A major physician-owned specialty hospital located in the northeast selects a new certified electronic health record technology (CEHRT) with an EHR agreement that protects their interests and reduces risks.
Crystal Clinic Orthopaedic Center (CCOC) was looking to adopt a new certified electronic health record technology (CEHRT) and decided to conduct several due diligence activities prior to negotiating with their selected vendor. The vendor’s cost projections didn’t include all associated costs, the software agreement was weighed heavily in the vendor’s favor, and the implementation statement of work didn’t sufficiently detail the vendor’s responsibilities and commitments, nor was it explicit concerning CCOC’s obligations. CCOC needed help determining the total cost of ownership (TOC), defining specific revenue cycle system requirements, developing a detailed statement of work, and negotiating with the vendor.
Furthermore, contracting for CEHRT is a complicated endeavor. And, the list is massive and confusing. There are scope of use limits, expansion charges, transaction charges, software licenses, and services for implementation, support, hosting, and equipment for the primary vendor and other third-party vendors. Standard software agreement terms have morphed into vendor safeguards or have just disappeared, such as:
- Acceptance & warranty
- Service level agreements (SLAs)
- Invoicing (per milestone schedule)
- Ineffective training/approval of training
- Project management quality assurance
- Testing acceptance criteria
- Performance standards
- Project management planning & acceptance
- Use of subcontractors
- Milestone-based payment schedule
While working side by side with the client’s internal work group to harness all of the EHR costs, both apparent and hidden, we built a model to forecast the TCO over the contract term. For the TCO, our experts identified:
1. Difficulty to predict costs
- Transaction fees for patient access (eligibility, address verification, Medical necessity, payment calculator) & patient accounts (patient statement)
- Subscription fees
2. Ongoing fee increases (annual increases, service expansion fees, and renewal fees)
- Application fees
- Other services (managed services (hosting), application services, subscription services, application management services, employer services, transaction services, & shared computing services)
3. Typically missed costs
- Costs to maintain legacy applications to work off the accounts receivable (application maintenance, hardware refresh, and third-party vendors)
- EHR archive to maintain current patient records
- Training resources (space & equipment)
- Increased vendor fees based on strategic business pro forma
- Client staff resource back-fill costs
- Consulting fees (program management, quality assurance, POMQA, chargemaster update, change management)
- Participation in EHR user group activities
- Implementation contingency costs
- Other equipment (not vendor provided)
- Interface fees to connect systems to the EHR
We thoroughly reviewed all agreements, performed analyses, developed recommendations, and facilitated negotiations to better align and balance the agreements. The following concerns were resolved for CCOC:
- Ongoing fees began at first productive use. This encouraged the vendor to complete the testing and implementation.
- Third-party software warranties were passed-through.
- A warranty based on business office key AR performance indicators was agreed upon between CCOC and the vendor with explicit AR expectations and penalties for nonperformance.
- Business volume related to scope of use limits and expansion fees were thoroughly vetted and revised or eliminated.
- A reasonable contract term was decided.
- Implementation scope of work details were enhanced.
- Service-level expectations were clarified.
In the end, CCOC achieved a better-balanced EHR agreement that protects their interests, reduces risks associated with the implementation, clarifies implementation roles and responsibilities, provides a mechanism to recover the costs associated with potential lost/delayed revenue, and provides better clarity regarding implementation and ongoing support costs.