Overcoming the Financial Barriers to Acquiring an Integrated EHR
Fri, 2011/08/12 - 9:00am

An electronic health record (EHR) that shares a single database with a practice management system is an integral tool that allows physicians to manage their practices more efficiently, reduce overhead and improve the quality of care. This is commonly referred to as an "integrated EHR." Cost is one of the most commonly cited reasons why physicians do not implement these systems. The American Recovery and Reinvestment Act of 2009 contains incentives for using an EHR meaningfully, but in the majority of cases each practice will need to make the initial investment in the EHR they plan to use. This article will discuss the financial benefits of investing in a fully integrated, single database, EHR/Practice Management system. It will also describe the benefits of leasing vs. ownership of an integrated system.

Benefits of an Integrated EHR

The financial advantages of owning an EHR have been stated elsewhere and include improved charge capture, elimination of transcription, elimination of paper records, staff reductions, reimbursement through pay-for-performance programs, and reduced malpractice insurance premiums, to name a few. However, the use of an EHR that shares a single database with a robust practice management application can result in additional savings and enhance revenue.

The following list details some of the advantages of integrated EHR/Practice Management systems:

  • Bridge the gap between billing staff and medical staff through process and workflow refinements 
  • Readily provide feedback to clinicians that will allow for compliance with correct coding initiatives, even payer specific issues
  • Facilitate better workflow including electronic messaging between billing and clinical staff, reduction in redundant processes, and automation of difficult, necessary and common procedures and follow up requirements
  • Improve charge capture through standardizing billing procedures, automated E&M coding, and more complete charge entry
  • Allow for reporting that pulls clinical and billing data from the same database
  • Complete integration of billing, demographics and clinical information 
  • Update demographics from the clinical or the practice management application
  • Avoid the cost of maintaining an interface between two software products 
  • With a non-integrated system, upgrades of one product may lead to one system no longer being able to communicate with the other unless another team works on the interface

Benefits of Leasing

Since the purchase of an integrated EHR/PM system involves the procurement of the equivalent of two software packages, the initial investment is typically somewhat greater than the purchase of an EHR alone. Two of the most common methods by which practices invest in these systems are by either purchasing or leasing software licenses. The license purchase is typically several thousand dollars per physician which can cause concern over the initial capital requirements. Leasing offers a viable alternative to this so practices should consider its benefits. Leasing maximizes the EHR procurement process because it virtually eliminates the upfront capital requirements allowing you to spread out the capital outlay over a period of time that will ensure cash flow remains balanced.

The following outlines additional benefits of leasing.

  • Tax treatment - The Internal Revenue Service does not consider certain leases to be purchases but rather tax-deductible overhead expenses. Therefore, medical practices can deduct the lease payments from income, thus reducing the net cost of the lease.
  • 100% financing - Since a lease often does not require a down payment, it is equivalent to 100% financing. Physicians can conserve the capital that would have been used for a down payment and reinvest it in the business.
  • Immediate write-off of dollars spent - With leasing, payments are treated as expenses on the income statement, so the technology solution does not have to be depreciated over an extended term.
  • Flexibility - As physicians' practices grow and needs change, the lessee may be able to add or upgrade technology at any point during the lease term.
  • Asset management - A lease provides the use of the technology solution for specific periods of time at fixed payments. The leasing company assumes and manages the risk of technology ownership. At the end of the lease, if the physician elects to return the technology, the leasing company is responsible for the disposition of the asset.
  • Upgraded technology - An EMR can make physicians' practices more efficient. Technology solutions that could depreciate quickly should be leased to limit a physician's risk of getting caught with obsolete software. Plus, leases make it easier to upgrade or add technology solutions to meet ever-changing needs.
  • Speed - Leasing can allow you to respond quickly to new opportunities with minimal documentation and red tape. Many leasing companies approve applications within a few hours.
  • Improved cash forecasting - When physicians lease, they can accurately forecast the cash requirements for the EMR system since they know the amount and number of lease payments required, and with leases, there are no floating fees.
  • Flexible end-of-term options - There are typically three flexible options at the end of a term. If the lessee elects to include hardware in the lease, for example, they will have the option of either returning the equipment, purchasing the equipment from the leasing company, or extending the lease for an additional period of time.
  • Tax benefits - Leasing companies can pass the tax benefits of ownership on to the physician in the form of lower monthly payments.
  • Easier financing than loans - With a lease, physicians can avoid requirements like compensating balances (i.e., deposits banks can use to offset unpaid loans), large down payments, client list reviews, and cash flow projections, making the finance process faster and easier.

Combining the Benefits of Leasing to Acquire the Benefits of an Integrated EHR

Leasing allows physicians to make payments over a period of time and utilize the benefits from the integrated EHR to make those payments. Most leasing companies will structure the lease with a six month deferral. This allows a practice to acclimate with the EHR during a period when the practice is not achieving the maximum benefits without making any payments. This is also especially useful for a new practice which may also be building patient volume during the initial months.

Example: Three physician practice licenses an integrated EHR/PM system and additional services for $35,000 (including licensing fees, support and training services) and signs a 6 month deferred payment lease with five years of payments.

The average payment factor for the above lease plan would be $819.53 (or $273.17 dollars per physician) per month. Let's consider just one of the benefits of an EHR: reduced staffing requirements. If a practice can reduce one headcount at approximately $43,750 ($35,000 base plus benefits and taxes) this would be a cost savings of $3,645.33 per month. This one cost saving item alone (not factoring in improved coding, elimination of transcription fees, etc.) would more than offset the monthly lease payment.

In summary, an integrated EHR/PM system has numerous advantages over maintaining an interface between two disparate systems. The modest increase in the cost of making this purchase is an excellent investment. Leasing eliminates the need to make a large upfront investment in software and services and should be considered when physician practices are evaluating the cost benefits of purchasing EHR systems.