Meaningful Use of Electronic Health Records and Medicare Expenditures: Evidence from a Panel Data Analysis of U.S. Health Care Markets, 2010-2013

Objective. To determine if recent growth in hospital and physician health IT adoption and use, as intended by the Medicare and Medicaid Electronic Health Record (EHR) Incentive program, is correlated with decreases in expenditures for elderly Medicare fee for services (FFS) beneficiaries.

Data. American Hospital Association (AHA) General Survey and Information Technology Supplement, Health Information Management Systems Society (HIMSS) Analytics survey, SK&A Information Services, and the Centers for Medicare & Medicaid Services (CMS) Chronic Conditions Data Warehouse Geographic Variation Database (GVDB) for 2010 through 2013. The GVDB reports standardized Medicare payments that eliminate variation due to factors such as payment adjustments for local wage levels and subsidies for training new doctors.

Study Design. A fixed effects model examining associations between Hospital Referral Region (HRR) level measures of hospital and physician health IT penetration and annual Medicare expenditures for elderly Medicare FFS beneficiaries with at least one of four chronic conditions: chronic obstructive pulmonary disease, congestive heart failure, diabetes, and ischemic heart disease. Our sample of 14.8 million beneficiaries accounts for 54 percent of all elderly Medicare FFS beneficiaries. We calculated hospital penetration rates (using AHA and HIMSS data) as the percentage of Medicare discharges from acute care general hospitals that satisfied criteria analogous to Meaningful Use (MU) Stage 1 requirements and physician rates as the percentage of ambulatory care physicians using EHRs.

Principal Findings. A 1 percentage point increase in discharges occurring in MU-ready hospitals was associated with approximately a $1.12 decrease in total annual Medicare expenditures per beneficiary and a $0.46 decrease in annual Part A acute care expenditures per beneficiary (these findings are based on HIMSS data but findings from AHA-based measures were quite similar). Given the observed increase in hospital adoption during 2010-2013 and the number of beneficiaries in our sample, this translates into $581 million less in Medicare Parts A and B expenditures related to hospital EHR adoption during 2010-2013 with 52% of these savings from the association between hospital EHR and Part A acute care expenditures.  A 1 percentage point increase in physician adoption was associated with approximately a $13 decrease in total annual Medicare expenditures per beneficiary and a $6 reduction in annual Part A acute care expenditures per beneficiary. This finding translates into $3.3 billion dollars less in Medicare Parts A and B expenditures during 2010-2013, with about half of the savings coming from the association of physician adoption and Part A acute care expenditures. Furthermore, we found that a 1 percentage point increase in physician health IT penetration has a statistically significant negative relationship with annual Part B expenditures per beneficiary of approximately $4, which translates into $1 billion in Medicare Part B savings during this time.

Conclusions. Healthcare markets with steeper increases in health IT penetration during 2010 to 2013 also had steeper decreases in total Medicare and acute care expenditures per beneficiary. These results suggest that some intended improvements in efficiency of health care delivery have been realized during the early years of the Medicare and Medicaid EHR Incentive Program.