Unlock Substantial Savings from Your EHR Transition

Topics: Health Information Governance

Download PDF

Healthcare organizations in the United States spend billions of dollars annually to store and manage medical records — both paper and digital. The fact is the ever-expanding wealth of patient information has become an ever-increasing strain on the U.S. economy.

The American Reinvestment and Recovery Act of 2009 (ARRA) attempts to rectify this by providing billions to promote the use of interoperable, certified health information technologies (HIT), including allocations specifically to Electronic Health Record (EHR) adoption. The Act fundamentally offers the financial assistance and incentives necessary for healthcare providers to begin the transition to electronic records, but cannot alone support the massive investment required to complete this migration. In addition, the complexity involved in integrating an EHR across multiple facilities in a health system — while still protecting the privacy of the patient data — is inherently challenging.

The good news is a large portion of the dollars necessary to fund all phases of EHR transition already exist in the budgets of hospitals and large health systems. And, with health system mergers driving the need for increased efficiencies and streamlined workflows, it is more important than ever to find savings where possible.

This paper examines how to unlock substantial savings by implementing best practices and developing a strategic transition plan that addresses workflow as well as technology. Using this approach, healthcare providers can consolidate patient records, clean up duplicate patient identifiers, securely protect the privacy of patient information, streamline records management and develop a cost-effective, EHR-ready infrastructure.

The High Cost of Records Management

The healthcare industry is indisputably one of the most data-intensive industries in the U.S. Yet modern dissemination and control of patient data continues to lag behind other industries such as banking, airlines, insurance and retail. As a result, healthcare organizations in the U.S. spend billions of dollars annually to store and manage medical records.

With the passage of the American Recovery and Reinvestment Act of 2009, President Obama advanced the vision of establishing electronic health records for all Americans by 2014. To accomplish this lofty goal, the Health Information Technology for Economic and Clinical Health (HITECH) Act within the American Recovery and Reinvestment Act of 2009 provides some $36 billion to promote the use of interoperable, certified health information technologies. This includes $19.2 billion earmarked to support the adoption of EHR systems. These payments are contingent upon eligible professionals and hospitals that participate in Medicare and Medicaid becoming meaningful users of certified electronic health record technology. Through March 2013, over $13.7B had been paid to hospitals or eligible professionals.1

However, that’s just the beginning. Providers still have a long, complex road to travel if they are to fully capitalize on the opportunity at hand. The funds available through the American Reinvestment and Recovery Act are subject to complex rules, most of which are designed to reward providers who have already made the transition and are using the EHR in a “meaningful” way. These conditions limit a provider’s ability to strategically plan for their transition in a way that enables them to optimize cost savings throughout their EHR implementation.

Considering the limited access to federal aid and the overextended state of hospital budgets and resources, industry analysts predict the savings associated with EHR transition will not be realized until at least 2019, when most hospitals and physicians have actually transitioned to electronic health records.2 The fact is, without a strategic transition plan to identify best practices to manage all phases of the transition, hospitals will continue to struggle to support the process of initial and ongoing EHR implementation.

The good news is a large portion of the dollars to fund the multiple phases of transition already exist in the budgets of hospitals and large health systems. To understand where these dollars can be found, we need to understand in some depth where and how healthcare facilities are spending money today on medical records and information management.

By cleaning up and consolidating medical records and cross referencing the Enterprise Master Patient Index, Memorial Healthcare System reduced physical records storage by 30 percent and produced an annual savings of $1.2 million.

Why Are Patient Records So Costly And Challenging To Manage?

Healthcare providers are required to manage all their patient information at every stage of its life — from creation to storage through destruction — while making that information available when needed and protecting it at all times. Even in the best of circumstances, healthcare records and information management presents an enormous challenge. It is an inherently difficult task to balance the information management challenges across multiple departments and thousands of patients, combined with the dueling needs to provide easy access and HIPAA-level security. This challenge is magnified even further as hospitals are merging with other hospitals and physician networks that all use their own unique processes.

Also adding to the challenge are the laws governing retention of patient records. Currently, state laws dictate how long a patient’s paper and electronic records must be maintained, and these laws differ widely between jurisdictions. In Florida, for example, healthcare providers are required to maintain records for seven years — and it is no coincidence that medical costs there are below the national average. On the other hand, Massachusetts has rules that require healthcare professionals to maintain patient records for 20 years — and again, it is no coincidence that healthcare costs are consistently above the national average. Some states do not have an established retention policy. In practice, healthcare organizations retain records in these jurisdictions in perpetuity. Even in states that do have specific retention laws, it is often common to find healthcare organizations permanently storing patient information. A study by the American Health Information Management Association (AHIMA) found that 50.6 percent and 52.5 percent of hospitals permanently retained adult and minor medical records, respectively.3

The cost of this records management effort is enormous. A significant portion of the current cost of maintaining patient records comes from labor and the rents paid to manage giant file centers, regardless of whether an electronic patient record system is in place or not.

Case Study: Memorial Healthcare System

Located in the Houston area, Memorial Healthcare System offers quality care to patients through 12 hospitals and specialty facilities. With over 377,000 annual emergency room visits, Memorial Healthcare System is one of the busiest health systems in the country.


The system’s total cost for medical records operations was rising at an alarming rate, and retrieval rates were gradually worsening as the overall volume of stored records increased. Already spending over $3 million to store and manage medical records, Memorial Healthcare System needed a solution to centralize patient information, reduce costs, improve the continuity of care and ensure a seamless transition to the EHR.


A system-wide assessment, led by an outside expert, identified the following inefficiencies:

  • High percentage of duplicate records in the database
  • Lack of cross-referencing between the existing Master Patient Index and newly acquired facilities
  • Inconsistent retention policies
  • Storage separated across multiple locations


The thorough, consultative assessment made it easy for Memorial Healthcare System to restructure its entire records process and seamlessly transition to an electronic health record system. By cleaning up and consolidating medical records and cross-referencing the Enterprise Master Patient Index, the hospital reduced physical records storage by 30 percent and produced an annual savings of $1.2 million.

The recent spate of mergers and acquisitions are another driver of duplication and inefficiency. At large, multi-facility health systems with affiliated ambulatory clinic networks, patient records management usually consists of a patchwork of legacy systems, processes and decisions made over many years. While most healthcare providers have rationalized their facilities in terms of services and specialties, they have not rationalized their records. Thus, many healthcare organizations suffer from inefficient workflows, duplication of efforts, and other records and information management challenges.

And, as organizations transition to the EHR, they typically focus on their patient data but often neglect to consider other paper-based records present throughout the organization. While the intention to become fully electronic is usually focused on clinical records, other record types, including HR records and billing, may remain in paper format. To achieve the mecca of a “paperless” organization, you need to consider the various sources of paper records throughout the health system.

What’s Needed Is a Plan, Not Just Technology

It is important to note that the successful implementation of electronic health records is not the sole solution to these challenges. Yes, the EHR promises to streamline information handling and ultimately reduce costs and improve care, but it’s important to remember that the EHR is really just automation, not a magic bullet. If a facility has poor workflow processes, migrating to electronic records will simply automate those poor processes, not solve them. Therefore, re-engineering manual systems and processes represents a major opportunity for reducing costs, improving service and establishing the correct infrastructure to transition to the automated record.

For example, one major issue that workflow re-engineering can address is duplication of information. It is estimated that 8 percent to 12 percent of a hospital’s records consist of duplicates 4, and that level goes up to 20 percent for larger facilities that have been through mergers and acquisitions.

In particular, cleaning up the Master Patient Index (MPI) or Enterprise Master Patient Index (EMPI) database is essential to the implementation of an EHR, or any strategic application for that matter. If patients cannot be uniquely identified across a health system, have multiple identifiers within or between facilities, or are otherwise misidentified, a comprehensive EHR will be virtually impossible to achieve. The process must be fixed first.

What’s more, paper records still play a role in hospitals throughout the transition process to a fully electronic record. A portion of the physical patient record will continue to exist and grow, at least in the near term. Over time, information technology will change how departments handle and use these paper records, but the paper, along with electronic information, will continue to exist for many years in a hybrid environment.

Finally, the EHR will not eliminate records management costs. In fact, storing, protecting and managing electronic records carries its own set of challenges and costs, an issue we will examine at the end of this paper.

Three Phases of Transition

It is also important to remember that all hospitals and departments are not equal. While many hospitals and large health systems are well underway with their transition to the EHR, there are many eligible providers and ambulatory care networks that are in the earlier stages.

A transition plan must take into account these different levels of automation. For example, if the department is paper-based, the records will need to remain close to the facility. Conversely, a department that has already introduced technology is no longer dependent on where the paper or film records are located, and as a result, the physical records’ proximity to the facility is less relevant.

Today, most departments are in transition because they have started or plan to start automating their workflow processes. These departments are in one of three phases.

Phase 1. The department is strictly paper or film based, has not installed technology, and requires that the records be located close to the facility in order to support patient care. According to the HIMSS Analytics Electronic Medical Record Adoption ModelSM, most hospitals are in the earlier stages of adoption.5

Phase 2. The department has introduced technology but also has a large historical paper and/or film library that must be accessed in order to support patient care. Healthcare organizations that have not made a complete transition to electronic records must manage a “hybrid” record, which includes both paper and digital files. In this case, it is not necessary to store the records in close proximity to the facility. When required, the historical file can be scanned offsite and transmitted electronically.

Phase 3. The department is completely electronic and no longer retains a historical paper or film record. Additionally, the electronic record is the legal record and storage management is focused on electronic rather than physical records. While this is the ultimate goal, few health systems have achieved this status. According to the HIMSS Analytics, only 1.9 percent are at Stage 7 - where the hospital no longer uses paper charts to deliver and manage patient care.6

Developing a Long-Term, Cost-Effective Transition Plan

The first step is to conduct a thorough, system-wide assessment of your records management system. In considering these issues, it’s essential to get input from all the key stakeholders — from IT, Health Information Management (HIM), and Human Resources (HR) to department heads and senior executives. The assessment should cover the gamut of records issues, including processes that impact costs, care and your organization’s goals. Among the issues to investigate are:

  • Understand what you’re spending, both where and why. Do you have multiple records storage vendors duplicating efforts — and costs?
  • What are your true, total costs of records across the enterprise? You should factor in real estate, personnel, vendors, etc.
  • How will you handle hybrid records? You may want to utilize intelligent scanning where paper is captured as an image and an index is used to locate it.
  • How will you manage the workflows and storage of PACS, RIS, HIS and Lab records in the post-EHR environment to ensure continued cost control and efficiency maximization?
  • How will you manage the explosive growth of digital data? Will you purchase capacity in advance of need, buying excess storage to compensate for system configuration and performance issues? Or will you look for a solution that maximizes capacity utilization, allowing you to scale on demand?

Designing the Strategy

Armed with insight into current processes and costs, healthcare organizations can map out a plan of attack to eliminate waste and optimize processes.

The plan should be based on four key strategies:

  • Consolidate and integrate health system records.
  • Clean up MPI duplications and errors to ensure a one-to-one relationship between identifiers and patients across your facility.
  • Re-engineer workflow processes that govern the management of paper and film records.
  • Develop a digital storage plan to streamline the cost associated with digital archiving, backup and recovery.

Consolidate and Integrate Records

While consolidation frees up the capital to support the transition process, centralization builds a highly secure and compliant hybrid environment where paper records and film can be easily converted to electronic health records. Centralization — meaning the transfer of all paper files, films, scanning and release functions to a single provider — eliminates unnecessary vendor expenses and strengthens the chain-of-custody associated with records and information management. The ability to retrieve, process, scan and deliver files from a central location reduces compliance risks and costs often encountered in fragmented systems. Moreover, the consistent application of workflow processes is more easily managed in a centralized system, ensuring continued cost-efficiencies in the post-EHR environment.

Clean Up MPI Duplications

A closer look at the current state of MPI clearly demonstrates the value of consolidation. The elimination of duplication is essential to the success of any EHR system. Yet today most hospitals currently range between 8-12 percent duplication despite the 2 percent best-practices recommendation.7 At these rates a comprehensive EHR will be virtually impossible to achieve. To prepare for EHR transition, hospitals should initially re-engineer workflow to target the 2 percent range.

Case Study: Exempla Healthcare

Formed in 1998, Exempla Healthcare includes three hospitals and a network of clinics serving patients in the Denver Metro area. The organization has a staff of over 7,000 employees and 2,000 physicians. More than 153,000 patients visit its emergency departments each year.


Years of managing multiple records management facilities and systems resulted in lowered retrieval rates and increased operating expenses. In order to improve access to patient information and facilitate their transition to electronic health records, Exempla needed a solution to get its arms around all records — in all forms, at all facilities.


With the help of an outside expert, Exempla was able to develop a self-funding transition plan in a very short time frame. The plan eliminated existing inefficiencies by re-engineering department workflow and staffing.


As a result, Exempla has improved patient care — retrieving requested records with 100 percent accuracy — while reducing operational costs by 20 percent and positioning itself for a smooth transition to the EHR.

Re-Engineer Workflow Processes

The importance of re-engineering and consolidating the manual processes of paper and film cannot be overstated. First, it reduces the workflow to a single coherent strategy upon which a successful EHR may be built. This provides tremendous savings to large healthcare providers whose service area extends across different regions and different regulations. Secondly, and just as importantly, the savings realized by re-engineering can help pay for the costs of the technology needed during the initial EHR implementation and throughout the transition process.

Develop a Digital Storage Plan

Finally, it’s important to note that technology and the savings associated with an EHR will not pay for the costs of the EHR on their own. As stated earlier, the number one financial drain on the current records management system is inefficient hard-copy storage. Similarly, the storage of digital files will result in increased storage costs if processes for streamlined digital archiving, reliable backup and recovery, and file retention are not identified and addressed early in the planning process.

Getting Outside Help

Considering the importance of medical records to the core mission of patient care, most healthcare organizations will find it beneficial to partner with an outside expert to help plan, guide and manage their records management strategy throughout the EHR transition.

It is essential to select a partner with specific expertise in healthcare records and information management who knows how to build an accurate financial model and manage an implementation with a full and detailed understanding of healthcare requirements and compliance regulations. This will free up internal resources and allow you to set goals and guide the project at an appropriate level — letting the experts manage the details.

Not only can an outside vendor help during the initial implementation, but they can also provide guidance throughout the transition process. With their knowledge of best-practices, they can save money, avoid costly missteps and bring technology proficiency.

Measuring the Results

The savings that a healthcare organization can realize from a planned EHR transition will depend on its individual circumstances. Therefore, the plan should spell out the expected savings so decision makers will know exactly what to anticipate in terms of return on investment. Correctly done, the process can fund itself based on the “hard savings” that are realized by optimizing records management. By hard savings, we mean real operational dollars spent on labor, storage vendors, purging costs, etc. The plan should be designed so that these direct savings are sufficient to undertake records optimization.

In practice, there are many “soft savings” that are realized as well, such as space savings, opportunity savings, cost avoidance, and so on. These savings make the case even better than it seems at first analysis. For example, if you replace an unneeded file room with a CT scanner, gift shop or treatment room that generates revenue, you have achieved serious “soft savings.”

In virtually every health system, based on hard savings alone, the aggregate cost of a new, optimized records management strategy is less than the current cost of a dysfunctional system. And remember, we have not even touched on the issue of patient care, which is invariably improved by optimized records management. Typically, savings can range from $500,000 for a smaller hospital system to well over $1 million for larger, multi-hospital systems. Furthermore, a healthcare organization can expect the optimized system to be in place, and returning hard savings, within about six weeks. In addition to the savings, the facility will have an “EHR-ready” workflow for its records, supporting the eventual move to a full EHR system.

The transition plan focuses on reducing operational costs by changing workflows, and centralizing or eliminating processes. The data in Table 1 below is based on health systems that have adopted the transition model described in this paper and it illustrates the average percentage of costs reduced in each of the major cost centers


Labor to Manage Onsite Active File Rooms

Consolidating active records to a single offsite file-room location will reduce management and storage costs. Twenty of the largest health systems in the U.S. reduced their total active file room labor costs, on average, by 39 percent by adopting this strategy. Centralizing the records to a single file-room location eliminated the need for an onsite file-room supervisor at each facility and eliminated 90 percent of the staff required to provide after-hour and weekend coverage. Consolidation further reduced the redundant tasks.

Labor to Merge and Correct Duplicates to Scan to EHR

Consolidation of the records provides access to the patient’s physical records and to the electronic Master Patient Index. Having access to both is essential when transitioning to the EHR. Today, most hospitals have audited their Master Patient Index databases for errors. It is very common that an electronic audit will find that 5 percent to 15 percent of the patients registered in the Master Patient database have been entered incorrectly. The most common mistake is made at the time of registration when the returning patient is mistakenly registered as a new patient and provided a duplicate number. Finding the duplicates electronically is not difficult; software uses a probabilistic algorithm to identify those patients with duplicate numbers. However, because patient records are stored in multiple locations, it is logistically difficult and expensive to locate, correct and re-file the patient records that have been identified as duplicates. It is not unusual to pay a million dollars just to merge and correct the physical records. Consolidation eliminates 100 percent of the labor required to correct and merge the physical record. Centralizing the records to a single location also allows access to the patient historical visits and gives staff the ability, on a day-forward basis, to retrieve the physical chart and correct the duplicates before scanning the records into the department’s automated workflow technology.

Labor to Release Information and Bill for Services (ROI)

In addition to centralizing records, the centralization of core processes is also essential to drive down costs. Each year the HIM and Radiology Departments are required to fulfill thousands of requests for copies of the patient records from patients, insurance companies, attorneys and auditors. Centralizing the Release of Information process from multiple sites to a single location will reduce the number of staff required to process the release requests and will reduce the amount of oversight required, and, by integrating the ROI workflow with the records management function in a secure, centralized location, healthcare organizations can eliminate unnecessary points of risk and gain the visibility they need to release with control. Scanning and automating ROI requests will further reduce the labor required to release the records. Centralizing and automating ROI workflow reduces the cost to release records and bill for the release services by an average of 47 percent. Through a unique combination of industry-leading best practices and advanced technologies, and with status updates at their fingertips, there will be no need to manually track processes. This savings in time enables the providers to refocus on their core business initiatives.

Labor to Code and Abstract a Patient Visit

Centralizing coding will improve quality and reduce the cost to perform the coding of the patient visits. Coding is key to the financial viability of the health system. Poor coding can reduce revenue and increase the chance of audits and penalties. Consolidation of the coding and abstracting process improves the scanning of core documents and provides a higher level of supervision and oversight, thereby reducing labor and management costs by an average of 18 percent.

Labor to Purge to Secondary File Rooms

Moving the active file rooms to a single file-room location eliminates 100 percent of the cost to purge the active files to a secondary file room. On a daily basis, staff send the completed patient records to the offsite file room, eliminating the costly monthly, quarterly or annual purges. When the EHR scanning systems are installed, staff send the newly scanned records offsite for temporary storage. When the electronic record is audited and retakes are completed, destruction of the scanned records is managed from the centralized record center.

Labor to Assemble and Complete Records

Centralization of the patient records will allow each department to re-engineer and streamline their workflow to process and complete a patient visit. Re-engineering will remove the restrictions of a serial process that limits access and adds processing time to complete the documentation for a patient visit. It also eliminates the need to assemble a record, create a folder for the visit and manage the incomplete chart room, reducing the labor, on average, by 37 percent.


Records Storage for the Healthcare Facility’s Departments

Most healthcare organizations store more records than they are legally required to retain. Over a period of years, the typical health system builds an ever-increasing library of inactive records stored in various onsite and offsite locations. This fact — and the significant costs associated with storing these records — is often overlooked by health system administrators. Establishing a retention policy for each record created will, on average, reduce the volume, and associated costs, of storing records by 32 percent.


Labor and Costs to Destroy Records Exceeding Retention

Most healthcare organizations have been unable to purge because their records are filed in multiple locations, making it virtually impossible to identify if a patient record qualifies for destruction. Consolidation of records reduces the cost to identify, purge, destroy and shred the paper and/or film-based record by 29 percent. Centralization of the records provides access to all the patient records, access that is necessary to identify that a patient record has exceeded the legal retention policy and is eligible for destruction.


Automation will eliminate the need to create file folders and the purchase of equipment to retain the patient folders. Once technology is implemented, the budget for paper and film supplies will decline by 97 percent.

Other Benefits

In addition to the direct savings listed previously, health systems typically enjoy many “soft savings” that can be quite significant. These include:

  • Repurposing of file room real estate for revenue generating purposes
  • Faster billing due to improved workflow; drop time can often be reduced to two or three days
  • Reduction of lost revenue from missing information
  • Higher find rates for information requests (hospitals often have a find rate of only 75 percent or less)
  • Elimination of duplicate testing, thanks to a consolidated system
  • Improved care resulting from better information

Beyond The Transition: Managing Records in an Electronic World

Most of the discussion surrounding medical records today is focused on the implementation and adoption of EHR, and rightly so. However, it would be a mistake to assume that electronic records will end the issues of cost. Digital archiving, like paper storage, encompasses its own unique challenges and cost drivers. Without a predetermined, strategic transition plan, health systems will face increasing IT labor costs, frequent software and hardware upgrades and, most importantly, increased data security risks.

One challenge facing Healthcare IT organizations is the paradox that while the cost of storage is decreasing, the total cost to manage this storage is not. For the health system trying to archive increasingly large volumes of data, costs can spiral upward, not down. Simply put, storage volumes are growing faster than hardware prices are declining. Administrative costs go up, too, as the information volume grows.

Another issue is integration, as health systems seek to merge their EHR, PACS, HIS, RIS and Scheduling applications into a coherent system.

Achieving this integration is less a technology challenge than it is a workflow challenge. Healthcare organizations must design their workflow so that departments can share and access records efficiently. This will enable the implementation of an underlying technology solution. Fortunately, once effective workflows are in place, the technology for handling the large volumes of electronic records is well developed and available today. One approach that is proving successful is cloud storage. At the very heart of cloud storage is the fact that storage is delivered as a service. There are no hardware or software purchases, and payment is on a usage basis with costs funded through operating budgets, not capital expenses. Cloud storage provides a scalable, flexible infrastructure that allows capacity to be consumed on an as-needed basis, in turn eliminating the wastefulness of acquiring capacity in advance of need. What’s more, enterprise-class cloud storage includes a host of management services that essentially eliminate the customer from management responsibility.

Ultimately, cloud storage enables providers to take advantage of advancements in technology while lowering total cost of ownership. In addition to eliminating up-front capital purchases, the healthcare provider achieves better backup and recoverability, reduces complexity, and frees up resources to focus on their critical initiatives, instead of spending time and resources on secondary storage management and technology.


The challenges of an EHR transition are great, but so are the opportunities. By addressing core issues such as workflow and duplicate information as well as technology, healthcare providers can develop a strategy that can unlock substantial savings.

Further, by working with an expert partner, providers can look forward to a full digital solution that combines all forms of medical records in a practical clinical solution that controls costs while unburdening healthcare providers to focus more of their scarce resources on the mission of patient care.

1 http://www.cms.gov/EHRIncentivePrograms
2 “Obama’s Inflated Health Savings,” Factcheck.org, June 16, 2008
3 “Record Retention Periods for Adult and Minor Records,” Perspectives HIM, June 10, 2008
4 Healthcare Executive Insight - January 2012 - “What’s the role of patient identity technology in health information exchange?“
5 http://www.himssanalytics.org/emram/index.aspx
6 http://www.himssanalytics.org/emram/index.aspx
7 Healthcare Executive Insight - January 2012 - “What’s the role of patient identity technology in health information exchange?”