Medicare pay cuts threaten physician tech investment

Many doctors see information technology as essential, but some wonder if reduced reimbursements will force them to cut back on buying and using it.

By Tyler Chin, AMNews staff. May 9, 2005.

As the federal government prods doctors to invest in costly electronic medical records software, it is simultaneously on course to slash physician pay by about 4% in 2006 and 26% cumulatively over a six-year period ending in 2011.

Unless Congress reverses impending Medicare cuts, some observers fear the cuts will severely crimp physicians' investment in information technology. A recent AMA Member Connect survey found 54% of physicians would defer buying information technology if Medicare reduces rates in one year, and 67% would do so under multiple years of rate cuts.

The timing of the cuts couldn't be worse, some observers say. They believe that doctors -- widely perceived for years as technophobes -- are now at the "tipping point" of adopting EMRs, which some also call EHRs, or electronic health records. That view was bolstered in April when Manhattan Research LLC, a New York-based market research company, released a survey claiming that the number of doctors who find information technology essential to their practice more than tripled to 380,000 in 2005 from 114,000 in 2002.

"Borrowing the $25,000 to $50,000 per doctor to make a long-term investment in an excellent EHR will only be done if the business case is there and doctors have the cash flow to pay back their loans," said Peter Basch, MD, an internist and medical director of e-health initiatives at MedStar Health, a health system in Columbia, Md. "With primary care doctors already living with an 18% decline in [Medicare] reimbursements since 1995 -- taking into account inflation -- any further cuts will likely make it impossible for them to afford excellent EHRs."