Federal stimulus incentives for hospitals and physicians to implement interoperable electronic health records (EHRs) will not nearly compensate them for the overall costs they will incur, but future penalties from reduced Medicare reimbursement could be a bigger motivator, according to “Rock and a Hard Place: An Analysis of the $36 Billion Impact from Health IT Stimulus Funding,” a paper published by the PricewaterhouseCoopers LLP (PwC) Health Research Institute.

To help drive adoption of electronic health records by 2015, the federal government is investing $33 billion in incentives to providers. An analysis by PwC’s Health Research Institute shows that a 500-bed hospital could receive an average of $6.1 million in incentives to purchase, deploy, and maintain a government-certified, interoperable electronic health record system. By comparison, the average 500-bed hospital that fails to implement a system by 2015 could see a reduction in Medicare funding by $3.2 million or more, depending on their Medicare volume.

The federal initiative comes at a time when capital-constrained healthcare organizations are struggling to find the necessary funding to purchase EHR systems. In a March 2009 survey of 100 hospital chief information officers, one-half of CIOs in hospitals with more than 500 beds said that federal funding is “crucial” to their ability to implement EHRs. “The stick, even more than the carrot, makes a fiscally compelling argument for adopting electronic health records,” said Daniel Garrett, managing director of PwC’s health industries technology (HIT) practice. “If an organization wants to have an enterprise-wide EHR up and running by 2011, they’ve got to start now. The incentives eventually go away and the stick will only get bigger.”

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