Electronic Health Records, Inflation, and Private Medicine


Published July 13, 2022

Cato Institute

In late 2021, doctors and medical students bombarded Congress with hundreds of thousands of letters protesting a scheduled 10% cut to Medicare payment rates for private physicians. The effort, largely organized by the American Medical Association, was rewarded, and doctors were granted a reprieve from the full reduction, but physician payments are still being trimmed just as inflation has hit a 40‐​year high. Physicians are also facing a statutory payment freeze scheduled to last through 2026.

In some ways, this marks a pivotal moment for private physicians. Unlike other small business owners, doctors running private practices have little power to set their own prices; Medicare largely sets the going rates for the entire industry. But the costs of running a private medical practice rose by around 39% between 2001 and 2021, even before the recent inflationary spike. Related expenses include office rent, employee wages and benefits, costly medical equipment, malpractice insurance premiums, and so forth. On top of that, a study published in JAMA Health Forum estimates that it costs $12,811 and takes more than 200 hours per physician annually to comply with the Medicare Merit‐​Based Incentive Payment System (MIPS).

EHRs / What is MIPS and why should it cost doctors so much? First approved by Congress in 2015, the system is designed to push doctors to improve the “quality and value” of their services. More than anything, it seeks to nudge physicians to use electronic health records (EHRs) in their daily work. This has proven to be costlier and more onerous than policymakers anticipated.

Beginning in 2017, hundreds of thousands of physicians across the country were forced to participate in MIPS or else face severe financial penalties. Today, Medicare increases or decreases payments to doctors based on how well they perform on a range of complicated EHR‐​related measures.

MIPS is just one of several major government initiatives to get doctors to adopt EHRs. The controversial technology systems were originally optimized for billing — rather than actual medical care — and they have been widely lambasted. In 2019, Fortune magazine and the Kaiser Foundation released a bombshell report, “Death by 1,000 Clicks,” on the thousands of serious, sometimes fatal, medical errors caused by EHRs. Some of the problems are features rather than bugs.

Because of the enormous quantity of data that EHRs require doctors to fill in per patient, the report explains that “critical or time‐​sensitive information routinely gets buried.” For instance, in 2014 Thomas Eric Duncan was sent home from a Dallas hospital with an undiagnosed infection. A nurse had entered his recent trip to Liberia — where an Ebola epidemic was raging at the time — among many other details in Duncan’s EHR, but the doctor never saw it. Duncan died of the disease shortly after his discharge.

The study noted that many other errors are hidden by contractual “gag clauses” imposed by EHR vendors, dissuading buyers from speaking out about safety issues and disastrous software installations. Some hospitals also fight to withhold records from injured patients or their families.

Complicating rather than streamlining / The federal push to get EHRs into medical facilities nationwide began in earnest after the 2008 financial crisis. Then‐​president‐​elect Barack Obama’s recovery plan included making “sure that every doctor’s office and hospital in this country is using cutting‐​edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year.”

Unfortunately, the large‐​scale adoption of EHRs has done none of those things. Until that point, medical facilities had been gradually replacing paper‐​record systems with digital records, much as smartphones incrementally replaced flip‐​phones. But Obama’s plan sought to greatly accelerate the transition. The 2009 stimulus bill invested over $36 billion in the EHR industry; in exchange for the infusion of cash, EHR vendors were expected to create record systems that conformed to a wide range of government requirements.

These made‐​to‐​order, government‐​approved systems — which were not sought after by either doctors or the patient community — have failed in egregious ways. Among other things, government‐​approved EHRs are often difficult to use, and poor software designs have led to countless recording and medical errors. They have complicated rather than streamlined medical files. The Fortune report notes:

Many doctors today opt for manual workarounds to their EHRs. Aaron Zachary Hettinger, an emergency medicine physician with MedStar Health in Washington, D.C., said that when he and fellow clinicians need to share critical patient information, they write it on a whiteboard or on a paper towel and leave it on their colleagues’ computer keyboards.

Perhaps most worrisome, these systems have disrupted the doctor–patient relationship and in some ways revamped the medical industry in undesired ways. Doctors who employ EHRs must spend a great deal of time carefully checking off boxes and marking down specific notes, which means they are often distracted during patient consultations. Both doctors and patients have complained bitterly about this in myriad surveys. To mitigate this, many physicians have begun employing “medical scribes” to literally follow them around, taking notes. (Private physicians, of course, must pay these employees out of pocket.) None of this feels much like innovation.

Critical moment / It is clear that the widespread use of EHRs benefits the EHR industry, which has grown from $2 billion annually in 2009 to over $13 billion annually today. It also benefits many companies interested in mass accumulation of health data; in 2019, the health data of over 50 million Americans were transferred to Google by Ascension, the second‐​largest healthcare provider in the United States. Google reportedly plans to use the data to improve artificial intelligence and other tools, but there is scant evidence that it has provided any meaningful benefit for patient care (the ostensible justification for MIPS and other programs). The cost of complying with government EHR requirements, combined with a host of other expenses, is pushing many physicians to leave medicine altogether.

Over the course of the COVID-19 pandemic, thousands of physicians have resigned or significantly reduced their working hours, and nearly 24% have said they plan to leave their practices within two years. The stress of the last several years surely contributed to these decisions, but private physicians have had to contend with serious financial instability related to unpredictable Medicare payment rates for decades. This, combined with enormous increases in administrative burdens and costs, has made the practice of medicine in the private sphere almost unrecognizable.

Devorah Goldman is EPPC’s Tikvah Visiting Fellow. Her work focuses primarily on religion, medical culture, and public bioethics.

Photo by National Cancer Institute on Unsplash


Devorah Goldman is EPPC’s Tikvah Visiting Fellow. Her work focuses primarily on medical policy, culture, and public bioethics.

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