From The Editor | September 14, 2009

How Much Will An EHR System Cost You?

kencongdon

By Ken Congdon, Health IT Outcomes

In most instances, it’s not too difficult for a business looking to make a significant software investment — say an ERP (enterprise resource planning) or CRM (customer relationship management) system — to put together an RFP and receive some solid, and fairly accurate, cost quotes in return. This has not been the case in healthcare, particularly when it comes to EHR software. Most of the hospital executives I speak with have been frustrated and overwhelmed by the EHR buying process. For example, when they ask vendors how much an EHR system will cost them they are typically given one of two responses — the vendor either does a song and dance to successfully duck the question or they provide the hospital with a pricing matrix containing so many variables it requires an advanced degree in calculus to decipher.

Why is this seemingly simple question so hard to answer? Well, unlike ERP and CRM systems that are mature and have most common system integrations standardized, EHR systems are still in their infancy. Therefore, the truthful answer to the EHR cost question is “it depends.” It depends on the size of the hospital, the implementation cycle, the legacy systems involved, and whether the software you’re evaluating has integrated with your legacy systems before.

The one universal truth in all scenarios is that an EHR system is going to be expensive — it’s just a matter of how expensive. For example, I’ve heard of EHR system price tags for 500-bed hospitals ranging from $10 million to $70 million. What’s the reason for such a huge discrepancy and how can you know whether your hospital requirements will correlate to an EHR system that costs $10 million, $70 million, or somewhere in between? The information below illustrates the reasons for EHR cost discrepancies and hopefully will provide you with a framework to get more concrete and consistent quotes for your EHR project based upon the requirements of your hospital.

Ensure You Compare Apples To Apples When It Comes To EHR Systems
One reason hospitals often become frustrated with the EHR evaluation process is because they compare EHR solutions that are built on completely different underlying technologies. There are three main frameworks for EHR systems: 1) server-based EHR systems, 2) ASP (application service provider)-based EHR systems, and 3) open source EHR systems. Each of these EHR system models has their own distinct pricing structure, capabilities, and internal IT requirements. For example, vendor-built, server-based EHR systems typically carry the heftiest license fees (upwards of $75,000 each) and overall costs ($25 to $50 million for a 500-bed hospital), and upgrades to these systems must be uploaded on a regular basis by IT personnel. However, vendors offering server-based solutions typically work closely with hospitals to build custom integrations to legacy systems, upgrade the system based on client feedback, and provide service and support to the system throughout its life cycle. ASP-based EHR systems have lower license fees (around $6,000 each) and, because the solution is hosted, the ASP automatically implements upgrades. However, with this model, EHR data resides on the ASP’s offsite server, requiring the hospital to relinquish control of its data, including disaster recovery capabilities. The open source EHR model has proven to be an affordable alternative to proprietary vendor systems. In fact, 320-bed Midland Memorial Hospital in Texas is reported to have implemented an EHR system based on a commercialized form of the open source VistA EMR operating in all veterans hospitals across the country for approximately $6.4 million overall. The downside to this model is that it requires a great deal of internal IT labor and expertise to develop custom legacy integrations. Furthermore, the open source community — not a vendor — is typically responsible for upgrading the system over time. You can streamline your EHR evaluation efforts by first deciding which EHR model is best for your hospital and then only comparing EHR offerings built on a common model.

How Common Are Your Legacy System Interfaces?
An EHR system must interface with the disparate practice management, laboratory management, diagnostic, pharmaceutical, accounting, and other systems already in use at a hospital. The cost associated with these interfaces depends on the “uniqueness” of your legacy systems. For example, if you have a practice management system from a popular vendor, then it’s more likely that an EHR provider has already developed integrations with that system. This will help keep your integration costs low ($2,500 range). However, if you use a lesser-known, discontinued, homegrown practice management application, then a vendor may need to develop integration scripts from scratch — raising your integration costs to $8,000 or more per application. By knowing the systems you’ll need to integrate with an EHR prior to evaluation, you can make more informed vendor decisions and control your overall implementation costs.

Get What You Pay For When It Comes To EHR Implementation
From what I’ve learned, the average EHR system implementation cycle is between three and five years and the cost of implementation services can range from $3,500 to $10,000 for ASP systems and $20,000 to $40,000 for server-based EHR systems. However, different vendors may have very different ideas of what those implementation services will include. You’ll want to clarify this deliverable with your vendor prior to signing a contract. Quality implementation services should include workflow analysis and redesign, template customization, and staff training and shadowing.

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While I know the information contained in this article won’t allow you to precisely calculate your potential EHR spend, hopefully it does help provide you with a starting point and game plan in which to collect some more specific and accurate answers to your EHR cost questions. Finally, it’s important to remember that implementing an EHR system is a journey rather than a destination. In other words, you’re never really “done” implementing an EHR system. Ongoing use of the system will always require additional integrations and upgrades that will carry with them recurring costs. The information contained in this article is only intended to help you evaluate costs for implementation of the initial system.