Under the American Recovery and Reinvestment Act of 2009 (ARRA), medical professionals, hospitals and practices that invest in electronic health records technology may be eligible to benefit from over $36 billion in government financial incentives. While it sounds peachy keen – incentive dollars do not arrive until after implementation and many practices see the upfront cost as a major setback to adoption. While the upfront cost can be a large investment, speed is of the essence. Those who implement EHR systems in the first year will receive the maximum incentive payout (February 29th, 2012 is the cutoff date for the 2011 calendar year). For each year following, incentives will be reduced by up to $5000.00 per year. By 2015, hospitals and practices will no longer be eligible to receive incentives and at that time could face penalties for not having the proper technology in place.
So while acting quickly is a must – making an informed decision about how to finance your technology is equally important.
Before getting started, you have to establish a baseline for making financing decisions (i.e. take into account all of the components of a complete EHR implementation such as EHR software, hardware to support it optimally, implementation services/costs, managed it services, etc). Analyzing your practice’s specific needs and situation will help you to decide how you will pay for EHR technology.
See below for an overview of the 6 most common funding options that may be available to you (to read and download the entire whitepaper by HP, visit http://www.healthcareitnews.com/sites/healthcareitnews.com/files/resource-media/pdf/3-3m5en5h.pdf)
1. Cash purchase
Pros
- Avoid loan or lease commitments
- No effect on credit standing
Cons
- Negative impact on practice’s cash reserves
- Unnecessary cash outlay if deferred loan or lease payments are available
2. Bank loan or line of credit
Pros
- Access to funds to bridge the reimbursement gap
- Rapid access to funds through credit line
Cons
- Cost of financing (down payment and interest rate)
- 100% coverage may not be available
3. Alternative Loan Program
Pros
- May include special low-interest options
- May have more flexible repayment terms than a conventional bank loan
Cons
- May have greater paperwork requirements and longer approval turnaround than a bank loan
- Availability may be limited to practices of a certain size or geographical circumstances
4. Software Vendor Financing
Pros
- May be a viable choice for Web-based projects with reduced hardware requirements
- Ability to tie financing to timing of major upgrades
Cons
- Covers software only; will need separate financing to cover hardware refresh, increasing overall complexity of financing
- May charge a higher interest rate than a bank loan
- Risk of data loss in the event of a payment dispute or other problem
5. Hardware Manufacturer Financing
Pros
- Comprehensive coverage without multiple financing agreements
- Choice of loan or lease, with the latter offering potential tax benefits over the lease term
- Formal programs for trading in, recycling or otherwise disposing of hardware at the end of its useful life
- Ability to tie financing to hardware lifecycle
- Potential for flexible terms with payments deferred for a period of time
Cons
- Not applicable if there is no major hardware refresh associated with your EHR investment
- Risk of manufactured using a self-interested third party to provide financing
6. Reseller Financing
Pros
- Existing trusted relationship
Cons
- May be a larger financing requirement than the reseller is equipped to make
- Unlikely to offer both hardware and software financing
- May require buyer to include a services component in financing
- Risk of reseller using a third party for financing
- May not be able to defer first payments
As you can see, there are many ways to finance EHR technology systems. Your organization’s specific needs will largely determine which of the options will work best for you.
If you are interested in receiving a one-on-one private consultation to better understand your technology needs, please click on the link below and our Relationship Development Specialist will contact you.
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