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Understanding the Costs and Benefits of Health Information Technology in Nursing Homes and Home Health Agencies: Case Study Findings

Publication Date

U.S. Department of Health and Human Services

Understanding the Costs and Benefits of Health Information Technology in Nursing Homes and Home Health Agencies: Case Study Findings

Andrew Kramer, MD, Angela A. Richard, MS, RN, Anne Epstein, PhD, Dennis Winn, MA, BSN, RN, and Karis May

University of Colorado, Denver Division of Health Care Policy and Research

June 2009

PDF Version: (124 PDF pages)

This report was prepared under contract#HHS-100-03-0028 between U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the University of Colorado. For additional information about this subject, you can visit the DALTCP home page at 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. Her e-mail address is:

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.


A. Background
B. Literature on Costs and Benefits of Health Information Technology for Nursing Homes and Home Health Agencies
C. Study Objectives
A. Site Selection
B. Site Visit Preparation and Data Collection
A. Perceived Benefits of Health Information Technology in Nursing Homes
B. Perceived Costs of Health Information Technology for Nursing Homes
C. Perceived Benefits of Health Information Technology for Home Health Agencies
D. Perceived Costs of Health Information Technology for Home Health Agencies
A. Anytime and Anywhere Access to Health Information
B. Greater Efficiency in Meeting Administrative and Federal Requirements
C. Improved Quality Management
D. Health Information Exchange
APPENDIX A: Pre-Visit Questionnaire
APPENDIX B: Site Visit Data Collection Forms
TABLE 1: Booz Allen Hamilton Reported Benefits and Costs of Health Information Technology Adoption
TABLE 2: Sites Participating in Screening Survey
TABLE 3: Electronic Clinical Applications of Interest
TABLE 4: Characteristics of Study Sites
TABLE 5: Nursing Homes -- Benefits Associated with Administrative Functions
TABLE 6: Nursing Homes -- Benefits Associated with Electronic Health Records
TABLE 7: Nursing Homes -- Benefits Associated with Medication Administration Records
TABLE 8: Nursing Homes -- Benefits Associated with Quality Management and Reporting
TABLE 9: Nursing Homes -- Benefits Associated with Health Information Exchange
TABLE 10: Nursing Homes -- Costs Associated with Hardware and Software
TABLE 11: Nursing Homes -- Costs Associated with Labor
TABLE 12: Nursing Homes -- Miscellaneous Costs Associated with Health Information Technology
TABLE 13: Home Health Agencies -- Benefits Associated with Administrative Functions
TABLE 14: Home Health Agencies -- Benefits Associated with Electronic Health Records
TABLE 15: Home Health Agencies -- Benefits Associated with Medication Administration Records/e-Prescribing/Computerized Provider Order Entry
TABLE 16: Home Health Agencies -- Benefits Associated with Quality Management and Reporting
TABLE 17: Home Health Agencies -- Benefits Associated with Health Information Exchange
TABLE 18: Home Health Agencies -- Benefits Associated with Telehealth Applications
TABLE 19: Home Health Agencies -- Costs Associated with Hardware and Software
TABLE 20: Home Health Agencies -- Costs Associated with Labor
TABLE 21: Home Health Agencies -- Miscellaneous Costs Associated with Health Information Technology


One of the major cited barriers to adopting health information technology (HIT) in long-term care is a lack of information on the benefits and costs of HIT in nursing homes and home health agencies (HHAs). While rigorous cost and benefit studies of information technology are limited in health care as a whole, establishing a business case for HIT in long-term care has become a priority in order to stimulate adoption of information technology applications that go beyond supporting administrative functions and federal data requirements. Several completed and ongoing multi-site studies in nursing homes and HHAs have demonstrated selective benefits of HIT in long-term care.

Site Selection

The eight sites for this study were selected from a larger group of purposefully selected providers that had a reputation for advanced HIT systems. Site selection was based on their self-reported level of HIT implementation, using a screening survey that utilized a previously-developed taxonomy of HIT functions. The minimum criteria for inclusion were the use of HIT functionality that included administrative functions and some form of electronic health record (EHR), with one or more of the following types of functions: quality reporting and decision-support tools, medication administration and e-prescribing, and/or health information exchange (HIE) and secure messaging capability. The five nursing homes and four HHAs (at one site two nursing homes were visited) included providers that were and were not affiliated with other long-term care settings, hospitals, physician offices, and retirement settings. They varied in terms of system design (e.g., web-based vs. software that was resident on local hardware), development (private vs. vendor designed), and functionality. Site visits involved structured interviews with administrative, financial, and a full range of clinical staff that assessed the specific benefits and costs associated with each functionality included in the taxonomy.

Reported Benefits of HIT Implementation

The single most frequently-cited benefit for both the nursing home and home health staff was anytime and anywhere access to health information afforded by an EHR. This access to electronic records was sharply contrasted to locating and retrieving the single copy of the resident’s paper chart, which may be in use by another individual, requiring not only the time to find and retrieve the record but also delays in waiting for the record to become available. Numerous examples were given of the advantages of being able to immediately access the chart in a nursing home when receiving a call from the family or the physician. In HHAs, the time savings and care coordination benefits were clearly substantial with various clinicians at multiple locations needing to review or make an entry into the record. A major benefit cited was access to health records from remote locations, which enabled remote providers such as physicians to review charts, make clinical decisions, authorize orders, and perform other tasks in a timely manner without traveling to the facility/agency.

A second benefit that was articulated at most all the sites was greater efficiency in meeting administrative and federal requirements in long-term care. With complexities related to determining eligibility for coverage, case mix reimbursement, and the numerous federal, state, and insurance carrier requirements in long-term care, administrative systems that were integrated with clinical information in EHRs yielded substantial benefits to providers. Bills were automatically generated from clinical information entered into the EHR leading to shorter billing cycles. Information used for payment was reported to be more accurate with automated edit checks, and ensured that services that were provided were billed and that billed services were provided. Minimum Data Set and Outcome and Assessment Information Set data were reported to be more accurate. Administrative staff could be more efficient and accurate, as they did not need to enter information that could be automatically pulled from the EHR. Claims denials and resubmissions were reduced. Most providers reported reductions in administrative staffing because of accrued time savings.

A third benefit that was universal, while not fully realized in most sites, was improved quality management through reports, alerts, and decision-support tools. Electronic reports to routinely track status, alerts that identified specific residents/clients with a more immediate concern, dashboards that required an action before logging out, and automated risk tracking were the basis for numerous examples of early intervention to prevent problems like falls, weight decline, skin breakdown, and hospitalization. The availability of quality information required an informed user to review reports on a systematic and regular basis, which often was difficult for nursing homes and HHAs to achieve. Many sites were discovering how to manage all the information that they were able to generate through now-available quality management systems. For the potential of HIT to be realized with regard to improved quality management, personnel must be allocated and trained in generating and using reports and the HIT systems to support these efforts require continued refinement.

Finally, HIE between providers was a large benefit in the few cases where sites had the capability. Data exchange with physicians for order review and approval minimized duplicate data entry, and data exchange with hospitals facilitated patient admission and transfer processes. To fully benefit from HIT in long-term care, interoperable systems that allow for HIE are an essential step to achieving care coordination and effective transitions across settings.

While these benefits exist in almost any health care setting, in long-term care they may be particularly pronounced. Long-term care is provided by interdisciplinary teams of clinicians that all have to share the same record in order to coordinate services. In home health care, both the patients and the care team are geographically dispersed, which is also the case for some members of the nursing home care team that work on a contractual basis. Physicians, an integral member of the team, are almost always remote from a nursing home or HHA and often need to review information to make clinical decisions and write orders. In addition, the patients are often frail and less able to advocate for themselves.

The following are enumerated benefits of HIT implementation reported by the nursing homes and HHAs included in this case study.

Reported Costs of HIT Implementation

On the cost side, sites described large financial outlays for servers and back-up systems, although the costs varied widely depending on the storage size and processing speed. An advantage of using a web-based system was that data were stored and backed up on the vendor’s server, thus it was not necessary for providers to directly purchase and maintain a large server. Hardware and software costs varied considerably depending on the systems purchased, bundling of applications vs. individually purchased applications, organization size, and individual vendor negotiations. Labor costs included needs for information systems staff that varied greatly, and clinician time for system and workflow re-design, as well as time to learn the system and how to manage and use the health information that was made available through the use of HIT. Maintaining duplicate paper systems in whole or in part was a cost at some sites, while other sites were paperless.


This study adds to the growing body of literature through case studies reporting benefits and costs/burdens in eight sites with advanced HIT systems. While all eight of the case study sites noted that they would “never go back” to paper-based systems for administration and clinical service delivery, no site had conducted a rigorous cost-benefit analysis of their HIT systems. Thus, the case studies necessarily focused on the costs and benefits reported by system users and managers. Respondents cited numerous examples of system benefits and rated their magnitude, as well as identified the types of increased costs and burdens resulting from HIT implementation.

The qualitative findings from the site visits may have implications for recent policy initiatives. The newly enacted American Recovery and Reinvestment Act (ARRA) included many provisions to accelerate adoption of HIT across health care providers, including nursing homes, HHAs, and other long-term care facilities. One provision of ARRA requires the Department of Health and Human Services to study the extent to which payment incentives should be made available to health care providers, such as nursing homes and HHAs, which are receiving minimal or no payment incentives for purposes of implementing certified EHR technology. The study has direct bearing on this provision in that it demonstrates some of the potential benefits of HIT in these settings that would be realized through incentives for EHR adoption.

Empirical studies that quantify benefits and costs have an important place in expanding our knowledge base so that we can emphasize functions that offer the greatest value. However, compelling qualitative evidence from this study and others on benefits of HIT provides ample rationale for why nursing homes and HHAs should move forward with HIT adoption. Failing to support and accelerate widespread HIT adoption in nursing homes and HHAs while awaiting large-scale empirical studies would be a disservice to the many beneficiaries and staff in long-term care settings who would benefit from improvements in quality of care and more efficient service delivery that were reported by the respondents in this case study.


A. Background

Calls for greater use of health information technology (HIT) to improve quality and efficiency in the United States health care system have been issued since the early 1990s. In Crossing the Quality Chasm, the Institute of Medicine (IOM) recommended the development of a national technology infrastructure, with the goal of eliminating most handwritten clinical data by the end of the decade (IOM, 2001). In April 2004, President George W. Bush signed Executive Order 13335 -- Incentives for the Use of Health Information Technology and Establishing the Position of the National Health Information Technology Coordinator. In support of this initiative, the Secretary for the Department of Health and Human Services (HHS) advocated for the nationwide adoption of interoperable HIT as a mechanism to improve health care quality and lower costs by: (a) preventing medical errors; (b) providing clinicians with better clinical decision-making tools; (c) facilitating information transfer across clinicians and health care providers; (d) allowing tracking of health outcomes; and (e) coordinating public health activities. In 2009, the American Recovery and Reinvestment Act (ARRA) provided $2 billion for implementing and/or evaluating HIT as part of a platform to improve health care efficiency and patient safety and approximately $17 billion in Medicare and Medicaid payment incentives to eligible professionals and acute care hospitals for their meaningful use of certified electronic health records (EHRs).

The term HIT refers to an array of computer applications ranging from those used by administrators (e.g., census management, billing), managers (e.g., staffing and scheduling modules), direct care providers (e.g., EHRs) and in some cases, patients (e.g., personal health records [PHRs]) (Division of Health Care Policy and Research, 2007b). EHRs have the potential to improve quality, patient safety (particularly related to medication errors), and patient satisfaction, and to decrease costs and inefficiencies by making current patient information and clinical decision-making tools accessible to clinicians in an easily-readable format (Booz Allen Hamilton [BAH], 2006; Shekelle, Morton, & Keeler, 2006; Bates & Gawande, 2003; Kaushal, Shojania, & Bates, 2003; Bates, 2002).

Despite the known and hypothesized benefits of HIT, long-term care settings such as nursing homes and home health agencies (HHAs) have been slow to adopt the technology. Estimates of HIT adoption rates vary widely, in part due to problems such as imprecision in definitions of terms. Estimates of EHR adoption in skilled nursing facilities range from approximately 1% to 42% (Kaushal et al., 2005; National Center for Health Statistics, Centers for Disease Control and Prevention, 2008) and from 5% to 58.5% in HHAs (Fazzi, Ashe, & Doak, 2007; Poon et al., 2006). However, adoption of EHRs with broad functionality is believed to be at the low end of these ranges. Slow HIT/EHR adoption rates have been attributed to several factors, including the costs of acquiring, implementing, and maintaining HIT/EHR; uncertainty about the benefits that may be realized as a result of EHR implementation and to whom these benefits will accrue; delay in adoption of national standards for HIT functionality and interoperability; and a history of instability in the vendor market (Ash & Bates, 2005; BAH, 2006; Poon et al., 2006; Middleton, Hammond, Brennan, & Cooper, 2005; Sidorov, 2006).

Efforts to promote HIT adoption for nursing homes and HHAs have been spearheaded by private and public sector leaders. These leaders have brought together health information experts, providers, vendors, government representatives, and researchers at Long-Term Care Health Information Technology Summits in 2005, 2007, 2008, and 2009. These summits represent an ongoing collaborative effort by long-term care and aging services stakeholders to assess current progress and advance HIT adoption by long-term care providers. The 2008-2010 LTC HIT Road Map includes recommendations to: (a) strengthen the cross-organizational collaboration of long-term care stakeholders; (b) increase the consumer-focused approach to quality initiatives and HIT applications; (c) advocate for tools to support providers in HIT adoption; (d) prioritize electronic prescribing (e-prescribing) of medications and medication management initiatives to improve patient safety; (e) certify EHR and e-prescribing products; (f) demonstrate interoperability of HIT through emerging standards; and (g) encourage further research investigating relationships between HIT, quality, and outcomes across the full spectrum of aging services and care (American Health Information Management Association, 2008a).

In 2003, the IOM recommended that the United States health care system make a commitment to the development of a national health information infrastructure by the year 2010 (Institute of Medicine of the National Academies, 2003a). The IOM identified the EHR-System (EHR-S) functions and timeframes over which these functions could be introduced for particular health care settings, including nursing homes (IOM Committee on Data Standards for Patient Safety, 2003b). In late 2006, the Certification Commission for Healthcare Information Technology (CCHIT) was petitioned by long-term care stakeholder groups to include nursing homes in the development of accreditation criteria for EHR products. A draft version of EHR-S functions for long-term care/nursing home (the LTC-NH EHR-S Functional Profile) was developed by a workgroup of long-term care industry stakeholders and became a health level seven (HL7) standard in January 2009. CCHIT will use the HL7 standard to inform the identification of long-term care/nursing home EHR certification criteria (American Health Information Management Association, 2007a, 2007b).

B. Literature on Costs and Benefits of Health Information Technology for Nursing Homes and Home Health Agencies

Little research has been published that describes HIT use and assesses benefits and costs of HIT in long-term care. However, studies of HIT in other settings or studies of cross-cutting HIT functions can be generalized to long-term care settings in some cases. For example, Kaushal and colleagues evaluated costs and benefits of a computerized provider order entry (CPOE) implemented at Brigham and Women’s Hospital (BWH), using actual cost and benefit data to report costs and cumulative savings. They concluded that the CPOE system at BWH resulted in substantial savings over a ten year period. The benefits that resulted in greatest savings were renal dosing guidance, nursing time, specific drug guidance, and adverse drug event prevention (Kaushal et al., 2006).

Shekelle et al. conducted a comprehensive literature review on costs and benefits of HIT within various health care settings, primarily hospitals and ambulatory care providers. In general, they found that EHR-S implementation requires substantial capital investments and organization change. However, benefits including improvement in service and resource utilization, productivity, care efficiency, documentation quality, clinical decision-making, guideline compliance, and decreased costs of care were cited in the literature (Shekelle et al., 2006). A literature review of research on the impact of HIT on quality, efficiency, and costs of medical care was also conducted by Chaudhry, Wang, et al. 2006 3 /id