NEW YORK – A new study from PricewaterhouseCoopers says federal stimulus funding for healthcare IT is crucial to the implementation of electronic health records in hospitals - but threats to take away funding in the long run may be even more persuasive.

“Rock and a Hard Place: An Analysis of the $36 Billion Impact From Health IT Stimulus Funding,” from the New York-based advisory group’s Health Research Institute, finds that healthcare providers are struggling to find money to implement electronic health record systems, primarily because the sour economy has depleted capital resources and forced them to make cuts in information technology.

And while the federal government is pledging $33 billion in incentives to compel providers to adopt meaningful EMR systems by 2015, that money won’t compensate hospitals enough for the costs they incur in setting up the systems, the report states.

A better motivator, PwC researchers say, is the threat of reduced Medicare reimbursements if those IT goals are not met.

“The stick, even more than the carrot, makes a fiscally compelling argument for adopting electronic health records,” said Daniel Garrett, managing director of PricewaterhouseCoopers’ health industries technology (HIT) practice. “It’s a small carrot compared to the amount of resources it will take to deploy this technology over the next five years. If an organization wants to have an enterprise-wide EHR up and running by 2011, they’ve got to start now. The incentives eventually go away and the stick will only get bigger.”

According to a March survey of 100 hospital chief information officers conducted by PwC, 82 percent have already reduced their IT spending budgets by an average of 10 percent, with 10 percent reducing budgets by more than 30 percent. In addition, two-thirds of those CIOs surveyed expect to make further cuts in IT spending by the end of the year.

According to the survey, 64 percent of the CIOs say it’s impossible to balance the demand for health information technology with the need to cut costs, and half of the CIOs who work in hospitals with at least 500 beds say federal funding is “crucial” to the implementation of EHRs.

According to PwC estimates, the average 500-bed hospital could receive up to $6.1 million in federal funding to purchase, deploy and maintain a government-certified EHR system – but it could lose $3.2 million or more in Medicare funding, depending on volume, if it doesn’t meet the government’s goal of deploying a “meaningful” EMR system by 2015.

Likewise, PwC estimates that an average three-physician practice must invest between $173,750 and $296,000 over two years to purchase an EHR system – but individual physicians can only receive up to $44,000 in federal funding to adopt the technology (funding is awarded to the physicians, not the practices).

PwC researchers also point out that the amount a hospital could receive in health IT stimulus funding has nothing to do with how much it spends on technology. The funding hinges on its Medicare, Medicaid and charity care volumes, which can differ radically from hospital to hospital.

Those incentives and drawbacks, say researchers, may compel healthcare providers to look beyond the initial ROI of an EHR.

“Some of the hardest work to be done in healthcare reform is still undone, that of an overall alignment of financial incentives from acute care and disease to wellness and prevention," said David Levy, MD, PricewaterhouseCoopers’ global healthcare sector leader. "Ultimately, technology may enable the capture, analytics and transparency required to make a patient-centered health system a reality.”