Wednesday, January 20, 2010

Trendspotter: EHR vendors peg financing deals to incentives

By Ken Terry

The deals from EHR vendors are getting better.

Among the latest offers to be announced is Ingenix’s for its Care Tracker EHR. Ingenix is offering an interest-free loan through OptumHealth Bank, a fellow UnitedHealth subsidiary, to cover implementation and subscription costs until Nov. 30, 2015. Qualifying physicians can repay the loans with annual government payments for meaningful use, which can total up to $44,000 over five years if they’re from Medicare, more if from Medicaid. Physicians who buy a Care Tracker EHR this year would pay nothing out of pocket for use of the remotely served, Web-based software. They’d have to repay the first installment of the loan after they received their government check next year; for the rest of 2011 and part of 2012, they’d pay nothing until they got their next government payment.

Like many other vendors, Ingenix is offering a meaningful use guarantee: If a practice doesn’t qualify for the annual government incentive, it doesn’t have to pay back the previous year’s loan.

Allscripts is offering practices deferred payments for the first six months on loans that are available through “preferred banks.” After that, they have to pay back the loans over 54 months. At the end of that term, they own the software. “Unlike some of the subscription models in the market, where you continue to pay on an annual basis even after that 60-month period, our solution is rent to own,” says Allscripts President Lee Shapiro. “And the loan payments are very competitive with any subscription services in the marketplace.”
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Allscripts offers its MyWay software on a subscription basis, too, and many small practices prefer that arrangement. But Shapiro notes that if a practice wants to purchase the Web-based EHR and have Allscripts remotely host and manage it, that is also an option. Allscripts guarantees that its software will meet HHS’ EHR certification criteria. If it doesn’t, it will wave up to 12 months of a client’s monthly support fees.

NextGen is offering three options. Along with a six-month deferred payment option, it is also allowing doctors to defer payments for four months, followed by incrementally increasing payments (four months at half payments, eight at three-quarter payments, and 44 months at full payments). The third possibility, available only to practices of three physicians or more, is a no-money-down purchase with 12 months of deferred payments, followed by a standard five-year loan.

Mark Anderson, a health IT consultant based in Montgomery, Texas, points out that most leading vendors are offering zero-interest or deferred-payment arrangements in expectation of the government incentives. “In reality, the cost ends up being the same,” he says. “If your payments are deferred, then the interest rate is higher later. If they’re zero interest, the practice ends up paying more for the solution.”

Shapiro, however, says that Allscripts is offering “very attractive programs” through its banking partners. The vendor is using its buying power, he says, to obtain loans at better rates than most practices could get on their own.

The other thing to bear in mind is that the software cost is only part of the total cost of ownership, which also includes outlays for hardware, training, and implementation. Steven Tolle, senior vice president of Ingenix’s Physician Solutions Group, says that, especially in the small-practice space, vendors must minimize these expenses to get physicians onboard.

Still, the five-year cost of subscribing to Care Tracker is $7,000 per physician, and Ingenix estimates that the total five-year cost for the EHR system is $23,500. That is less than the $44,000 maximum payment from Medicare, but a significant portion of that amount must be laid out upfront, despite the zero-interest software financing.

Ingenix and other vendors are aiming their new offers squarely at small-practice physicians who have notoriously resistant to EHRs. To what degree the software vendors will succeed is uncertain. Certainly, many physicians remain hesitant to buy, even with the government incentives. Some doctors fear they will lose productivity, and some have heard horror stories about failed EHR implementations. On the other hand, Allscripts just reported a 30 percent hike in revenues for the quarter ended Nov. 30, 2009.

The real deal lies somewhere between these viewpoints. Many physicians will adopt EHRs and show meaningful use in 2011, but some will need help that goes beyond what their vendors can provide to do that. What could make a big difference are the government’s plans to launch 70 health IT regional extension centers and have community colleges train thousands of EHR technicians. The sooner that happens, the better for everyone.

Ken Terry is a New Jersey-based freelance writer and the author of the book "Rx for Health Care Reform." In his weekly Trendspotter column, Ken is looking out for trends and changes that may affect your practice.

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