Regulatory Changes to Fraud and Abuse Laws Open Door for Hospitals to Help Physicians Purchase Elecrtonic Medical Records

Despite Potential to Improve Care and Align Physicians, Hospitals Remain Cautious

News Release
Sept. 18, 2008

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—Despite regulatory changes allowing hospital to help physicians purchase electronic medical records (EMRs), hospitals are proceeding cautiously, according to a study released today by the Center for Studying Health System Change (HSC).

Under August 2006 exceptions to the federal physician self-referral and anti-kickback laws—both intended to prevent hospitals from offering financial incentives to physicians in return for patient referrals-hospitals can subsidize up to 85 percent of the upfront and ongoing costs of EMR software and related information technology (IT) support services for physicians. Physicians must pay the full cost of any hardware, and the exceptions are scheduled to sunset on Dec. 31, 2013, when physicians must assume any ongoing EMR costs.

Hospital strategies to aid physician EMR adoption include offering direct financial subsidies, extending the hospital’s ambulatory EMR vendor discounts and providing technical support, the study found. Two key factors driving hospital interest in supporting physician EMR adoption are improving the quality and efficiency of care and aligning physicians more closely with the hospital.

A few hospitals in the study had begun small-scale, phased rollouts of subsidized EMRs, but the burden of other ongoing hospital IT projects, budget limitations and lack of physician interest were among the factors impeding hospital action, according to the study funded by the Robert Wood Johnson Foundation.

"While hospitals have strategic incentives to provide support, particularly to tie referring physicians to their institution, the effects of the regulatory changes on physician EMR adoption will ultimately depend both on hospitals’ willingness to provide support and physicians’ acceptance of hospital assistance," said Joy M. Grossman, Ph.D., HSC senior researcher and coauthor of the study with Genna Cohen, an HSC research assistant.

The study’s findings are detailed in a new HSC Issue Brief—Despite Regulatory Changes, Hospitals Cautious in Helping Physicians Purchase Electronic Medical Recordsavailable here. The study is based on HSC’s 2007 site visits to 12 nationally representative metropolitan communities: Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking change in these markets since 1996.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.