn. offered grants of $3,000 to members who implement EMRs. The grant represents a third of the $9,000 it costs a doctor to implement an EMR from GE Medical Systems, which will discount its product to IPA members, said Bill Donahue, IPA executive director. After the first year, the ongoing cost will average $6,000 per doctor per year.

The IPA made the offer because insurers and employers are asking the association and its members to provide quality-of-care data, he said. So far, more than 100 physicians have expressed interest in the offer.

While pleased with the reaction, Donahue said he had no illusion that every IPAmember, or even most, will adopt EMRs immediately. Many remain averse to electronic records, not to mention paying thousands of dollars for a system.

Still, some vendors sense increased readiness by physicians to commit to EMRs. "That's really what's fueling our growth," said Roger C. Holstein, CEO of WebMD Corp. "We're investing heavily in the business."

Even firms that specialize in selling EMRs to hospitals, health systems and large group practices are targeting the small-physician market. For example, Cerner Corp., Kansas City, Mo., and Siemens Medical Solutions, Malvern, Pa., will market an Internet-based EMR to small practices through hospitals and other entities that want to connect to those practices.