When the Vioxx recall hit in late September 2004, it was almost a yawner for Peter Basch. "It took us two or three minutes to figure out which of our patients were on it," says Basch, who is part of an eight-doctor practice in Washington, D.C. That two to three minutes was how much time it took to structure and execute a search for the practice\u2019s electronic records database.Basch says that the Vioxx recall was a noncrisis for his practice largely because he and the other doctors have been using electronic health records (EHRs) for the past nine years. In fact, the first major drug recall occurred the same year Basch\u2019s practice started using EHRs. In September 1997, the Food and Drug Administration warned doctors against prescribing fenfluramine and phentermine (Fen-Phen) together as appetite suppressants. At that time, Basch\u2019s practice needed about 30 minutes to find all of its patients who were taking the diet pills. Basch, though, doesn\u2019t even think that quick-search capability is the best reason to use electronic health records. Instead, he points to not having to write out prescriptions.One of his patients was on more than 15 medications and would never get them refilled. He had to write them all out for her twice a year. "That was incredibly painful," he says. "When I could do it in a couple of clicks, I was able to smile at her and say, \u2019Anything else?\u2019"Basch is a great white-coated hope for much of the medical industry\u2014a doctor in a small practice who is using electronic health records and believes in them, he says, "with almost religious fervor." But such faith is sparse among doctors. Basch estimates that EHRs are used by no more than 15 percent of the 800 doctors employed by MedStar Health, the seven-hospital corporation that owns his practice. And so far only 14 percent of all the physicians in the United States have invested in EHRs, according to a 2005 survey by the Medical Group Management Association.Many physicians say they simply don\u2019t see the financial upside for their practices, and some are concerned about retaining the confidentiality of patient information. (For more on health privacy concerns, read "The Electronic Bogeyman" on Page 68.)"How do you convince a practice to spend between $20,000 and $40,000 a physician and decrease productivity and disrupt the practice for a year to make the change to these systems?" Basch asks. "That\u2019s a tough argument to make in the current environment."The Argument for E-MedicineNonetheless, health insurers, hospitals, and state and federal agencies are determined to make that argument succeed, if only because of the potential of EHRs to improve the quality of health care and reduce its costs. A Rand Corp. study published in Health Affairs in the fall of 2005 estimated that the broad use of EHRs would cut $81 billion from operating costs. That same study estimated that if most hospitals used EHRs, it would eliminate 200,000 mistaken drug prescriptions a year, saving $1 billion. Then there are the countless hours that patients and staff spend filling out forms, and then finding them\u2014one study estimates that doctors can\u2019t find the records needed for 30 percent to 40 percent of their patient visits. The effort to accelerate the rate at which the hundreds of thousands of physicians in small practices who don\u2019t use electronic health records (roughly 75 percent of them) adopt such systems is proceeding on several fronts. The U.S. government has four major standards efforts under way to provide guidance for electronic data exchange by doctors, hospitals and insurers. Congress is also considering relaxing elements of the Federal Medicare and Medicaid Anti-Kickback laws and the Federal Anti-Referral Law so that hospitals might help doctors in their regions adopt electronic health record systems. (For more on the national health records initiative, read "What Happened to Do No Harm?" on Page 42.) The physicians and IT executives who have taken the lead in implementing EHRs say there is a strong business case for investing in these systems. In interviews with CIO, these early adopters provide a number of valuable tips for how to make the business case to doctors in small and midsize practices and help them over the implementation hump. With national, state and local initiatives starting this year, they say, the momentum for widespread EHR adoption is building. "It\u2019s happening very fast now. The funding to do it isn\u2019t there yet, there are cultural barriers, legislative barriers and privacy barriers\u2014but there is now a national effort to overcome all of these barriers," says John Halamka, CIO of the $1.2 billion CareGroup, a system of hospitals and practitioners that includes Beth Israel Deaconess.Pay for PerformanceThe dynamite needed to break through these barriers, Halamka and others believe, will be pay-for-performance programs, a fundamental shift in the way insurers reward doctors for treating patients. Such programs are designed to reward doctors not only for seeing patients but for how they do on measures such as managing patients with chronic conditions like diabetes, or screening them for preventable problems like colon cancer. The pay-for-performance model would also reward doctors on qualitative measures like patient satisfaction. Such incentives work best when tracked by electronic health records. Thus, pay-for-performance bonuses give physicians a clear incentive to adopt EHRs. Halamka says the reason he\u2019ll have all 3,000 of his group\u2019s physicians using electronic health records is because CareGroup\u2019s contract with Blue Cross Blue Shield came up for renewal last year, and it now includes a pay-for-performance component. He says that as other insurers\u2019 contracts come up for renewal, they\u2019ll put in the same incentives. Pay-for-performance programs will start to counter the impediments that work against doctors investing in electronic health records, predicts Micky Tripathi, president and CEO of the Massachusetts eHealth Collaborative. The Collaborative is using a $50 million donation from Blue Cross Blue Shield of Massachusetts to link the hospitals and doctors in three Massachusetts communities on electronic health systems. It is the most ambitious pay-for-performance plan currently under way and is being watched closely, in large part because it puts all of the doctors in one area on systems and builds a health information exchange to connect them and the area\u2019s hospitals.Patrick Barbier, a 62-year-old solo family practitioner in Newburyport, Mass., will be one of the very first doctors on the Collaborative system. He applied to be in the pilot because he thinks his patients will benefit from the consistency of care they\u2019ll be able to get when he\u2019s on vacation or off duty, because their records will be accessible to covering doctors. He also thinks e-prescription and lab systems will reduce his paperwork burden. "That will be a very good thing for me," Barbier says.Wanted: Better Incentives But others argue that physicians need to be given better incentives before they move toward wide-scale deployment of these systems. Jeffrey W. Rose, CEO of HealthAlliant, a nonprofit adviser to regional health information organizations, says that none of the pay-for-performance pilots currently under way offer enough payment to overcome the obstacles. "Ninety-plus percent of the benefits [of EHRs] accrue to others\u2014insurers, hospitals and government entities," he says. "We expect physicians to make the investment even though others get the benefit."Because of this cost\/benefit dynamic, Rose and other physicians think that insurers and state and federal governments should put up more money for EHRs. For example, the American College of Physicians, which represents specialists in internal medicine, wants to see either low-cost loans or outright grants for physicians who plan to implement EHRs. Rose says that research on one of their large-scale projects showed that EHRs created $125 million in annual savings for medication management and another $100 million in diagnostics management. It also showed that 95 percent of the savings went to self-insured employers and commercial and government health-care plans. "They expect doctors to pay for this, and it just isn\u2019t fair," he adds.But Dolores Mitchell, executive director of the Massachusetts Group Insurance Commission, disagrees. Mitchell has implemented a pilot program that tracks how individual physicians do on specific quality-of-care measurements so patients in the state-funded plan can see how their physicians perform; these physician profiles, which are culled from EHRs, could eventually be used in a pay-for-performance system. "There\u2019s a lot of push from doctors to say [we] should put up the money [for EHRs]. Well, think of everything else that goes into a doctor\u2019s office\u2014if they put an MRI in their office, they don\u2019t ask me to pay for it. This is what it costs to be a modern, efficient, safe practice\u2014it\u2019s a cost of doing business. You deal with that in two ways: You charge more money, and I believe the tax laws of this country still allow you to write it off as tax deduction."Mitchell says doctors worry about system obsolescence, the overall cost of implementation and the changes in the way practices work. She\u2019s sympathetic to a point but hopeful that the pilot projects will show doctors that EHRs "only hurt for a minute." The hurt actually lasts for more like three months, Basch tells doctors at MedStar Health, where he is medical director of e-health. Basch is helping to roll out EHRs from GE Physician Office to the roughly 800 doctors employed by MedStar Health, which had $2.7 billion in revenue and more than 1 million outpatient visits in its last fiscal year. Basch says that the up-front costs are between $15,000 to $20,000 per physician, about 40 percent of which is the cost of hardware, including flat-screen monitors and networking equipment. He is nearing completion of a two-year rollout to 100 physicians, starting with practices that volunteered. Basch expects a variety of returns over the long run, including reduced medical errors, cost savings and improved quality of care. While large organizations like MedStar are well-positioned to gain benefits from EHRs, smaller practices that have adopted the systems find they can also get great returns. Automatic Savings Deborah Milburn, administrator at Dublin Primary Care, an eight-doctor practice in Colorado Springs, Colo., says it cost her practice about $12,000 per doctor to install an EHR from Amicore. That included updating hardware and giving doctors tablet PCs to carry around. "Where are these estimates of $20,000 to $40,000 per physician coming from?" Milburn wonders. Dublin Primary Care generates $5 million or so in revenue a year, exactly the sort of practice that is supposed to be least able to afford to implement electronic health records. Milburn doesn\u2019t understand why. The practice decided back in 2002 to install an EHR system as a way to eliminate expenses like transcription costs, while giving more consistent treatment to patients. Three years after turning it on, the system has done more than break even. Dublin Primary Care spends $10,000 a month less than it did in 2002, even figuring in $13,000 a month in IT costs. That\u2019s after three years of cost increases, staff raises and the like. Those savings have come from eliminating transcription costs, which were running at more than $6,000 a month in 2001, plus drops in costs for things like printing. But the biggest savings has come from decreased staff\u2014Dublin has gone from 53 full-time staff to 38, without a drop in patients. Milburn says that when Vioxx was recalled, she didn\u2019t even have to do a search; her vendor (Amicore) sent her software that executed the necessary queries. She also notes that the annual back-to-school headache of pulling immunization records is now relatively painless. Another doctor who is on his second implementation of an EHR system says that both times it has paid for itself within the first year of use, and he doesn\u2019t understand why physicians aren\u2019t rushing to implement them. "It\u2019s astounding to those of us who\u2019ve been to the mountaintop and seen the glory of them," says Joel Diamond of Diamond Fera and Associates in Harmerville, Pa.Diamond says that in his first practice, a seven-doctor group with four locations, it cost $80,000 to implement an electronic health records system from Misys. But the elimination of transcription costs and 2.5 full-time positions in the first year covered the cost of the system. The practice also got so much better at coding and reimbursements that one of its payers audited it (the practice passed the audit with flying colors). When Diamond and one of his partners left to form a new practice, they put in an EHR from the get-go. They knew it would work, and they also expect to see pay-for-performance start to make it even more worthwhile to their bottom line. Under the pay-for-performance model, "people will lose money without an electronic medical records system," Diamond says. "There is no way to track your data without one."Diamond and his partner have also started consulting on these systems, and spend time helping other members of the Pennsylvania Academy of Family Physicians think about them. He says the message is always: You will not lose money, you will save time, and your quality of care will go up exponentially.Doctors Need Hand-HoldingEven so, many physicians remain leery of EHRs. That\u2019s largely because they\u2019ve heard so many failure stories. "I\u2019ve read that one-third of implementations fail," says Michael S. Barr, vice president of practice advocacy and improvement at the 119,000-member American College of Physicians.EHRs fail for a variety of reasons\u2014they\u2019re slower than paper in the beginning, and the network may not work well. Despite the hundreds of vendors on the market, fewer than 20 can handle the needs of large organizations. And not all vendors know what they\u2019re doing. In addition, learning how to use these systems can disrupt the doctor\u2019s practice and its workflow, and the whole process may seem daunting to many physicians. Many early adopters say training is the key to success. EHRs often change a medical practice\u2019s basic workflow, even simple things like what to do with a lab report. So it takes time to train physicians and their staffs to use the new systems. Basch estimates that MedStar will take three to six months to train doctors and their staffs before their systems go live. And then once the system is live, MedStar will continue to provide support and follow-up training.Likewise, CareGroup, which is essentially acting as an application service provider for its doctors, will do intensive up-front training. The key to its implementation, Halamka says, will be full-time onsite support and training for the entire first week after each of its practices starts using the system.Similarly, the Massachusetts eHealth Collaborative is doing more than just furnishing doctors with hardware and software. It is providing training and support on all aspects of the system, including basics in how to connect the hardware and use the software, through June 2008. And it is seeding the pilot slowly, starting with only eight of the targeted 160 practices. As the pilot began in January, Tripathi estimated it would take 10 to 12 weeks to roll out the systems because the new EHRs need to be integrated with the physicians\u2019 existing systems for diagnostics and billing and practice management. Once all of the doctors\u2019 systems are up and running, the Collaborative plans to build out the networked health information exchanges. The overall goal is to have everything up and in place in all the networked facilities by July 2007.Training and ample support will also be central to the health information exchange in Fishkill, N.Y. A. John Blair, who is president of the nonprofit Taconic IPA in Fishkill, has set up a company called MedAllies to implement a health information exchange for 500 doctors in 175 practices both inside and outside the IPA. Five hospitals and two national reference labs already use the health information exchange, primarily for lab results and tests.MedAllies is now in the pilot stage of rolling out EHRs to more than a dozen practices. MedAllies plans to act as a systems integrator of sorts for these practices, coming in to study the workflow in the office before recommending a system to use, implementing the system and then training the doctors and staff on how to use the systems and adapt their workflow to them. MedAllies\u2019 staff is then available to handle further questions, which Blair thinks is a key for small practices; a vendor may do a good job implementing a system, but then it\u2019s off to the next customer. "Our certified trainers don\u2019t leave town," he says. MedAllies plans to charge physicians about $500 a month to host and support the EHRs. But despite that relatively modest cost, Blair says he\u2019s going to be conservative and say that 100 doctors or more will be up on EHRs by the end of this year. However, Blair predicts 50 percent of the region\u2019s doctors will be using EHRs in three years and close to 100 percent in 10 years\u2019 time.Halamka of CareGroup sees a similar timetable. He predicts it will still take about five years for most doctors in Massachusetts to be using EHRs, and about 10 years nationwide."I\u2019m very excited," he says. "2006 is the year where economics and politics and demand [for EHRs] will all coincide."