The pressure is on to plug in. The federal government put billions of dollars on the table for physicians and hospital officials to digitize all patient records in their offices in the next four years. Those who start late get less money.
With health IT money up for grabs, many EHR vendors are offering financing deals to attract business. But, just like shopping for a car, experts warn about reading the fine print before buying
For healthcare providers, particularly doctors in small practices, the push for change could hardly have come at a worse time. They're being asked—some say forced—to pony up the capital to pay for costly new technology while still reeling from a punishing recession. Physician adoption of electronic health records has been far slower than was hoped, and financial strain is the top reason cited by numerous studies and polls.
But like a car dealer ready to help you drive off the lot in a brand-new vehicle you can't afford today, some of the marquee names in health information technology are ready to lend doctors a hand.
Here comes the EHR salesman with a silk tie, a calm demeanor and a portfolio of solutions. He offers a long-term financing contract and a promise that the doctor can have an EHR now, virtually for free: Just sign on the dotted line, pay little or nothing upfront and owe no interest until the federal grants start rolling in. And he guarantees the product will meet the government's still-undefined requirements to qualify for federal incentive payments under the American Recovery and Reinvestment Act of 2009.
The salesman hands the doctor a pen. Sign today, install tomorrow, and pay nothing until next year when you get the government's money, he says.
This scenario is playing out in physician offices across the country. But experts who advise providers are urging them to at least consider some of the risks before rushing into any of the special financing deals being offered by a growing number of vendors, including Allscripts-Misys Healthcare Solutions, GE Healthcare, Ingenix, McKesson Corp., and Siemens, as well as a group of software vendors offering their individual systems under loans financed through IBM Global Financing.
Advocates say it's best to disregard sales tactics and focus on the hard-nosed questions they should have been asking about EHRs all along: Will a system work as promised, and what specifically happens if it doesn't? Will the long-term costs justify the purchase? Will the EHR vendor be around in five years? What are the consequences for missed payments?
In other words, the experts say, don't purchase an EHR just because the vendor-financier appears to present the easiest solution to the conundrum created by the federal mandate: the need to pay for technology with government subsidies that are contingent upon successful use of the system.
“This cash-flow issue is an important issue, and we recognize that. We just want to make sure that they're making the deal for the right reasons and not just because the financing was enticing,” said Sue Severson, the director of health IT for Stratis Health, a not-for-profit, Bloomington, Minn.-based quality-improvement organization that offers healthcare providers assistance in evaluating EHR deals. “Look into the product first before even looking at the loan program.”
Severson said her research has found that physicians should generally plan on spending $25,000 to $50,000 per physician for hardware, software and implementation costs, plus another 20% of those costs for ongoing maintenance and technical support services. The federal government is offering up to $44,000 per physician in subsidies delivered via enhanced Medicare payments over four years, but the first payments won't start flowing until 2011. Alternatively, subsidies will also be available to practices through Medicaid.
That tight timeline paired with the complexity of implementing an EHR system means the leverage at the bargaining table could be skewed as physicians and hospitals attempt to protect themselves in the event things don't go well, said Steven Fox, a partner with the law firm Post & Schell and chairman of the firm's IT group. “The ultimate power a buyer has—I use the analogy of buying a car—is the ability to say, ‘No thanks,' and walk out of the showroom,” Fox said. “If you're not willing to do that and if the vendor knows you're not willing to do that, you're not going to be able to get the contract terms you need.”
Some physicians might not realize it yet, but buying an EHR system with financing instead of cash carries hidden risks that ought to be considered, because ultimately a doctor's entire trove of patient information could be at stake, experts say.
Imagine a scenario where a physician has failed to pay her EHR bills. A roomful of patients is waiting in the lobby when suddenly a group of men with two-wheel carts walk in and begin removing all the computers, with patient files and business records. They don't ask any questions, and they don't stop when you tell them to leave. They're not robbers, but repo men. And they're here to reclaim the EHR system.
“It's absolutely essential to make it clear in the contract that that data can never be held hostage, no matter what, even if you haven't paid, no matter what the reason is,” Fox said. “If you haven't provided for that, it gives the vendor the ability to say, ‘You want the data? You have to pay.' ”
Sound hard to believe?
“We have that right, ultimately, if they didn't pay and there was no resolution to the dispute,” said Jim Ambrose, president of healthcare financial service, equipment and finance for GE Capital, which is the division of General Electric Co. that offers the financing for GE Healthcare systems. Several other vendors interviewed confirmed they have a legal right to repossession in cases of nonpayment.
But in a conference-call telephone interview with Ambrose, Jim Corrigan, a senior vice president and general manager for healthcare IT at GE Healthcare, jumped in to qualify Ambrose's statement: “I can't recall a time when we've had to de-install a product because of a customer's inability to pay. We have that right, but we have always seemed to work out a way with our customers to help them bridge a bit of a tough spot.”
It's this separation—between the vendor providing the EHR and the banker loaning the money to finance the deal—that is causing many of the calls for caution by the experts who work for the healthcare providers.
“Your payment obligation now is to a financing entity, but the performance obligation is to your vendor. So you could have a disconnect between the payment obligation and the performance obligations,” said Jeffrey Ganiban, a partner in the healthcare law division at Drinker Biddle & Reath. “Your financier could say, ‘If you have a problem between you and the vendor, that's not my problem. I'm just a bank.' ”
Siemens Healthcare, though, has long offered its hospital customers the option of financing its software through Siemens Financial Services or other partners, including IBM Global Financing. Chris Roth, vice president and controller for Siemens Healthcare, said he couldn't recall a single default on one of those loans. When there were “bumps in the road,” the lenders have been inclined to act as partners to find a solution even though Siemens Healthcare is not a party to the loan contract, Roth said.
“If something goes wrong, don't expect to see the bounty hunter,” Roth said. “There is nothing to go take back out. You're talking about labor and, in effect, floppy disks.”
In the case of Ingenix, which is a wholly owned subsidiary of UnitedHealth Group, physicians would have no physical property to repossess because its CareTracker EHR is entirely Web-based. But Ingenix is not without recourse for a physician who doesn't pay. “We would probably shut down their CareTracker capability at some point if the loan was not paid and we knew that they had received their federal money,” said Kim LaFontana, a vice president with Ingenix. “We could do that … it's like shutting down your Hotmail.”
Though the details will vary according to a customer's credit standing, Siemens Healthcare now is attempting to coordinate loans that allow hospitals to defer payments until the federal incentive payments start arriving: $2 million to start, plus additional sums in subsequent years depending on the portion of Medicare discharges in the hospital's payer mix.
Those payments, though, depend on the hospital deploying the technology in a way that meets the government's definition of meaningful use. “There would be an expected back fence,” Roth said. “Assuming we do things flawlessly and the hospital or institution doesn't adopt the right system or achieve the right metrics, they would have to pay at that time regardless.”
Like Siemens, some of these companies have been offering financing to potential customers for years, either through partner lending institutions or their own financial arms.
“This is not anything new from that light,” said Dan Michelson, an executive vice president and chief marketing officer for Allscripts. He wasn't sure exactly what remedies were in place should a customer fail to make payments to Allscripts' partner, U.S. Bank. “Whatever we've put in the contracts, people have gotten comfortable with at this point.”
Yet many observers said EHR buyers shouldn't expect the experience to be much different from buying a car. A bank doesn't modify its automotive loan terms just because the car itself may not have met the buyer's expectations.
“One of the things we've struggled with in the past is to make sure that financing is still tied to the vendor,” said Steven Waldren, director of the American Academy of Family Physicians' Center for Health Information Technology. “Once the vendor got paid, the incentive to find a solution was less. They had no obligation to make sure the software really worked.”
A crucial difference in an EHR loan compared with a car loan is what's at stake: a doctor's ability to freely access patient data. Even in cases where the data is guaranteed to be returned if the deal goes south, the doctor needs to make sure the contract says exactly how that would happen.
A partner with physicians
LaFontana of Ingenix agreed that the issue could pose a concern for physicians. She said her company tries to position itself as a partner with the physician, instead of just a vendor, and would always make arrangements to transfer patient data back to the provider, in whatever form they request it. “There's no case in which we would hold patient data hostage. That's not what a partner should do,” she said.
Lawsuits filed against one EHR vendor in South Florida alleged the vendor declined to give physicians passwords to access their patient data until they paid increased maintenance fees, and the company eventually filed for bankruptcy protection, according to court records and published reports.
Meanwhile in Wisconsin, the Milwaukee-based Independent Physicians Network in November 2008 sued its EHR provider, MedcomSoft, for failing to deliver a master index of clinical information for data-mining, court records say. The lawsuit was dropped four months later after MedcomSoft's law firm, Foley & Lardner, reported to the court that the company was not only in bankruptcy, but also it did not appear to have any employees or directors following a sale of its assets to a Pennsylvania-based limited liability holding corporation.
“I think we're going to see more of those kinds of horror stories,” said Nancy Nankivil, the senior vice president of quality and efficiency for the Wisconsin Medical Society. “There are some double-edged swords to all of this. Physicians are trained to provide patient care, and they now have to become IT experts, finance experts, legal experts, compliance experts.”
One of the ways recommended to avoid problems is to do business with companies that have a track record and a stable presence in the market. Few in the industry doubt that some of the vendors operating today will not exist in five years. Although mergers and acquisitions in healthcare are nothing new, observers say it's particularly an issue in the EHR world because the federal grants have become a “pot of gold” attracting vendors with little prior experience.
But Steven Grant will tell you that even picking a long-standing vendor is no guarantee.
Grant, a physician, is president and CEO of United Physicians, a 1,700-member independent practice association in Michigan. About five years ago the organization subsidized the adoption of an EHR offered by Misys Healthcare Systems in the offices of more than 170 of its physicians, after doing extensive research on the various functionalities of the software, as well as the histories of the companies backing them.
But in 2008, Misys was bought out in a $330 million deal to form Chicago-based Allscripts-Misys Healthcare Solutions. Grant said the merged company has begun informing United Physicians' members that it will no longer support some of its Misys systems, which his IPA helped underwrite, and that some doctors' offices must pay thousands in fees for installation of new software.
An Allscripts spokesman responded that practices such as the ones in Grant's IPA are in fact not required to make the switch from their Misys software, which the company will continue to support and maintain. Physicians will need the switch, however, in order to have an EHR that gets certified for stimulus incentives, and Allscripts has presented the cost to Misys customers as a return of $10 from the government for every $1 spent on the upgrade and associated hardware.
But Grant isn't happy. “We did a deal with Misys. They're not there anymore. They're AllScripts,” he said. “At the time, Misys was considered one of the top EMRs in the country. … We thought they were going to be around for a long time. Well, guess what.”
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