Financing And ROI

While the health information technology (Health IT) landscape continues to evolve, cost, both direct and indirect, remains the single largest barrier to the adoption of electronic medical records (EMRs) and other Health IT. It is important to know your costs, your options for financing, and how to think about your return on investment (ROI) upfront.

Costs

Make sure you understand both the implementation costs (one time set-up) as well as the ongoing (licensing and maintenance) costs for the products you are considering.

Set-up costs

There are many costs to implementing an EMR system, some of which may be unexpected costs like staff overtime, reduced revenue during initial implementation period or vendor travel costs. Studies suggest that initial costs average $30,000 per physician. Set up costs typically include the following:

• Vendor set-up fees including the cost to build a system for your practice, vendor travel and implementation assistance.
• Add-ons or customization of the software for your practice.
• Interfaces with other systems in your practice (practice management, affiliated hospital or diagnostic lab systems).
• New PCs for each exam room, physician office and staff stations.
• Hardware for networking of PCs including wireless routers and/or cable installation and file servers (if the vendor is not an ASP provider).
• New printers to be stationed close to exam rooms and/or in physician offices.
• Scanning of existing paper charts and conversion of paper charts to electronic format.
• Training classes, lost staff productivity, lost physician revenue and potential overtime.

Ongoing costs

After initial costs of purchase and implementation, costs typically stabilize. Ongoing costs can range from $3,000-$15,000 per physician per year. Ongoing costs include:

• Leasing costs with the software vendor.
• Maintenance of the software such as upgrades or further customization. These costs may sometimes be included as part of the vendor licensing contract.
• Annual subscription and technology support for hardware or software. These costs may be included as part of an ASP contract.
• High speed internet connectivity, particularly for ASP arrangements
• Security, firewall and virus protection applications to protect your patient data and office productivity.
• Back up procedures and additional storage for EMR data.
• On-board training of new physicians or staff.

See the selection tools and templates section for vendor cost-comparison tools that you can use during the selection process.

Financing

Most physicians have concerns about financing their investment in EMRs. While there has been some loosening of the Stark and anti-kickback laws, which would allow for some physicians to receive financial assistance from hospitals, it is not clear how this will impact adoption of EMRs. Consequently, the burden will remain with the physician at least for the short term.

There are basically two financing models for EMR systems: licensing, leasing and application service provider (ASP).

Licensing

Many practices license a vendor's software. This requires you to purchase individual licenses or “seats” for you and each member of your staff. The arrangement may require you to purchase a license for all potential users or it may require you to purchase a license for a maximum number of “simultaneous” users (ie maximum number of people on the system at one time). A license agreement typically means that the software will be owned by the physician with some restrictions. Make sure that you purchase enough licenses or “seats” to avoid competing for access.

Leasing

A leasing arrangement includes a monthly fee paid to the vendor in exchange for use of the software product. However, physician must purchase the server hardware to support the software application and may also have to pay for customizations & initial installation support.

Application Service Provider (ASP)

ASP vendors sell products that are typically Web-based applications that run on the vendor's equipment at their site or at a secure data center facility. They do not require a physician or practice to own or maintain the server and some related equipment since the software and database content (patient data) are stored at the vendor's site. In addition, the backups, servicing and upgrades are all done by the vendor so there is less disruption to the individual practice to perform these functions. This may be a good choice for practices that want to concentrate on changing their business processes and leave more technology upgrades to the vendor. 

Return on investment (ROI)

While it is truly hard to quantify all benefits and costs associated with implementing an EMR, there are some resources available to help you evaluate the potential ROI for your practice.

AAFP has a separate sheet for estimating your costs. Although they are not combined into a single ROI calculation, they will allow you to estimate your ROI.