There are several criteria by which the company can establish acceptability for the eCube system of EMR that is available from Fresenius. The first stakeholder group consists of the patients, who will benefit from the enhanced functionality that comes from the eCube system, in particular the superior health outcomes that come from having accurate medical histories available to physicians and other practitioners while they are working with the patient. Management must strike a balance between business objectives and patient outcomes, and therefore there are multiple different acceptability measures that are possible, both based on profit and patient outcomes. Management will also want to know that the system is relatively easy to install, that there is training available from the vendor for the staff, and that the vendor will deliver full support of the system if there are any problems.
Another stakeholder group consists of the owners/shareholders of the health care provider. For them, the primary measure of acceptability is financial. The net present value calculation is one that is usually used. The NPV calculation takes a number of factors into account, primarily the future cash flows but also the cost of capital at the company. The future cash flows that are incremental to this decision include the cost of the equipment, the cost of installation and training, and the savings that will accrue from having the equipment. There are two types of savings that will come into play here. These are internal savings that come from increased efficiency that results from having the eCube in the business, once that software and staff are fully up to speed. There is also, in this case, external saving because a lack of electronic medical records will leave the facility subject to fines from the government. The cost of the EMR must be in part weighed against the avoidance of these fines.
There are also risk and compliance issues that can be factored into the measures of acceptability. Certainly, purchasing the eCube or a similar system will reduce the compliance risk, because the organization will not be subject to fines under the Affordable Care Act. The system also reduces risk. As Jena (2011) notes, there is significant risk attached to errors in medical practice. This risk varies by specialty and patient, but average payments for successful malpractice claims are in excess of $500,000, and malpractice insurance is an increasing cost factor for health care providers as a result. The eCube system can reduce risk by providing accurate information in a timely manner, even to bedside (Kalathil, 2011).
With respect to the number-crunching, risk is generally accounted for by using sensitivity analysis. For example, the normal time to purchase and implement the eCube system might be six months, but if problems arise with the software or the people trying to use the software, the time for successful implementation could be nine months. Alternately, the cost savings projected at the time of purchase could fail to materialize. Sensitivity analysis accounts for these by providing figures for "best case," "normal case" and "worst case" scenarios. With proper financial analysis prior to the decision, risk can be avoided.
Another way to avoid risk is to place the onus on management to ensure that the implementation goes smoothly. This is easier said than done. There are many risks inherent in implementing electronic medical records. Physicians in particular have resisted the change -- nobody really knows why, but that resistance needs to be overcome in order to ensure that the entire eCube effort goes smoothly. A key consideration is that organizational change has been studied extensively, and there are a large number of strategies that have proven effective at handling resistance to change, especially resistance to technological change. Management needs to learn from the experiences of other companies in order to make this implementation work. In particular, management needs to correctly anticipate the potential problems and have strategies in place proactively to ensure that this resistance is overcome (Self & Schraeder, 2009).
Another strategy for avoiding risk relating to the implementation of electronic medical records is to engage the key stakeholders in the change process. This should actually be easier despite whatever resistance might be there simply because the change is being forced by law. However, management needs to embrace the change and lead it. It is the role of management to ensure that every element within the organization is behind the change. There should also be an opportunity for the different stakeholders to have their input on the change, in particular those who will experience the most changes as the result of the change.
With respect to compliance, there are several different roles that need to be taken into consideration. The first of these is understanding the nature of change that is demanded in the Affordable Care Act. Compliance is all about operating within the confines of the law, so is critical to understand all of the applicable laws and what they contain. This means not only the ACA but HIPAA as well, and any other laws that might apply to electronic medical records. The CEO and CIO in particular need to understand the issues more completely than anybody else, since ultimately the responsibility for compliance falls at their feet.
In addition to understanding the legal environment against which the firm's performance will be judged, the senior management team needs to understand the product. All of the different companies that market similar products will want to make a presentation, but management needs to go beyond that and actually work with the system, or talk to peers who have. In a day and age where people refuse to book a hotel without checking it out on TripAdvisor, it makes no sense whatsoever to enter into an agreement to purchase an electronic medical records management system without doing extensive research on the system to ensure that it is the right one for the organization. The process of research should take months, ideally, and include interviews with executives who have faced this issue already. Understanding how the different systems work in practice is important to ensuring that risk is mitigated.
Once a system has been decided on -- in this case eCube from Fresenius -- there are other compliance related issues that need to be addressed. Training is something that IT and HR will do together, to ensure that the people who work on the system know how to use it in compliance with the law. Further, the IT department is responsible for time frames. The CEO is ultimately responsible for compliance, and during the initial stages of implementation might want to consider having placing somebody in charge of compliance to ensure that the way the organization deals with the electronic medical records is consistent with the laws surrounding their implementation.
Lastly, all senior executives are responsible for creating the organizational culture around the electronic medical records and compliance. They set not only the policies and structures by which compliance will be achieved, but these managers also set the ethical tone of the company through their own actions. As a consequence of this, all of the executives are in charge of making sure that compliance with the law is a top priority throughout the company, and indeed the top priority with respect to how electronic medical records are used. This is critical, because compliance is more likely to occur where it is culturally-expected. The expectation already comes from patients and from regulators, but it must also come from the highest levels of the organization.
The cost of the project is to be negotiated with Fresenius based on the specific parameters of the system -- it is not recommended to use an off-the-shelf system for EMR. The cost is expected to be within the $150,000 range for license, installation and training, plus an ongoing $25,000 license fee. The cost benefits are expected to be $20,000 per year for efficiency, increasing 10% per year, and $15,000 in reduced liability costs. The fines avoided are worth $10,000 in the first year, and $20,000 in the second year and each year thereafter. The cost of capital for the company is estimated to be 10% at current interest rates and debt levels. The shelf life of this product is 10 years.
Using this data, the net present value of the eCube system is
Up Front Cost
Cost of capital
NPV, future flows
less up front cost =
This analysis shows that the project is economically-feasible. However, this assessment is based on a number of factors. The first is that the cost comes in on budget. There is some leeway here with respect to the cost of the eCube, so it is unlikely that there…