October 1, 2007

Unscrambling the EHR Pricing Puzzle
By Carolyn P. Hartley, MLA, CHP
For The Record
Vol. 19 No. 20 P. 16

For every electronic health record (EHR) system, there is a corresponding pricing model that requires you and your certified public accountant to analyze what you are purchasing, the duration of the contract, and ongoing fees.

If you’re like most physician practices, you have already seen as many as 10 to 15 demonstrations. More likely, they are all starting to look alike, a good indication that the certification process to standardize the exchange of health information is working. But trying to compare the pricing structure between vendors is far from easy.

A cardiology practice recently asked to have three contracts evaluated—two from large EHR companies and a third from a midsize EHR company—to help the practice understand what it should purchase. Rather than comparing apples to apples, they had the equivalent of a gorilla, a palm tree, and an apple.

Daniel Karp, MD, chief medical officer with M. D. Anderson Cancer Center, says one way vendors can help buyers is to make their software easier to purchase. Citing an example, he says he recently went into an auto dealership to purchase a car for his daughter. After greeting the sales representative, he said, “In the next eight minutes, I’m going to buy this car for my daughter. What number do you want me to write on the check?”

The sales representative responded as he had been trained. “Well, starting from the sticker price, you can add extended warranties, service agreements, oil changes, and tire rotations for the life of the car, and we can add a sunroof…”

“I have one check in my pocket. What number shall I write on it?”

With that, the sales representative invited Karp into the sales manager’s office. Roughly eight minutes later, the manager had a check in his hand, and Karp’s daughter had a car.

While purchasing an EHR may one day work like that, Karp acknowledges there are many elements that cause price variances.

Price Variances
1. Software license: application service provider (ASP) or server — ranges between $6,000 (ASP) and $75,000 (server)

It’s difficult to compare apples to apples when comparing an EHR that you host on site (server-based) to an EHR hosted by the vendor (ASP) because the pricing structures are significantly different. When comparing vendor pricing models, compare server-based to server-based and ASP to ASP.

Begin by making a decision about where and how you want to create, access, and store data. There are, in general, three pricing decisions to make. They are the following:

• Server-based: Do you want to own the software, host it on site through a dedicated server, provide your own disaster recovery plan, hire an internal or consulting IT manager, and implement the upgrades yourselves?

• ASP-based: Do you want to license the software and let the vendor host it and provide the disaster recovery plan, technical support, and upgrades?

• Hybrid: Do you want to license the software, let the vendor host it and provide the disaster recovery plan and technical support, and own a redundant backup server on site?

2. Interfaces with technology currently in place — ranges between $2,500 and $8,000
For years, technology in the practice included a practice management (PM) system, a laboratory-loaned computer that could only be used for lab-related reporting, billing software that managed the billing and reimbursement process, word processing software for medical transcription to write referrals, Internet access software, and any other specialty-specific software. Interfacing these systems should be a top priority when selecting an EHR and developing an implementation plan.

If you like—and trust—your current PM software company, you should stick with it to avoid data conversion fees that typically begin at $5,000. In that case, the PM system is best of breed. That decision is easier now than it was three years ago because most vendors use Health Level Seven-compliant technology. Even so, with hundreds of EHRs matching up with hundreds of PM systems, the one-to-one variables create an infinite number of combinations.

To analyze your interface costs, ask the EHR vendor how many times it has interfaced with your current PM system. If the vendor regularly hooks up with that particular PM system, you can expect to be charged a $2,000 to $4,000 interface fee. However, if you are one of the first to interface these systems, expect fees that could climb as high as $50,000.

More standard interfaces include those with labs and pharmacies, and, in some specialties, radiology. Most lab interfaces with an EHR system are free.

Those contemplating giving their PM system the boot should consider an integrated PM and EHR system.

3. How does the vendor define a “licensed user”?

Every vendor’s contract defines licensed user as the person who has access to data via a user ID and password.

Typical licensed user models in a physician practice include the following:

• One price for the physician: All staff who report directly to the physician;

• Tiered price: Physician (higher price), nurse (midrange fee) and administration (lower fee); and

• Clinician/nonclinician: Physician and physician-extender (same price) and administration (lower fee).

The first type may seem more expensive, but it can be less difficult to manage. It also eliminates the inclination to share the physician’s user ID and password with the nursing staff rather than pay an additional fee. In my experience, every EHR vendor contract has a clause that states the practice will be charged fees if unauthorized users are discovered.

Sharing user IDs also can be risky if a faulty medical decision is made by a nurse logged in under the physician’s user ID, something that is traceable since nearly all EHR systems create an audit trail.

4. Service agreement, including software maintenance, technical support, and upgrades (18% to 22% of the licensing fee) — ranges between $350 and $1,250 per month

A service agreement spells out what the EHR vendor must do to maintain the software, including upgrades. Most EHR vendors release a new version of their software every four to six months, depending on feedback from users, its customer base, and federal or state initiatives.

In an ASP model, the maintenance agreement tends to run between 18% and 22% of the initial licensing fee to fix bugs in the software. An ASP agreement should also create a bypass or workaround, provide daily and redundant backups, and have updates, including federal- and state-regulated changes.

In a client-server model, most vendors provide updates, but practices are responsible for maintaining the software and downloading updates, either from the Internet or a vendor-supplied CD. Most client-server customers also contract with local technical support for hardware and connectivity support.

As part of either an ASP or server contract, most vendors expect practices to employ a trained “super user” who will explain the problem, relay what’s been done so far, and participate in the solution.

Costs generally not included in the service agreement include the following:

• installation charges for electrical requirements and cable and phone connections;

• networking design and administration charges related to the set-up and service of the client’s network;

• hardware maintenance;

• third-party software maintenance for products not provided by the vendor;

• correcting errors resulting from software changes made by the practice or a third party (This applies primarily to client-server agreements.); and

• costs for data conversion or interfaces.

5. Implementation — ranges between $3,500 and $40,000
Implementation costs are typically included in vendors’ budgets and consist of variables such as the number of locations, level of computer experience, and connectivity charges. But implementation to one vendor may mean something different to another, so clarify the terminology before signing the contract. Installation is one component of the larger implementation plan.

Implementation should mean the following:

• workflow analysis and redesign to fit the EHR workflow;

• preparing and training staff for go-live and establishing super users;

• customizing templates;

• software installation;

• creating interfaces with lab and pharmacy;

• shadowing your staff for a specific number of days (Five to seven is typical.); and

• following up additional templates as needed.

Pulling It All Together
If, like Karp, you have one check in your pocket and you’d like to purchase an EHR, ask the vendor to break down the costs into a single checklist. An ASP model is easier to determine than one that is server-based because the prices are more consistent. The following is an example:

ASP

Initial purchase $6,000 to $10,000

Interfaces $2,500 to $7,500

Maintenance agreement $6,000 to $11,000

Implementation $3,500 to $10,000

Total $18,000 to $38,500

Length of Contract
Most EHR vendors require a minimum two-year licensing agreement, but some require as much as a 10-year minimum. Keep in mind that it will take all of two years to learn how to use the system, while others say, “We earn the doctor’s business every year.”

Also, ask about fees to withdraw data. Any vendor interested in preserving its reputation will provide data in a common format for the practice to reinstall into another system; however, the withdrawal fee may be upward of $50,000.

— Carolyn P. Hartley, MLA, CHP, is coauthor of the newly released book Technical and Financial Guide to EHR Implementation and president and CEO of Physicians EHR, LLC, in Cary, N.C.