U.S. Department of Health and Human Services

Evaluation Design of the Business Case of Health Technology in Long-Term Care: Final Report

Booz Allen Hamilton

July 13, 2006

PDF Version

This project summary was prepared under contract between the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Booz Allen Hamilton. For additional information on this subject, you can visit the ASPE home page at http://aspe.hhs.gov or contact the ASPE Project Officer, Jennie Harvell, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201, Jennie.Harvell@hhs.gov.

The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.

TABLE OF CONTENTS

ABSTRACT

EXECUTIVE SUMMARY

1.0 INTRODUCTION

2.0 METHODOLOGY

3.0 BACKGROUND

3.1 The Post Acute and Long-Term Care Environment

3.2 Health Information Technology in Post Acute and Long-Term Care

3.3 HIT Costs and PAC/LTC

3.4 HIT Benefits and PAC/LTC

3.5 To Whom Benefits Accrue Overview

4.0 APPROACHES TO DESIGNING THE BUSINESS CASE FOR HIT IN PAC/LTC

4.1 Study Considerations

4.2 Alternative Approaches to Designing the Business Case Demonstration/Evaluation

5.0 RECOMMENDATIONS

5.1 Research Questions

5.2 Recommended Design

6.0 SUMMARY AND CONCLUSIONS

APPENDICES

APPENDIX A: Stakeholder Discussion Summary

APPENDIX B: Illustrative Stakeholder Discussion Guide

ENDNOTES

NOTES

LIST OF EXHIBITS

EXHIBIT 1: Types of HIT Applications and Functionalities

EXHIBIT 2: Evaluation Study Steps

EXHIBIT 3: Research Questions for Designing a Business Case

EXHIBIT 4: Healthcare Use During the 2-Year Study Period by Elders’ Gender and Age

EXHIBIT 5: Transition Patterns for Those with at Least 1 Transition During the 2-Year Study Period by Elders’ Gender and Age

EXHIBIT 6: Post Acute Care and Long-Term Care Financing

EXHIBIT 7: Types of HIT Applications and Functionalities

EXHIBIT 8: Cost Breakdown -- Cost-Benefit and Survey Literature, Stakeholder Discussions and TEP Input

EXHIBIT 9: HIT Net Benefit/ROI Studies

EXHIBIT 10: Illustrative Benefit Metrics

EXHIBIT 11: Illustrative Cost Metrics

EXHIBIT 12: Potential Study Designs

EXHIBIT 13: Evaluation Study Steps

EXHIBIT A-1: Types of HIT Applications and Functionalities

ABSTRACT

Health information technology (HIT) has the potential to improve the quality of care while enhancing cost efficiency. To reduce the risks faced by providers considering implementation, it is necessary to develop an understanding of the costs and benefits of HIT investment. A deeper understanding of the business case and cost/benefit accrual is also important to policy makers who wish to influence HIT investment decisions. Although a number of studies have focused on the business case for HIT investments, the emphasis has generally been on the acute and ambulatory care settings.

The Office of the Assistant Secretary for Planning and Evaluation (ASPE) in the Department of Health and Human Services (HHS) recently engaged Booz Allen Hamilton (Booz Allen) to help design a study to assess the business case for HIT in post acute care (PAC) and long-term care (LTC) settings. The purpose of this effort is to inform providers, payors, policy makers and others regarding the costs and benefits (financial and non-financial) of HIT in the PAC/LTC environment.

In developing study approaches Booz Allen reviewed the relevant published literature, conducted stakeholder interviews, and received input from a Technical Expert Panel (TEP). Candidate approaches included prospective and retrospective study designs with or without an ASPE funded implementation. These options were presented to the TEP for comments and feedback. The TEP emphasized the need for a cost-effective study that could generate data-driven findings on the business case for HIT in PAC/LTC within a reasonable timeframe (2-3 years).

Based on these findings Booz Allen recommends that ASPE conduct a retrospective study of 10-20 nursing homes (NHs), or home health (HH) agencies, or both. This approach leverages existing HIT applications in PAC/LTC settings and will spare ASPE the considerable costs associated with subsidizing implementations. Employing both quantitative and qualitative methods, this approach places heavy emphasis on the use of administrative and interview data to inform the estimation of costs and benefits. We believe that the proposed study can be completed within 18-36 months.

We believe that our suggested study approach is a cost and time efficient way to address significant gaps in the understanding of HIT costs and benefits in the PAC/LTC settings. Advances in this understanding may have significant impacts on HIT adoption. In addition to the recommended study design to evaluate costs and benefits, Booz Allen also suggests that ASPE consider sponsoring or cosponsoring a separate survey on the prevalence and penetration of HIT applications in the PAC/LTC sector. The findings of such a survey would be complementary to this study and would provide a much needed quantitative baseline assessment of the state of HIT in the PAC/LTC environment.

EXECUTIVE SUMMARY

Health information technology (HIT) is increasingly viewed as a tool that can promote quality and cost-effective care in the U.S.¹ Promoting the use of HIT is a major health initiative of the current Administration and HHS. In April 2004, the President established the Office of the National Coordinator for Health Information Technology (ONC) through an Executive Order. The Executive Order and the strategic framework developed by ONC emphasize the need for:

• Evidence on costs, benefits and outcomes associated with HIT implementation; and
• Reducing the risks that providers face in making HIT investments.

This need to establish evidence on the costs and benefits associated with HIT is driven by the limited number of systematic studies that examine these costs and benefits across care settings. The lack of a robust evidence on HIT costs and benefits is especially conspicuous in the post acute care (PAC) and long-term care (LTC) environment. A deeper, evidence-based understanding of costs and benefits is needed and is essential to inform providers contemplating purchase of HIT systems. In addition, such an understanding can provide useful and reliable information to policy makers, payors, employers, and others who seek to influence HIT adoption.

To promote this understanding, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) within the Department of Health and Human Services (HHS) engaged Booz Allen Hamilton (Booz Allen) to design an evaluation to assess the business case for HIT in PAC and LTC settings. The purpose of this project is to develop cost-effective robust study design option(s) that can greatly enhance the existing knowledge base on HIT costs and benefits in the PAC/LTC setting. In designing this evaluation Booz Allen sought to address key research questions which include:

• What types of PAC/LTC providers should be included in the evaluation design?
• What types of alternative HIT functionalities should be included?
• What are the categories of costs and benefits associated with HIT implementation?
• To whom do costs and benefits accrue?

Booz Allen developed alternative study approaches based on reviews of published literature, and stakeholder interviews. The literature review included an examination of the PAC and LTC environment, and cost-benefit studies of HIT in PAC/LTC and other settings. In consultation with a Technical Expert Panel (TEP) these approaches were narrowed to a single recommendation which is presented in this report along with the supporting evidence justifying this approach.

Overview of the PAC/LTC Environment

The PAC/LTC environment is complex representing a heterogeneous group of patients with chronic illnesses and those recovering from acute events. Patients in PAC/LTC settings can be young or old, and usually require an array of medical and nursing therapy services, as well as personal and supportive services for an extended period. PAC/LTC may be provided in a variety of settings including nursing facilities (NFs), assisted living facilities, adult day care, and home and community-based services. While there are alternative types of facilities where PAC/LTC is delivered, care is predominantly provided in nursing home (NH) and home health (HH) settings. Approximately 88% of PAC/LTC care users receive care in one of these two settings.²

Due to the variety and complexity of conditions relevant to patients in PAC/LTC, these patients experience frequent transitions from acute to PAC/LTC settings, as well as transitions between PAC/LTC settings.^{3, 4} Coleman and Berenson’s targeted review of patient transfer literature highlights the issue of transfers as a leading challenge in the delivery of healthcare, particularly in the Medicare population.⁵ These frequent transitions across the continuum of care represent “risk points” at which important clinical information may not be transmitted or may be transmitted incorrectly, creating gaps in quality and opportunities for error.⁶ Health information exchange has the potential to reduce errors and improve quality of care.

In addition to the complexities associated with a heterogeneous, high morbidity, frequently transitioning patient mix, the PAC/LTC environment faces significant staffing shortages and retention challenges due to the heavy reliance on nursing staff. HIT may help alleviate this problem through improved workflow efficiencies and improved staff satisfaction.

There are two other aspects of the PAC/LTC environment relevant to determining the accrual of HIT costs and benefits: sources of financing (i.e., who pays for the services) and payment methods (how are they reimbursed). These two aspects affect who receives the benefits and therefore how likely they are to invest in HIT. Services provided in PAC and LTC settings are primarily financed by Medicare, Medicaid, and out-of-pocket sources. An analysis of 2004 National Health Accounts Data estimates that 41% of LTC is financed by Medicaid ($65B), 23% by personal out-of-pocket ($37B), 20% by Medicare ($32B), 9% by private insurance ($14B) and the remainder by public or private sources.^{7, 8}

Reimbursement for PAC/LTC services varies depending on who pays for the services. Medicare uses the Prospective Payment System (PPS) to reimburse skilled NFs, HH agencies, inpatient rehabilitation facilities, and LTC hospitals. State Medicaid programs devise their own payment systems for NF and home and community-based service providers. Payment systems vary greatly by state and by type of provider. Many states reimburse NHs through a PPS similar to Medicare’s. Recent studies of Medicaid programs and financing trends indicate that some states have moved from cost-based systems to PPS as a cost-containment strategy.⁹ Alternative reimbursement methods can create differing incentives for HIT adoption, and understanding the distribution of benefits is important to policy makers.

HIT in PAC/LTC

Based on TEP guidance, stakeholder input and a review of the literature, we have focused our analysis on HH and NH services. As stated previously, a majority of the PAC/LTC services are provided in these settings. The NH setting has been emphasized because of the acuity of NH patients, the volume and intensity of the services provided, and the frequency of transfers. Emphasis on the HH setting is based on the continued growth in HH utilization, and the desire to facilitate further migration of care from institutional settings to the home.

Our analysis of HIT in PAC/LTC therefore focused on functionalities relevant to the NH and HH settings. Based on TEP input and stakeholder discussions, we have identified a number of HIT applications, tools, and functionalities that are particularly relevant in NH and HH environments. Exhibit 1 provides a brief description of these functionalities.

These applications may be used independently or in combination at varying levels of functionality, based on the unique needs and characteristics of the setting pursuing HIT implementation. There is also functional overlap between some of these tools, applications and functions. While anecdotal reports suggest that some PAC/LTC settings have already implemented POC and medication management tools to improve patient safety and quality of care, there is relatively little quantitative information regarding the actual penetration of these applications in PAC/LTC facilities.

In addition to stand-alone functionalities, the potential for interoperability across HIT systems holds significant promise for benefits and return on investment (ROI). For this reason, public and private groups have been working to develop standards and standard functionalities to facilitate interoperability (e.g., HL7 efforts to develop standards for an EHR Functional Model and public/private efforts to apply HIT standards to the federally required NH Minimum Data Set).

Costs and Benefits of HIT in PAC/LTC

Although there is a paucity of peer-reviewed literature quantifying the costs associated with HIT acquisition and implementation in a PAC/LTC setting, Booz Allen has used the literature on ambulatory and acute inpatient HIT costs to provide insights on the types of costs that may be incurred with an HIT implementation. Based on the HIT literature, stakeholder discussions and TEP input, we have developed a breakdown of cost categories, including:

• Selection costs;
• Acquisition costs (e.g., hardware, software, training); and
• Recurring costs (e.g., maintenance, upgrades, subscription fees).

These costs are likely to vary based on factors such as facility size, levels of functionality and connectivity, length of implementation, and extent of user training.

There are also a limited number of studies that focus on measuring benefits of HIT in a PAC/LTC setting.^{10, 11, 12} It is widely asserted that HIT can provide significant clinical benefits, in terms of safety, quality improvements, and enhanced efficiency. This is particularly relevant to the PAC/LTC setting since patients are especially susceptible to adverse drug events due to the use of multiple medications, comorbidities associated with multiple chronic conditions, and increased utilization rates of drugs.^{12, 13, 14} Evidence from studies in these settings suggests that CPOE systems and decision-support can help reduce medical errors. The effects of HIT on workflow and labor efficiency in the ambulatory and inpatient environment appear equivocal and highly dependent on usability and appropriate re-engineering of work processes. The evidence that HIT can reduce redundant testing appears to be more consistent.

Return on Investment (ROI) and Benefits Accrual

Analysis of net benefit or ROI of an HIT implementation in the PAC/LTC setting is limited. We are aware of only a single prospective study, and that analysis was conducted in a single institution over a period of about one year yielding equivocal results.¹⁰ Given the limited evidence on HIT costs and benefits in the PAC/LTC environment, we also examined peer-reviewed cost-benefit literature in the ambulatory and inpatient environment. A small number of these studies in the acute and ambulatory settings suggest that positive provider ROI may be achievable. However, positive net benefit in these studies from the provider’s perspective is dependent on a variety of factors including: quality of the implementation and workflow redesign, the level of functionality and usability, and the nature of the reimbursement environment (capitated vs. fee for service). The measurement of benefits is also highly dependent on the period of assessment. It may require up to three years (or more) for financial benefits to exceed costs and shorter studies may not capture these benefits, leading to the erroneous conclusion that a positive ROI may not be achievable.

Though PAC/LTC provider facilities bear the financial burden of HIT investments, benefits may accrue to others such as payors or patients. Whether or not a particular entity benefits from HIT investment is a function of:

• Who pays for the services;
• How the reimbursement is structured (e.g., capitated vs. fee for service); and
• The types of benefits (e.g., cost savings from generic switching or reduction of redundant tests), which are determined by the functionality of the system adopted.

Understanding the distribution of benefits is important for policy makers who seek to influence adoption of HIT. It is therefore essential that a formal evaluation of HIT costs and benefits include a thorough mapping of benefits to determine which benefits accrue to which stakeholders.

Demonstration and Evaluation Recommendations

After reviewing the literature and conducting stakeholder discussions, Booz Allen developed a range of alternatives to assess the business case for HIT in PAC/LTC settings. The options included several prospective and retrospective study designs, with or without an ASPE funded implementation. Booz Allen presented these options to the TEP for comments. The TEP response emphasized the need for a cost-effective study that could generate data-driven findings on the business case for HIT within a reasonable timeframe (2-3 years).

Based on these recommendations Booz Allen has proposed that ASPE conduct a retrospective study of 10-20 sites, focusing on NHs, HH, or both. While a prospective study would be methodologically more rigorous, the time horizon (probably in excess of five years) would be unacceptably long given the need for evidence-based guidance in the short term. Cost would be another limitation. The retrospective design would leverage existing HIT applications in PAC/LTC settings, saving both time and implementation costs. This approach would include quantitative and qualitative methods, using both administrative and interview data to inform the estimation of costs and benefits. It is realistic to expect that such a study may be completed within 18-36 months.

The purpose of this study will be to:

• Develop an improved understanding of the specific clinical and non-clinical HIT functionalities used in PAC/LTC settings;
• Estimate the costs and benefits associated with these functionalities; and
• Gain an understanding of the distribution of these costs and benefits among relevant stakeholders.

There are significant gaps in the understanding of the business case for HIT. This study will advance the state of knowledge on the costs, benefits and net benefits of an HIT implementation in PAC/LTC. In addition, it will provide an enhanced understanding of the distribution and timing of these benefits. This study could also provide insight into minimum system functionality requirements to determine potential reimbursement incentives should the Centers for Medicare and Medicaid Services (CMS) establish pay-for-performance for HIT adoption in the future.

Study Methodology

Booz Allen proposes a seven-step methodology for conducting this evaluation study. Exhibit 2 displays these seven steps.

EXHIBIT 2. Evaluation Study Steps

The evaluator will begin by identifying the specific HIT applications and functionalities used in the PAC/LTC environment. Choice of study functionalities will be influenced by stakeholder discussions and preliminary hypotheses regarding which are most likely to produce a positive ROI for the adopting provider.

After identifying the HIT functionalities of interest, the evaluator will develop a list of associated cost and benefit metrics that can be estimated as part of the study. The metrics developed must be targeted to the specific HIT applications and functionalities studied. These must be crafted so that both the baseline and outcome metrics are measurable in a retrospective analysis. Data availability and access will be a major consideration.

Site selection will occur in two steps. The evaluator will first create an initial universe of potential sites and then, in consultation with ASPE, narrow that universe to a final site list. Decisions at each Step will be based on specific criteria and a specified method of site selection. An important criterion is whether a site possesses an appropriate set of HIT functionalities as defined in Step One. Other considerations include: level of connectivity with other facilities; adopter status (e.g., early adopter, late adopter); organization size and type (e.g., chain of facilities, free standing facility, 50 beds, 200 beds); types of residents; and pre-existing information technology capabilities and experiences including legacy systems and corresponding implementation constraints.

The evaluator will develop a data collection plan that includes use of inperson site interviews and administrative data such as claims data, cost, and quality reports. When developing the data collection plan, the evaluator should be aware of the limitations of data sources and availability when gathering pre and post-implementation data retrospectively, and incorporate mitigation strategies. The data collection plan should include design and development of data collection instruments.

Upon completion of the data collection, the evaluator will conduct both qualitative and quantitative analyses and then produce a report that details the methods and findings. The evaluator will provide a discussion of those findings and make recommendations on relevant policy issues offering suggestions for future studies of HIT in PAC/LTC settings.

Challenges and Risks

We are aware that the proposed study, while cost and time efficient, possesses certain limitations. The retrospective study design limits the ability to measure the baseline, or pre-implementation state, against which to measure the impact of HIT. This may present particular challenges in assessing impact on workflow and labor efficiencies since recall bias and staff turnover, especially if the baseline state was remote in time, may cloud retrospective perceptions of the pre-implementation state. The small sample size may make it difficult to generalize to the broader population of NHs or HH agencies, particularly if there is significant variation in the types of facilities, populations, and HIT functionalities being studied. Inclusion of a comparison group would strengthen the study design and increase confidence that observed trends attributed to HIT implementation were causally related. However, cost constraints may prohibit a comparison group at this stage.

In addition, this study will not assess the adoption rates of different types of technology and functionality across the PAC/LTC sector. Such an assessment would be useful in understanding the broader baseline state of the industry. Booz Allen has recommended that ASPE consider such a survey, perhaps in partnership with another agency or organization.

There is a risk that this study may not demonstrate a benefit from HIT implementation or may even demonstrate a negative ROI. Given the paucity of existing systematic research this could have a disproportionately negative effect on PAC/LTC adoption. This would be particularly unfortunate if failure to demonstrate ROI was based on a study approach that failed to capture what, in reality, was a positive net benefit. As noted above this could relate to an inadequate assessment of the inefficiencies, and the costs related to them, in the baseline state. Failure to demonstrate a positive ROI could also result from examining a post-implementation period that is too short to allow benefits to accumulate. Studies in the ambulatory environment suggest that it may take two to three years to achieve a positive net benefit.

While these challenges and risks were considered, they were balanced with the need to develop an empirically based approach to measuring the benefits of HIT that could yield results in the relatively near future. Careful attention to study design and execution may mitigate these risks. Finally, we view this as a first step in developing a body of robust evidence on HIT costs and benefits driven by data.

Summary and Conclusion

The PAC/LTC environment is complex due to the nature of the population, the multiple care settings, the frequent transitions between care settings, and the convoluted and varied reimbursement mechanisms. While aspects of this care environment, such as frequent transitions and a population on multiple medications, suggest that HIT may produce significant qualitative and financial benefits, there is a paucity of systematic studies to support this hypothesis. Even if financial benefits are realized they may not accrue to the provider organizations making those investments.

Accordingly, ASPE has proposed to study the business case for HIT in the PAC/LTC environment so that these benefits may be quantified and mapped to the appropriate stakeholder. The outcomes of this study will be useful for PAC/LTC providers considering HIT investments, and for policy makers, payors, employers and others who may seek to influence HIT adoption in PAC/LTC settings. Booz Allen was engaged to assist ASPE in conducting the research and analysis necessary to design a cost-efficient approach to this study.

Based on review of the literature, stakeholder discussions and TEP recommendations, Booz Allen has proposed that this demonstration be performed as a retrospective analysis of HIT implementations in 10-20 PAC/LTC settings. This study will include both quantitative and qualitative data and analysis. While a larger sample size and comparison group would add to the rigor and generalizability of the study, resource constraints may preclude those options. Despite the small size of the evaluation, it would represent a significant contribution since there is a paucity of methodologically sound analyses of costs, benefits and net benefits of HIT in the PAC/LTC environment.

In addition to the recommended study design in this report, we suggest that ASPE consider other studies focused on HIT in PAC/LTC environment such as a survey of the prevalence of HIT in PAC/LTC. However, we consider the current study under consideration the most important to conduct first since it will provide much needed evidence and guidance to the broad spectrum of stakeholders in the PAC/LTC environment.

1.0 INTRODUCTION

Health information technology (HIT) is increasingly viewed as a tool that can promote quality and cost-effective care in the U.S.¹ Promoting the use of HIT is a major health initiative of the current Administration and the Department of Health and Human Services (HHS). In April 2004, the President established the Office of the National Coordinator for Health Information Technology (ONC) through an Executive Order. ONC “provides leadership for the development and nationwide implementation of an interoperable HIT infrastructure to improve the quality and efficiency of healthcare and the ability of consumers to manage their care and safety.”¹⁵

The primary goals of this initiative are to:

1. Improve coordination and collaboration on national HIT solutions; and
2. Improve standardization, reliability, availability and efficiency of comprehensive HIT solutions.¹⁶

In addition, the strategic framework and the Executive Order emphasize the need for:

• Evidence on costs, benefits and outcomes associated with HIT implementation; and
• Reducing the risks that providers face in making HIT investments.

Understanding the costs and benefits of HIT investment is critical to reducing the risks providers face in making such investments. A deeper understanding of the business case and costs/benefits accrual is also important to policy makers, payors and others who may wish to influence HIT investment decisions. Although a number of studies have focused on the business case for HIT investments, their emphasis has been on the acute and ambulatory care settings and have largely excluded post acute care (PAC) and long-term care (LTC).

To address this knowledge gap, the Office of the Assistant for Planning and Evaluation (ASPE) within HHS recently engaged Booz Allen Hamilton (Booz Allen) to conduct a preliminary study to help design an implementation and evaluation to assess the business case for HIT in PAC and LTC settings. The purpose of this effort is to inform providers, payors, policy makers, employers and others on the costs and benefits (financial and non-financial) of HIT in the PAC/LTC environment.

As the study was originally envisioned, Booz Allen was to provide three alternative demonstration and evaluation approaches -- high, medium and low cost. These scenarios were to address a number of research issues and questions as described in Exhibit 3. These included: definition of the appropriate provider setting or settings in which a demonstration and evaluation should be conducted; identification of the kinds of technology and functionality to be evaluated; determination of the appropriate measures to assess cost and benefits; and an understanding of how and to whom the benefits accrue. These approaches were to be informed by published literature, stakeholder interviews, and input from a Technical Expert Panel (TEP). After considerable analysis and following input from the TEP, which reached strong consensus regarding study methods, ASPE requested that Booz Allen recommend a single preferred approach to explore in further detail. The findings from this preliminary study are summarized in this report and provide the rationale for the recommended evaluation approach.

2.0 METHODOLOGY

In developing recommendations regarding study design, Booz Allen reviewed the relevant published literature, conducted stakeholder interviews, and sought input from a TEP. As mentioned previously, most of the peer-reviewed literature and studies pertinent to HIT have focused on the ambulatory and acute care settings. There is a paucity of scholarly literature regarding HIT use in the PAC/LTC environment.

Booz Allen conducted a total of 33 structured discussions with 45 PAC/LTC stakeholders and subject matter experts to address gaps in the literature and to inform the proposed study design. Stakeholder discussions were conducted primarily via conference calls. In addition, Booz Allen and ASPE conducted a one day inperson meeting that included representatives from PAC/LTC vendors, a PAC/LTC pharmacy, PAC/LTC providers, and representatives from three associations. These discussions covered a number of topics on the current state of HIT in PAC/LTC settings, including available HIT applications, adoption influences, costs, benefits, benefactors and barriers. In addition, the stakeholders were specifically asked to give input on:

• The types of PAC/LTC and ancillary providers that should be included in a demonstration and evaluation of HIT in PAC/LTC;
• The types of HIT applications that should be included in a demonstration and evaluation of HIT in PAC/LTC; and
• The combination of applications and health information exchange (HIE) perceived to yield the highest return on investment (ROI).

Based on the literature review and stakeholder discussions, Booz Allen developed a range of alternatives to study the business case for HIT in PAC/LTC settings. The options included prospective and retrospective study designs with or without an ASPE funded implementation. These options were presented to a TEP for comments and feedback. The TEP emphasized the need for a cost-effective study that could generate data-driven findings on the business case for HIT in PAC/LTC within a reasonable timeframe (2-3 years).

3.0 BACKGROUND

This section of the report will provide a synthesis of information from the literature review, stakeholder discussions and TEP input on the PAC/LTC environment, HIT applications currently used in PAC/LTC, and costs and benefits of HIT implementation. This will include a discussion of the various PAC/LTC settings, the recipients of PAC/LTC services, reimbursement structures and the associated challenges facing the PAC/LTC industry. Additionally, this section will offer an overview of HIT and detail several functionalities specific to PAC/LTC. Finally, this section will contain an overview of our findings on HIT costs, benefits, and net benefits with a discussion of benefit accrual.

3.1 The Post Acute and Long-Term Care Environment

The PAC/LTC environment is complex, and boundaries among care settings are fluid. PAC/LTC users represent a heterogeneous group of patients including those with chronic illnesses, as well as patients recovering from acute events. Generally, patients in PAC/LTC settings require an array of medical and nursing services related to chronic conditions or acute hospitalizations. In addition, persons in need of PAC/LTC will often require a range of personal and supportive services for extended periods. Given the multiplicity and complexity of user needs, PAC/LTC patients will likely experience care in numerous settings with frequent transitions between settings.^{3, 4} These frequent transitions across the continuum of care are “risk points” at which important clinical information may not be transmitted, or may be transmitted incorrectly, creating gaps in quality and opportunities for error.⁶

The following sections offer more details about the PAC/LTC environment, including descriptions of PAC and LTC settings and the recipients of PAC/LTC services.

3.1.1 Definition of Post Acute and Long-Term Care

The PAC/LTC environment encompasses all healthcare settings and services that cater to the needs of patients over a long period of time,¹⁷ including a broad range of supportive, clinical, personal and social services that assist patients and their caregivers in managing health and activities of daily living (ADLs).¹⁸ PAC/LTC is available in a variety of settings such as nursing facilities (NFs), housing with supportive services, assisted living facilities, adult day care, and home and community-based services. These services may be reimbursed by payors or may be paid out-of-pocket by patients. The PAC/LTC environment is a challenging one in which to deliver care because of the numerous patterns of transfer and points of information exchange required in these settings.

3.1.2 PAC/LTC Settings

Both PAC and LTC services are provided in institutional and non-institutional settings. Most nursing homes (NHs) are certified by Medicare and Medicaid. Medicare skilled nursing facilities (SNFs) and Medicaid NFs are institutions in which patients live and have 24-hour care available to them. SNFs and NFs provide 24-hour care for residents and are typically staffed by certified nursing assistants (CNAs) and nurses (registered nurses (RNs), licensed practical nurses (LPNs), licensed vocational nurses (LVNs)). Patients treated in SNFs are typically recovering from acute episodes of illness or injury. NFs provide 24-hour care for residents who require skilled nursing, rehabilitative services, or who require health-related services that can only be provided in an institutional setting. Physician medical care in many Medicare and Medicaid certified NFs is generally provided by non-staff physicians who have contracts to provide medical care and attention to NF residents. Assisted living and retirement community facilities are also residential settings, but offer less intensive care than NHs. Residents of non-certified settings may receive unpaid and paid (i.e., by private out-of-pocket payments, Medicare, Medicaid, or other sources) home and community-based services.

Although there continues to be a need for institutional PAC/LTC settings, public opinion studies indicate that assisted living and paid home care is becoming increasingly popular. Several states have taken various measures to increase the use and availability of home health (HH) care services. In some cases, they have designed and implemented programs to make patients aware of other options for care when faced with the possibility of a NH stay. In other cases, state legislatures have included funding for HH care in their states' budgets. Stakeholder cost estimates suggest that treating PAC/LTC patients in home or community healthcare settings could result in significant savings in a state's Medicaid program. These state trends show greater efforts to divert institutionalized patients to home or community-based care settings.¹⁹ The costs and benefits of home care and adult day care are reflected in the Medicaid program’s recent spending for those types of services. Medicaid currently spends $25 billion on home care; this amount has doubled since 1992 and is likely to continue to grow. This trend has been further stimulated by recent federal policies such as the Presidential New Freedom Initiative, the Olmstead Supreme Court ruling, and Medicaid programs available to states (optional 1915(c) home and community-based services waivers).²⁰

Most patients receiving PAC and LTC are not institutionalized. In 1997, the Centers for Disease Control and Prevention (CDC) reported that 1.47 million elderly residents occupied NHs,²¹ and Day’s study from that same year reported an estimated 78% of LTC was provided inhome or in community-based facilities.²² The Kaiser Family Foundation (KFF) analysis of the National Health Interview Survey database reported that of an estimated 9.5 million patients with LTC needs in 2000, only 1.6 million (17%) are in NHs.²³ In 2002, a Government Accountability Office (GAO) report estimated that 400,000 patients lived in assisted living facilities.²⁴ Based on its analysis of 2005 Online Survey and Certification Automated Record data, the American Health Care Association (AHCA) found that 1.4 million residents occupied 16,090 NFs and 102,837 resided in 6,466 intermediate care facilities for the mentally retarded (ICF/MRs).²⁵ The February 2006 Centers for Medicare and Medicaid Services (CMS) Home Health Quality Initiatives Report states that an additional 2.4 million elderly and disabled persons receive paid HH care.²⁶

The PAC/LTC environment faces significant staffing and staff retention challenges. NH and HH providers commented that recruiting and retaining nurses has long been a challenge, and the situation may only get worse as the PAC/LTC population increases. A NH provider added that the long and demanding hours are a major concern for many employees, with many of them having to work overtime or take on double shifts to provide their patients with adequate care. It was also noted that in addition to patient care, nurses in NFs are also inundated (and frustrated) by excessive paperwork. Staff retention is also a significant challenge in the HH environment. One HH provider indicated that in 2005, approximately 6,000 nurses were hired across their 200+ facilities, and in the same year, approximately 6,000 nurses were replaced. The same HH provider surveyed its staff, and indicated that the remote nature of HH care is usually a contributing factor to provider dissatisfaction.

3.1.3 Recipients of PAC/LTC Services

As mentioned before, the population requiring PAC/LTC services is heterogeneous. Patients with PAC/LTC needs may be elderly or young. They may suffer from chronic conditions, need rehabilitative care, and/or have mental or physical disabilities. PAC/LTC needs may arise from accident, illness, and physical or mental frailty. In addition to nursing or therapy care, PAC/LTC patients may require human assistance (e.g., hands-on, supervision, or standby help) with ADLs (e.g., bathing, dressing, or eating)²⁷ or with instrumental activities of daily living (IADLs) (e.g., shopping, money management, or transportation).²⁸ As mentioned in stakeholder discussions, although PAC/LTC care is often associated with the elderly population, many PAC/LTC patients are under 65. A recent report by KFF estimated that 3.5 million of the 9.5 million patients receiving NH and paid home and community-based services are under 65 years old.²³

Patients need PAC/LTC services for a variety of conditions. Elderly persons receiving PAC/LTC services often present with a variety of physical and cognitive disabilities that may result from medical conditions such as stroke, heart conditions, obesity, depression, or age-related infirmities such as dementia, Alzheimer’s, or Parkinson’s.²³ Younger PAC/LTC patients may suffer from serious illness, developmental disabilities, or other musculoskeletal or developmental conditions that inhibit movement and require specialty care.

Transfers Between PAC/LTC Settings

Due to the variety and complexity of conditions requiring PAC/LTC, patients often require care from multiple sources and settings. Coleman and Berenson’s targeted review of the patient transfer literature highlights the issue of transfers as a leading challenge in the delivery of healthcare, particularly in the Medicare population.⁵

Kramer et al.’s study examining the affects of nurse staffing on hospital transfers estimated that 19% of all patients transferred from hospitals to SNFs return to the hospital within 30 days.²⁹ MedPAC’s June 2005 report to the Congress, Issues in a Modernized Medicare Program, states that one-third of Medicare beneficiaries used PAC within one day of discharge from an acute care hospital in 2002. In this study, SNFs were the most commonly used PAC/LTC setting (13%), with HH settings close behind (11%).³ Murtaugh and Litke found that during a two year period, 36.4% of transitions were from a short-term general hospital to a PAC or LTC setting. The study defined the PAC or LTC settings as:

• Rehabilitation units in short-term general hospitals;
• NHs, SNFs and skilled nursing units of hospitals;
• Formal home care in the form of paid assistance with ADLs or IADLs; and
• Other formal care settings including inpatient settings such as psychiatric facilities and home-based hospice care.

Murtaugh found that 20.8% of all transitions were from a hospital to paid home care. Murtaugh reports that almost 18% of the elderly experienced one or more transitions during the two-year study period (20.3% of the women and 14.2% of the men). The probability of a transition (for elderly women) increased with age. Murtaugh also identified a number of common transition patterns. For patients with only one transition, it was most commonly from “no paid care at home” to paid care in any of the settings studied. Those with two transitions most frequently experienced two types of transitions:

• From PAC/LTC to “home without formal care” (though this type of transition declines with age for women, and is constant for men up to age 85, then decreases in frequency); or
• Direct admission to LTC or PAC, followed by “home without formal care” (approximately 10% of men and 8.4% of women).

The analyses completed by Murtaugh indicates that for those PAC/LTC patients who experienced transitions, 9% had seven or more transitions in a two-year period, usually back and forth from short-term general hospitals to one of the studied care settings. These results are presented in detail in Exhibit 4 and Exhibit 5.⁴

Other studies have also highlighted the importance of patient care transfers for PAC and LTC planning and policy recommendations. A study conducted by the Agency for Healthcare Research and Quality (AHRQ) in 1999 estimated that 23% of hospital patients 65 and older were discharged to another institution, and 11.6% required follow-up home care.^{6, 30}

The transfer of patients from setting to setting is a challenge in providing PAC/LTC care. Cortés et al. explains the need for comprehensive and transferable medical records that document all stages of patient care. Despite state regulations, federal rules, and professional standards mandating documentation and transfer of patient information between facilities, many patients are transferred without the basic information required to provide continuous and quality care.³¹ Inadequate information transfer often leads to disruptions in care, which impairs the ability of the NH or hospital staff to develop appropriate and effective care plans. As noted by stakeholders, the quality of transitions is often compromised due to the inability of providers in both NH and hospital settings to obtain patient healthcare records or histories. Coleman points out that breaks in continuity of care and lack of a specified care plan caused by an inadequate exchange of patient information may exacerbate a patient’s existing medical condition, prolong the readjustment period in the new setting, and contribute to hospital readmissions or a permanent loss of functionality.⁶ Stakeholders observed that the lack of information exchange could allow drug interactions and allergies to go unnoticed, potentially leading to adverse drug events (ADEs).

Coverage and Payment for PAC/LTC Services

Coverage and payment for PAC/LTC services can also be complex. Some PAC/LTC costs are covered by private health insurance. Other costs are paid out-of-pocket by PAC/LTC patients. However, the Medicare and Medicaid programs fund the majority of PAC/LTC services in the United States. An analysis of 2004 National Health Accounts Data estimates that 41% of LTC is financed by Medicaid ($65B), 23% by personal-out-of-pocket ($37B), 20% by Medicare ($32B), 9% by private insurance ($14B) and the remainder by public or private sources.^{7, 8}

Since over half of PAC/LTC is financed through Medicare and Medicaid, the projected increase in the number of elderly, disabled elderly, and the number of elderly individuals living alone is likely to place a growing burden of financing PAC/LTC services on the federal and state governments.²⁴ Several changes in the nation's population are anticipated:

• As the “Baby Boomer” generation retires, the number of people over age 65 is expected to increase from 34.8 million in 2000 to 54.8 million in 2020.²⁴
• By 2020, a reduction in unpaid family support (caused by low birth rates and geographic spread of families) will cause 1.2 million elderly to be living alone without any living children or siblings. This is double the number of unsupported elderly in 1990.²⁴
• By 2040, it is estimated that the number of individuals over age 85 will be approximately 14 million, with a concurrent increase in the number of disabled individuals reaching 12.2 million the same year.²⁴

As a result, national spending on PAC/LTC for the elderly population is projected to increase to $379 billion by 2050 in 2002 dollars.²⁴

EXHIBIT 6. Post Acute Care and Long-Term Care Financing

Medicare and Medicaid Overview

Most elderly and disabled are entitled to receive health insurance coverage through the Medicare program. For persons eligible for Medicare services, the Federal Government pays for a variety of services including: hospital, physician, pharmacy, SNF, HH and outpatient rehabilitation therapy services. Coverage for services is subject to a myriad of complex rules that vary across services. Medicare payment methods are similarly complex and varied, and generally require some level of beneficiary copayments.

The Medicaid program is a means-tested program that provides health and LTC services to certain groups of individuals (including the elderly and disabled). Medicaid programs are managed by the states within broad federal guidelines. States must provide certain Medicaid services, including NF services. Funding for Medicaid covered services are shared between the states and the Federal Government. Medicaid coverage and payment methods for covered services are generally established by each state, consistent with federal policies.

As a result, assessing the benefits and costs of HIT implementation in PAC and LTC settings requires an understanding of numerous complex financing, eligibility, coverage and payment rules across two large but very different payor sources as well as understanding the associated financial impact on patients.

3.2 Health Information Technology in Post Acute and Long-Term Care

HIT can be defined as technology used to collect, store, retrieve, and transfer clinical, administrative, and financial health information electronically.³² With respect to administrative activities, HIT refers to the automation of paper and manual functions to enhance efficiency. Administrative HIT applications include claims and remittance systems, eligibility verification, enterprise resource planning, predictive modeling and data mining systems, “Smart” cards, and websites that support service delivery. Most administrative functions are related to payor reimbursement activities and many of these applications reuse clinical information collected via other applications.

Representative clinical HIT functionalities include clinical data repositories, clinical documentation, computerized physician order entry (CPOE) including electronic prescribing (e-prescribing), decision-support, digital content, electronic health records (EHRs) and personal health records.

3.2.1 HIT in PAC/LTC

Based on the literature review, stakeholder input, and TEP guidance, we have focused on the role of HIT in HH and NH services. The NH setting was recommended because of the acuity of NH patients, the volume and intensity of the services provided, and the frequency of transfers. The HH setting was recommended because of the steep and continued growth in HH utilization and the desire to facilitate the future migration of care from institutional settings to the home environment. Approximately 88% of PAC/LTC users receive care in NH or the HH environment.²

Most clinical HIT applications are designed for ambulatory or acute care settings; however, some functionalities are specifically applicable to PAC/LTC. In Exhibit 7 below, we describe the types of HIT functionalities that are used in PAC/LTC settings, specifically NH and HH environments. These functionalities are based on TEP input and stakeholder discussions conducted by Booz Allen as part of the preliminary ASPE funded study.

Each PAC/LTC setting has unique needs and characteristics. As a result, each setting may use different HIT applications, and may require different levels of functionality for each application.³³ While many PAC/LTC settings have already implemented POC and medication management tools to improve patient safety and quality of care, there is relatively little information regarding the actual penetration of these applications in these settings. TEP members have suggested that it would be useful to conduct a survey to assess the current penetration and prevalence of HIT in PAC/LTC settings.

3.2.2 HIT Application Standards, Interoperability and the Minimum Function Set

Automated data sharing among providers, or interoperability, promises to bring many of the most significant benefits of HIT. Though currently uncommon, it promises to facilitate true patient centered care so that real-time information will be accessible to all providers as patients move through the system. The need for interoperability has strongly influenced the development of data, messaging, and functional standards for EHRs.³⁴

The Health Level Seven (HL7) group has been working for several years on building consensus for EHR levels of functionality. The EHR-System Functional Model is a component of the Electronic Health Record Functional Model Draft Standard for Trial Use (EHR-FM/S DSTU), and is divided into three sections: direct care, supportive, and information infrastructure functions. There are over 125 individual functions in the EHR-FM/S DSTU, many of which may be used to categorize HIT functions needed in PAC and LTC. The Minimum Function Set (MFS) for LTC was balloted⁽ⁱ⁾ by the HL7 EHR Technical Committee at the end of 2004. The EHR Functional Model Draft Standard -- and the MFS for LTC -- provides the framework for an emerging national reference standard for the selection of appropriate categories and functionalities of HIT for consideration in a future business case evaluation. Currently, the MFS is being updated to reflect a more comprehensive list of functions for PAC/LTC settings.

Examples of Current Research and Pilots

Stakeholder discussions revealed a number of current research efforts to explore and evaluate HIT and HIE in the PAC/LTC environment. These efforts vary in scale and focus, but may provide valuable insight upon completion.

Section 646 Demonstrations under the Medicare Modernization Act, provides broad demonstration authority with the ability to test aspects of HIT, quality improvement, and other delivery system transformations. Representatives from CMS noted that the demonstrations may include, but cannot be limited to PAC/LTC providers. First round proposals were received in January 2006 and are under consideration. Second round applications are due in September 2006.

One vendor indicated involvement with an e-prescribing pilot study examining the National Council for Prescription Drug Programs formulary benefits. This NH based pilot is establishing interoperability between the NH and a pharmacy.

Other existing CMS information technology programs mentioned by the stakeholders included the Physician Group Practice Demonstration, in which physician practices are awarded grant money to invest in information technology. Representatives from CMS also cited grants that have been given to states to implement systems transformation. These systems transformation grants are aimed at broad system changes in six areas including quality and information technology, and a component of these grants involves planning for PAC/LTC transformation.

Another CMS representative described a collaborative program in the State of New Jersey to examine the role of HIT in preventing pressure ulcers. A representative from AHRQ stated that they have awarded contracts to five states (Colorado, Indiana, Rhode Island, Tennessee, and Utah) to expand networks for information sharing among hospitals, acute care facilities, PAC/LTC, labs, providers, and payors. State representatives from two of these states indicated slow progress in recruiting NFs for the HIE demonstrations. One state representative, from Utah, noted that there are two NHs implementing EHRs that will enable them to exchange data electronically with other providers.

HH providers indicated that they were piloting HIT and HIE. One provider is piloting the use of a hand-held POC device throughout 250 HH settings, and the other provider described an HIE pilot between the HH agency and two area hospitals. Several researchers (from the University of Missouri) interviewed indicated that they were currently evaluating HIT in NHs. Some were studying a POC device in several NHs and evaluating clinical outcomes and workflow efficiencies. Another is evaluating the impact of an e-MAR in NHs, and has documented reductions in ADEs.

3.3 HIT Costs and PAC/LTC

We have found no peer-reviewed literature quantifying the costs associated with HIT acquisition and implementation in a PAC/LTC setting. A number of studies have estimated the costs of HIT acquisition and implementation in acute and ambulatory settings;^{35, 36, 37, 38} however, costs associated with HIT implementation in PAC/LTC settings cannot be directly extrapolated from these studies as there are fundamental differences in characteristics of the settings, such as staffing mix, workflow, patient profiles, documentation, coding and reimbursement processes, and types of service. In addition, with few exceptions, cost estimates of HIT implementation cited in the literature for ambulatory and acute inpatient settings are not based on empirical measurements but on projection models or expert opinion.^{35, 36, 38}

The literature on HIT costs related to the ambulatory and acute inpatient settings can however, provide insights on the types of costs that may be incurred with an HIT implementation. Exhibit 8 presents a breakdown of cost categories derived from the HIT literature, stakeholder discussions and TEP input. These costs include selection costs, acquisition costs and recurring costs.

Literature review and stakeholder interviews indicate that HIT adoption and implementation costs generally depend on a number of factors, such as:

• Size of facility;
• Level of functionality;
• Level of connectivity;
• Length of implementation; and
• Extent of user training.

Costs associated with a HIT implementation are usually incurred by the facility that is acquiring the system. Many providers view hardware costs, software costs, implementation and training costs, and costs associated with lost productivity in the early stages of implementation, as significant barriers to HIT adoption.⁴¹

One HH agency that we interviewed reported that the initial installation costs for telehealth systems were estimated to be $103,000, including the hardware, software, and related monitoring peripherals for ten telehealth units. The initial costs could either be paid in full or could be financed through a leasing agreement.⁴² Actual costs are likely to be higher because the costs associated with training and loss of productivity were not included in these estimates.

In addition to direct costs of acquisition and implementation, there is evidence to suggest that HIT adoption can result in increased labor costs, particularly in the early stages of adoption. In a NH study examining the pre-HIT implementation baseline and the post-HIT implementation outcomes (a pre/post study), Cherry et al.¹⁰ found an increase in staffing costs during the study period. Researchers analyzed survey data from 30 individuals including RNs, LPNs, nurse practitioners, physician assistants and physicians. The results revealed a significant increase in overtime costs for nursing and other staff. Cherry hypothesized that this increase in the overtime costs may be a result of:

• Inefficiencies associated with concurrent use of electronic and paper records;
• Time required to learn the new system; or
• Some combination of both.

She has further hypothesized that had the evaluation been continued for a longer period of time that greater efficiencies and savings would have been realized.⁴³

The challenge of concurrently using electronic and paper records has been highlighted further in a study by Cortes et al.⁴⁴ Evaluating an EHR software package in a teaching NF, the authors found that patient information became more fragmented and staff found it time-consuming to reconcile paper and electronic records. While this study only focuses on implementation in a single facility, it highlighted the potential costs that could result from a suboptimal EHR implementation.

In addition to increases in labor costs, implementing HIT in PAC/LTC settings can create challenges for compliance with CMS reporting requirements. NFs that are reimbursed by CMS must adhere to Minimum Data Set (MDS) reporting guidelines. Kramer et al. observed that many PAC/LTC providers maintain separate health information systems to support federal reporting requirements (e.g., MDS, Outcome and Assessment Information Set (OASIS)), and that differences in the required content for these information systems create barriers to electronic information exchange.⁴⁵ The implementation of multiple, non-interfacing health information systems can result in additional costs for facilities because they maintain separate MDS reporting systems.

3.4 HIT Benefits and PAC/LTC

This section describes our findings from the literature, stakeholder discussions and TEP input, on the benefits associated with HIT adoption in diverse care settings. Understanding the financial and non-financial consequences of HIT investments is essential to inform health providers, payors, and policy makers about the value of HIT. There are a limited number of studies that focus on measuring benefits of HIT in a PAC/LTC setting.^{10, 11, 12}

3.4.1 Clinical Benefits

It is widely asserted that HIT can provide significant clinical benefits, including improved safety, quality and efficiency. This section provides an overview of the potential clinical benefits of HIT, and where possible, details benefits specific to the PAC/LTC environment.

Safety Benefits

In 1991, Brennan and Leape published The Harvard Medical Practice Study, which was among the first of many studies estimating the number of ADEs and their impact.The Harvard Medical Practice Study examined 30,000 records from 1984 in 51 New York Hospitals and found that:

• 3.7% of all hospitalizations were associated with an ADE;
• 14% of the ADEs were fatal; and
• 58% of the ADEs were preventable.⁴⁶

These findings, along with data reported in other studies, were extrapolated in the Institute of Medicine report To Err is Human, which estimated that medical errors resulted in 44,000 to 98,000 deaths per year.⁴⁷ Subsequent studies have estimated the average number of ADE related deaths in the U.S. to be as high as 106,000 annually.^{48, 49} Johnson et al. have estimated the costs of ADEs and, after accounting for clinical costs and malpractice awards, found that ADE costs rank higher than the total cost of cardiovascular or diabetes care.⁵⁰

Due to the comorbidities associated with multiple chronic conditions, the use of multiple medications, and the increased drug utilization rates, PAC/LTC patients are particularly susceptible to ADEs.^{12, 13, 14} Evidence from studies in these settings suggests that CPOE systems can help reduce medical errors. The potential for a CPOE system to reduce medical errors in a NH environment was noted by Gurwitz et al.¹² This study found that a majority of errors occurred in the ordering and monitoring stages, leading them to suggest that CPOE or similar systems with appropriate decision-support software can prevent these errors. Rochon et al.¹¹ studied the implementation of a CPOE system with clinical decision-support in a large Canadian academic teaching facility with 300 chronic care beds, a NH, and residential units. The findings suggest that CPOE can reduce the risk of ADEs in LTC.¹¹ The authors cite several factors that promote effective implementation of HIT including: staff training, staff management of system change, inclusion of clinicians in implementation decisions, and accounting for initial increased clinician burden due to online documentation.¹¹ Cherry identified several safety benefits following an electronic medical record (EMR) implementation in a NH, including a reduction in hospitalization rates and decreased mean fall prevalence per month over the course of two years.¹⁰

ASPE sponsored four case studies to evaluate the impact of EHRs in health delivery systems to exchange information with PAC and LTC settings.⁴⁵ Discussions with clinicians from the four sites revealed that EHRs with high levels of functionality helped reduce errors, including medication errors, particularly during patient transitions across care settings.

A post-implementation evaluation of a web-based reporting system in a health system’s SNF settings reflected decreases in the time spent preparing paper safety reports. Further, the web-based reporting system generated data that were useful for identifying opportunities and processes to reduce errors.⁵¹

Although studies in a variety of clinical settings have demonstrated the impact of CPOE, the ability of a particular CPOE system to reduce ADEs depends on that system’s level of functionality. Gandhi analyzed error rates at two ambulatory care clinics where prescriptions were hand-written and two that used basic computerized prescribing and found no significant difference in errors between the two types of sites.⁵² He speculated that more advanced capabilities, including dose and frequency checking, could have prevented 95% of the ADEs. Nebeker and colleagues examined errors and ADEs in a Veterans Administration hospital with CPOE.⁵³ The authors identified 483 significant adverse events or 52 ADEs per 100 admissions. Of these, 9% resulted in serious harm and 91% were deemed moderate in severity. Despite the presence of a “minimal” CPOE system, a majority of ADEs resulted from adverse drug reactions (93%). The authors observed that this CPOE system lacked decision-support for drug selection, dosing, and monitoring and attributed the errors and adverse events to this gap in functionality. The authors suggested that healthcare providers purchasing CPOE systems should consider whether the system addresses the most “troublesome aspects of the medication administration process.”

Fortescue⁵⁴ assessed pediatric inpatient medication errors at two academic institutions and estimated that:

• 60% of these errors could have been prevented by a basic CPOE;
• 76% could have been prevented by a more advanced CPOE with decision-support; and
• 19% could have been prevented by an electronic medication administration record (E-MAR).

In addition to potential ADE reductions, HIT has the potential to offer the clinical benefit of increased adherence to clinical guidelines. Service delivery in the PAC/LTC environment presents challenges associated with patient frailty, multiple comorbidities, and the participation of multiple caregivers. There are persistent staff shortages and high turnover, and many physicians do not receive significant training in geriatric care.⁵⁵ When physicians have received formal training, it is often narrowly focused and fails to address the role of medical staff in case management and care coordination. It has been hypothesized that EHRs can help improve quality of care by promoting adherence to evidence-based guidelines through real-time prompts, alerts, and reminders.

Some studies have shown that electronic guidelines can increase physician compliance with treatment guidelines. Safran found that physicians provided with HIV treatment guidelines showed higher levels of compliance than the control group.⁵⁶ Similarly, Margolis showed increased rates of compliance with pediatric treatment guidelines for otitis media.⁵⁷ However, he also found that physicians would not use the system after a few weeks because they felt the process to be onerous. Balas conducted a meta-analysis of the literature regarding electronic prompting of physicians.⁵⁸ He found that prompting can often result in a modest increase in preventive care performance. However, the effect was neither cumulative nor sustained, and results vary depending on the type of prevention. These investigators state that more substantial improvements would be achieved by combining the computer-based reminder systems with clinical education, feedback, and patient involvement.^{58, 59}

Tierney and colleagues observed less favorable outcomes when examining the effect of HIT in promoting adherence to guidelines. These investigators provided primary care physicians and pharmacists with electronic evidence-based cardiac care suggestions over a period of one year. During that time, patients made 3,419 primary care visits to these physicians.⁶⁰ The study's findings reflected no impact on quality of life, medication compliance, utilization or costs. Other studies that have examined evidence-based treatment suggestions for asthma, hypertension, diabetes, and coronary heart disease found no improvement, or only marginally improved, compliance among physicians.^{61, 62, 63}

Although electronic guidelines can influence provider behavior, existing studies suggest that the level of functionality and usability, and the appropriate construction of reminders influence the effectiveness of electronically mediated guidelines.

Efficiency Benefits

Studies of workflow and other efficiencies associated with HIT implementations in PAC/LTC are scarce. More studies have been performed in the hospital and ambulatory environment. Outcomes are inconsistent and also vary by provider type.

Poissant and colleagues⁶⁴ recently performed a meta-analysis of the literature and found that in hospitals the use of bedside terminals and central station desktops reduced nurse documentation time by about 25%. However, bedside CPOE terminals increased physician documentation time by about 18%. Physician use of central station desktops for CPOE was significantly more inefficient, increasing documentation time from 98% to 328%.

Formal time-motion studies are limited and are also inconsistent in their findings. For example, Overhage found that an outpatient EHR increased encounter time per patient by 2.12 minutes (from 9.8 to 12).⁶⁵ In another study, it was shown that the time spent on patient order entry increased from 2.1% to 9% of the workday after the implementation of an inpatient CPOE.⁶⁶ A time-motion study by Pizziferri and colleagues measured physician perceptions against actual workflow changes.⁶⁷ The study suggested that the average time for clinical documentation was reduced by 0.5 minutes with EHR usage; however, only 29% of those completing the survey felt that the EHR could improve the documentation times.

In addition to labor efficiencies, HIT may improve cost efficiency by reducing redundant and unnecessary tests. Bates et al. found that a large proportion (28%, N=78,798) of laboratory tests received by patients appeared to be redundant based on the clinical recommendations for each test.⁶⁸ Tierney et al. published the results of three prospective randomized controlled studies in 1987, 1988, and 1990 respectively, to examine the impact of electronic information on physician test ordering behavior. In each of these studies the authors found that the volume of tests decreased between 9% and 16.8%.^{69, 70, 71}

The effects of HIT on workflow and labor efficiency in the ambulatory and inpatient environment appear equivocal and highly dependent on usability and appropriate re-engineering of work processes. The evidence that HIT can reduce redundant testing appears to be more consistent.

Cherry and Owen conducted one of the few studies focused on the impact of HIT on workflow efficiencies in a NF.¹⁰ The study evaluated a web-based EMR and communication system specifically designed for the LTC setting. The system included the following types of functions: MDS, care planning, notes, census, accounts receivable, order management and vital signs. The system also contains additional functions including user-defined assessments, protocol-based event management, automated communication and reminders, lab and pharmacy integration and physician paging. To assess the impact of the system on workflow efficiency, the authors gathered data using structured surveys pre and post-implementation.

The authors found that nurses had more time available to devote to patient care, however the nurses spent more time on transcription of non-automated physician orders. Though it implemented a paperless system, the facility maintained parallel paper records. Cherry feels that the maintenance of the parallel paper record “probably had some effect on the results and certainly reduced the gains in efficiency to some extent.” The paper record was important because it facilitated the extensive state survey process. Cherry emphasized that HIT systems should meet surveyors’ needs for accessing data, however she also notes that it may be challenging for surveyors to use an electronic system with which they are unfamiliar.⁴³ The study showed that the facility experienced a lower RN and LVN turnover rate than the national average following the implementation and Cherry has hypothesized that had the evaluation period been longer more favorable results would have been observed.⁴³

Stakeholder interviews corroborated Cherry’s findings, describing significant inefficiencies related to obtaining patient records, redundant testing, and prescription ordering. Some stakeholders stated that certain HIT implementations improved workflow efficiency allowing nurses to spend more time on patient care.

3.4.2 Net Benefits and Return on Investment from EHRs

There have been very few net benefit or ROI analyses of an HIT implementation in the PAC/LTC setting. Relatively more studies have been done in the ambulatory and inpatient environment (see Exhibit 9). The studies by Walker and Hillestad projected net benefits on a national scale. The Walker/CITL⁷² study estimated the net benefits from interoperability while Hillestad⁷³ examined and estimated the net benefits from a nationwide implementation of EHR in inpatient and ambulatory settings. The other studies were more focused on particular inpatient or ambulatory care settings. All these studies showed positive ROI from EHR implementation, although the level of ROI was dependent on a variety of factors including: the level of functionality, the quality of the implementation, the nature of the reimbursement environment, and the duration of time over which benefits were measured.

However, these studies have methodological limitations. Most of these studies are based on projection models rather than empirical measurement of costs, benefits, and net benefits. The exception is the study by Miller, which measured actual costs and benefits in physician practices. Miller’s retrospective analysis revealed that the 14 practices studied increased their revenue as result of more effective documentation and coding. They also reduced costs associated with transcription, and maintenance of paper charts. The average net benefit in these 14 practices was approximately $33,000 per full-time equivalent (FTE) provider per year. However, the sources of benefit cited here, particularly reduced transcription and medical records costs, are less relevant in the PAC/LTC environment where nurses and CNAs perform most of the documentation, extensive transcription is less common, and medical records maintenance is less onerous.

As noted previously, Cherry and Owen conducted one of the only studies that has explored efficiency impacts and net financial benefits of HIT in a NF.^{35, 36} The authors collected baseline data prior to project implementation and then collected data throughout the implementation period from December 2003 to August 2004.¹⁰ This evaluation failed to show a net financial benefit associated with EHR adoption.¹⁰ No significant increases in Medicare or Medicaid payment receipts were identified, and the overall costs of providing services did not change. A net benefit may have been observed if data on costs and benefits had been gathered over a longer time period.⁴³ Studies in the ambulatory and hospital environment cited above have shown that the ROI from EHR adoption depends in part on the time horizon over which the benefits and costs are assessed. For instance, Miller noted that the average physician practice in this study recouped the costs of the EHR 2.5 years after implementation.⁷⁶

3.5 To Whom Benefits Accrue Overview

Understanding the distribution of benefits is important for policy makers who seek to influence adoption of HIT. Although PAC/LTC provider facilities bear the financial burden of HIT investments, they may not reap all of the benefits from these investments. Whether or not a particular entity benefits from HIT investment is a function of:

• Who pays for the services;
• How the reimbursement is structured; and
• The types of benefits (e.g., workflow efficiencies, cost savings in switching to generic medications) that are dictated by functionality.

There are a number of stakeholders who may benefit from HIT implementation in PAC/LTC environments. These include payors, such as Medicare or Medicaid, the providers of care including physicians, and the patients themselves. The distribution of benefits between payors, such as Medicare and Medicaid is dependent on complex reimbur