Understanding Electronic Medical Records

Reliability and Integrity as Critical Components of Medical Practice Valuation, Profitability, and Compliance

Yigal M. Rechtman, CPA, CFE, CITP, CISM, Kenneth N. Rashbaum, JD, and Reed D. Gelzer, MD, MPH

The sale and merger of medical practices into larger medical groups or hospital networks is an ongoing trend that began almost a decade ago. A key component of these transactions has been the valuation of the target medical practice; the purchase price is often calculated through a combination of the quality of earnings, operational efficiency, and a regulatory compliance risk assessment. All these components are strongly tied to the quality of the electronic medical records (EMR) system, which makes assessing EMR's reliability critical to proper valuation of the practice and a strong indicator of the degree of risk to the acquirer. Such risk is elevated when the EMR does not comport with acceptable documentation requirements for Medicare, Medicaid, and private payors, as well as for applicable privacy, cybersecurity, and business records requirements. This article provides a framework for analysis of one of the most significant aspects of medical practice value: the practice's treatment data.