Understanding the Costs
EHR costs can be broken into two categories:
- Upfront costs at implementation
- Annual or recurring costs, which include maintenance
Both categories include software, hardware, and service costs.
| Software costs (for both ASP and Client/Server models) include programs besides the EHR such as: |
Hardware costs, incurred if you choose Client/Server, can include: | Service costs can include: |
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Confirm what is — and what isn’t — included. Get specifics about what’s included in the contract. For instance, some vendors limit training and charge additional fees when that limit has been exceed; others offer no training. Make sure you understand what you’re buying.
Beware of hidden costs. Make sure you fully understand what rights a license grants you and what you’ll have to pay extra for. This will reveal all costs and help you calculate the grand total price for your needs.
PAYMENT OPTIONS
When all costs are included, EHR implementation can easily cost $30,000 per physician; this is a major investment. Luckily, financing options make affording EHRs easier.
Bank loan: Many banks offer low-interest loans to practices implementing EHRs. These loans require a down payment and usually have 3-5 year terms.
View a list of local banks with special offerings for physicians adopting EHRs.
Line of credit: A line of credit gives your practice liquid capital as needed, not unlike a credit card. Just like a credit card, you’ll have a spending limit and pay interest on any outstanding balance. The benefits of a line of credit include no down payment and no interest if you don’t carry a balance. Using an entire line of credit to purchase an EHR may not be a good choice, however, as it ties up all of your reserve funds.
Pay it off quickly. Taking too long to pay off a line of credit is dangerous: if it takes more than five years, you risk being stuck paying for a system on its way to obsolescence.
Lease: Leases are the most common way of paying for healthcare IT because they don’t require a down payment and offer quick approvals and flexible payments.
There are two lease options: finance and true. In a finance lease, you own the product at the end of the term. However, there’s no early repayment option and the interest rate may be higher than on a loan or line of credit.
Under a true lease, you don’t own the EHR at the end of the lease, though most contracts include a fair-market-value purchase option at the end of the term.
Which lease is better? There’s no one answer to this. The lease that’s best for you will be determined by your situation. True lease payments are generally lower because you aren’t buying the EHR over time. Finance leases save you end-of-term purchase fees and make affording an EHR easier.
If you’re purchasing your EHR from more than one vendor, leasing hardware and software separately may net you a better deal. As always, though, discuss your options with a leasing agent and your accountant to determine the best approach.
Cash: Be cautious about buying an EHR in cash. Only do this if you have extremely strong, profitable cash flow. Be sure to consult your accountant before undertaking this option — spending your entire cash reserve wouldn’t be wise.
ASP: You’ll get the lowest upfront costs by selecting an EHR offered on the ASP (Application Service Provider) model. Since you make monthly payments under this model, your initial costs are lower — and some ASPs offer an option to buy. You can also write off your monthly fees — generally $150-$800 per doctor per month — from your taxes.