Margret Amatayakul

In conducting an ROI analysis for an electronic health record (EHR), conventional wisdom suggests estimating costs liberally and benefits conservatively. This may be good advice from a theoretical perspective, but in doing so, you may be setting yourself up to go over budget.

The Medical Group Management Association suggests that, on average, physician offices are 30 percent over budget in their EHR expenditures. No similar statistics appear to be available for hospitals.

Why might the suggestion above ring true for you? Surely we do not want to suddenly start estimating costs low and benefits high. What it does mean is that we're neither fully resourcing these projects nor setting realistic expectations to balance potentially higher costs. In other words, the ROI analysis is not being used as a management tool. In fact, many ROI analyses never see the light of day. They are performed by or for the CFO to justify a project. The analyses rarely receive accurate input from those responsible for achieving the results (those responsible often tell CFOs what they think the CFOs want to hear), and they seldom are used in a formal benefit realization study that holds people accountable for results. 

Identifying the True Costs and Benefits of EHRs

There are many reasons why the EHR ROI analysis is not used as a management tool. Examples include the difficulty of anticipating all the costs, products that do not live up to expectations, the presence of too many intervening variables that impact results, and the paucity of accurate baseline data to determine a delta. And, speaking of change, the scope of the change brought about by EHRs tends not to be fully appreciated and, as a result, typically cannot be overcome. These shortcomings all conspire to produce a project that is over budget without having achieved desired results.

Indeed, all of the reasons why an EHR ROI analysis should not be used as a management tool hold a measure of truth. But they also present falsehoods that should be reckoned with.

Identifying the costs and benefits that contribute to the EHR ROI analysis should begin with defining measurable goals and setting expectations. The healthcare industry has not yet learned to perform these steps well. Most who describe the goals of an EHR state that they want an EHR to reduce hassles, increase revenue, aid in patient safety, improve productivity, and/or help achieve better quality outcomes. These "goals," however, are meaningless in defining benefits for an ROI analysis. In fact, if an EHR can't achieve these goals, why go through the expense and effort to implement one?

Detailing the specific goals you hope to achieve with an EHR should give your organization a much more accurate picture of what the costs and the benefits will be. For example, you may identify a goal as reducing lost charges by X percent. Do not be surprised, however, when the costs and the benefits reflected in the ROI analysis are estimated higher, but probably still proportionate to previous results-just more accurate and likely to be achieved.

Suppose your organization's goal is to reduce duplicate tests by Y percent by ensuring that all lab results are available online and the ordering of potential duplicate tests will generate a flag. On the cost side, it is clear that there must be electronic systems to support the display of lab results online. There must also be a computerized provider order entry (CPOE) system. However, for there to be a flag, there must be discrete lab data that interact with the CPOE system. Hence, lab results cannot merely be generated as a print file. Perhaps the lab system needs to be upgraded to produce discrete data. There may need to be interfaces written to the CPOE system. The CPOE system must have clinical decision support (CDS) embedded in it. There may also be other, related source systems that you desire to feed the CPOE system to generate other CDS. This may entail acquiring a clinical data repository, especially if you have multiple different vendors. As you can see, costs can spiral. 

Setting Your Organization Up for EHR Success

While many organizations are not as specific with respect to their benefits metrics as in the example above, most organizations do not  anticipate the longer-term effects of a single goal (and its associated costs) and do not at all address how they will ensure that their intended users will actually use the systems that are being implemented. Managing change must be understood to be a cost, but doing so will enable your organization to accrue better benefits.

Using the CPOE example, on the cost side, an organization may need to invest in computer skills building for physicians, formal work flow analysis, physician activities to develop standing orders in support of CPOE use, a clinical data analyst to build standing order templates and CDS rules, and potentially some disciplinary action relative to physician reluctance to participate in CPOE adoption. However, when physicians are engaged in the process of defining the goals and understanding the expectations associated with them, they are more likely to comply. After all, they set the goals! They do not want to fail. In fact, on the benefits side, not only will you be better able to achieve the specific goals stated above when physicians are actively engaged in the adoption process, but also, you will be very likely to experience additional benefits from CPOE adoption-and so will the physicians who fully use the CPOE system.

When an organization develops an ROI without adequate resources or specific expectations of the benefits it hopes to achieve, the organization is setting itself up to fail. Why implement a system you do not expect to fully utilize? When it comes to EHR adoption, organizations must be willing to address the true costs and benefits associated with effecting change. Change management is not easy, but it cannot be accomplished at all without devoting resources  to it and setting expectations clear for accomplishment of goals.

Margret Amatayakul, RHIA, FHIMSS, is president, Margret\A Consulting, LLC, Schaumburg, Ill. (

Publication Date: Thursday, November 01, 2007

Login Required

If you are an existing member, please log in below. Username and password are required.



Forgot User Name?
Forgot Password?

If you are not an HFMA member and would like to access portions of our content for 30 days, please fill out the following.

First Name:

Last Name:


   Become an HFMA member instead