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Family Practice Associates of Lexington (Ky.) wanted to replace its aging practice management system and move from a document management system to full-fledged electronic health records. But money was a problem.

With the relaxation of the Stark Act restrictions against hospitals and integrated delivery systems making donations to group practices for I.T. and a favorable Internal Revenue Service ruling on the issue, the 13-physician practice went looking for some help with the financing, says Susan Miller, R.N., administrator at the practice.

But Miller was rebuffed. The large delivery system in the area wasn't helping any practices other than the ones it owned.

When the practice went to its payers looking for financial assistance to deploy I.T., it was also turned down. In addition, efforts to convince payers to adopt new reimbursement methods that could increase the practice's income failed.

"We approached all our payers about participating in the development of a pay-for-performance program, but none of them were offering anything in this area of the country," she says.

Family Practice Associates sets aside funds for expenses, but implementing an EHR and practice management system required more money than what it had available. With nowhere to turn for help, the practice's physicians took out a five-year loan with personal guarantees to fund the software and hardware acquisitions, Miller says.

Faced with declining reimbursement from payers, many practices don't have the money, often a six-figure investment, to pay for the latest technologies, says Cynthia Dunn, R.N., senior consultant at the Medical Group Management Association's Health Care Consulting Group, Englewood, Colo.

But because they face pressure to adopt electronic records and other technologies to improve the quality of care, many practices are taking out small business loans with personal guarantees to finance the systems, Dunn says.

The expense of taking out a loan, coupled with an initial loss of productivity when new technologies are first deployed, makes installing new systems - despite potential long-term benefits - less than appealing for some, Dunn says.

So far, relatively few practices are receiving donations from hospitals or delivery systems for I.T. as a result of the relaxed Stark Act or IRS rulings, Dunn says.

Although some hospitals are starting donation programs, some practices are reluctant to participate because they're concerned about losing control of their patient data, Dunn says. That's because the IRS ruling states that hospitals donating I.T. to practices can then have access to all the practice's patient data, even for patients who have never been hospitalized.

Help with Research

Since 1999, Family Practice Associates had been using a document management system to digitize paper records. Once the practice decided the time had come to take the big step of implementing EHRs, Miller spent two years investigating systems while still keeping the practice running.

"I didn't have someone I could pull from their job to research this," Miller says. "While you're doing this you still have to supervise staff and oversee the daily flow of the practice."

Miller eventually found a source of help with the selection process. She turned to DOQ-IT University, short for Doctor's Office Quality Information Technology University. The free service helps small and medium-sized primary care practices choose new technologies. The organization is run by the Centers for Medicare and Medicaid Services and the TMF Health Quality Institute, an Austin, Texas-based not-for-profit consulting firm.

Under the program, consultants come to the practice and conduct a network, hardware and software evaluation and prepare a readiness assessment. The organization then provides the practice with demonstrations of different software and helps physicians make a decision. Vendors also give DOQ-IT participants price breaks on systems.

The organization helped Family Practice Associates choose practice management and EHR software from Chicago-based Allscripts LLC. The practice management system went live in June, and the EHR was expected to go live this month. The practice would not reveal the cost of the new system nor the discount it received through DOQ-IT.

Based on her frustrations funding the new technology, Miller suggests the federal government should step in to provide lower interest loans that don't require a personal guarantee. She also argues that managed care companies should lend a hand with funding and provide higher reimbursement to practices that are highly automated.

Solo practitioners can find it particularly challenging to pay for new technologies. Edward Bujold, M.D., ultimately turned to family members for help in financing a records system.

"The burden of paper was becoming crushing, and it just seemed like the right thing to do," says Bujold, who practices at Family Medical Care Center in Granite Falls, N.C. "The future of medicine was going to be an EHR."

Faced with the expense of the new technology, as well as the purchase of the other half of the building where his practice was located, Bujold contemplated taking out a bank loan. But a family member offered to loan him the money at the same interest rate but without the closing costs.

The investment in EHR software from Misys, Raleigh, N.C., has proven worthwhile. Bujold's revenue has increased 18% in the three years after it was deployed, primarily as a result of improved coding due to fewer missed charges, he says.

Even larger practices frequently have to take out loans to pay for new technology.

For example, the 39-physician Campbell Clinic has taken out loans to finance certain projects, while others have been paid for from its operating budget, says George Hernandez, CFO at the Germantown, Tenn.-based orthpaedics practice.

Over the past three years, Campbell Clinic has deployed a picture archiving and communication system and a document management system, says Justin Lauer, I.T. manager at the practice. A new practice management system will be rolled out in the next few months.