In 2009, the federal government decided that doctors and hospitals were slow to take up electronic health records (EHR).  Isn’t everyone fed up with filling out forms and having his or her medical records filed in manila folders?  So the feds decided to dish out $30 billion to pay doctors and hospitals to install EHRs credentialed by a new government agency, the Office of the National Coordinator of Health Information Technology (ONC).

By July 2014, $25 billion of these payments had gone out the door.  Unfortunately, results indicate that this federal spending has perverted the natural adoption of EHRs, and may have even lowered the quality of care.

The Congressional Budget Office (CBO) estimated that the payments would boost EHR adoption rates to about 70 percent for hospitals and about 90 percent for physicians by 2019.

It is unlikely that these targets will be achieved.  According to a report issued by the ONC last year, 59 percent of hospitals and 48 percent of physicians had at least a “basic EHR system.”  And we have likely reached the high-water mark of adoption.

Doctors are frustrated that the certified EHRs force them to spend hours typing meaningless data instead of actually consulting with patients.  Further, because most doctors receive the payments linked to Medicare, they are force to do this to elderly patients, who are least likely to want EHRs or electronic prescriptions.

An influential report on EHRs was issued last year by an independent scientific group referred to as JASON.  It concluded that “[f]urthermore, there are questions about whether that transition will actually improve the quality of life, in either a medical or economic sense.”

“Meaningful Use” of federally certified EHRs is what triggers the incentive payments.  There are three stages of meaningful use.  Stage 1 was easy, demanding only that 30 percent of patient records be entered by computerized order entry.

Stage 2, which requires interoperability between competing EHRs, was originally supposed to be achieved by 2013, but that has been pushed back until 2016.  This will push Stage 3 into 2017.

Stage 2 is proving a real hurdle, because it imposes the requirement of interoperability.  Last September, the administration’s Health IT Policy Committee met with industry leaders and disclosed shockingly low figures.  Intermountain Healthcare executive Marc Probst, who was at the meeting, was disappointed: “The numbers are very low, particularly for Stage 2 attestation. I mean they are like 4 percent of [providers] that should be currently going for Stage 2.”

A March 2014 Government Accountability Office (GAO) report found that 61 percent of professionals and 36 percent of hospitals that participated in the Medicaid EHR program in 2011 did not continue in 2012.  Sixteen percent of professionals and 10 percent of hospitals participating in the Medicare EHR program in 2011 did not continue in 2012.

This trend is continuing, according to a January 2015 survey of almost 2,000 physicians conducted by SERMO (an online community of physicians). Of those surveyed, 55 percent said they would not attest to Stage 2 in 2015.

A 2014 report for the RAND Corporation also concluded that the federal money was invested poorly:

By subsidizing “where the industry is” rather than where it needed to go, HHS rule-makers allowed hospitals and health care providers to use billions in federal subsidies to purchase EHRs that did not have the level of connectivity envisioned by the authors of the HITECH act.

Because most health care providers appear to have installed EHRs for the sole purpose of receiving a government payment, it is not surprising to learn that the EHR industry has not been as vibrant as it could have been under free-market conditions.  In 2012, only five EHR vendors accounted for over 50 percent of market share, leading to the expert comment that “[t]here is concern that the EHR market, itself, represents a barrier to innovation.”  According to the JASON report, “[c]urrent approaches for structuring EHRs and achieving interoperability have largely failed to open up new opportunities for entrepreneurship[.]”

Federal payments to encourage EHR adoption have caused significant harm. Congress should guard itself against lobbyists seeking further appropriations to “fix” the problems caused by the first $30 billion.

John R. Graham is senior fellow at The Independent Institute (www.independent.org), Oakland, CA and senior fellow at National Center for Policy Analysis.