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EHR Incentive Inflates EHR Pricing

Posted on July 25, 2012 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

In a recent conversation I had, the question of EHR pricing came up. It was suggested in the conversation that EHR incentive money was inflating EHR pricing.

I wish that I had harder data on the price of EHR software. Unfortunately, there’s no really good source of EHR pricing across all the 600+ EHR comanies. At one point I considered the idea of creating such a resource, but the challenge of getting that type of information is ominous and might be impossible since many EHR vendors keep that information very close to the chest.

Since we don’t have the quantitative data that we’d love to have in this situation, instead let me offer some observational data on EMR pricing.

In my first couple years blogging about EMR software (I started EMR blogging 6+ years ago), I was able to witness a dramatic shift in the price of EHR software. The norm 6+ years ago was for an EMR for a small clinical practice to cost somewhere in the $30,000 range. For a larger group practice they were easily paying $100,000-200,000 for their EHR software. In almost every case this was a huge up front lump sum payment for the EHR software. Although, many of them conveniently offered financing for your purchase. These EHR were almost always an in house EMR software that needed a lot of up front costs for things like a server.

In those early years, we started to see a wave of mostly SaaS EHR software enter the market at a much lower price point. In most cases they were offering their EHR software for a small monthly fee (usually around $350-500/doctor). Of course at this same time a number of Free EHR software entered the market as well. Both of these entrances forced the price of EMR software to decrease dramatically. Sure, a few EMR software vendors pillaged a practice for an ourtrageous price, but for the most part the price of EMR software came down. Plus, the movement to the monthly charge pricing model for EMR software took hold. In most cases, EMR software vendors would offer a one time fee EMR pricing model along side a monthly per doctor EMR pricing model.

Over the past couple years I think we generally saw a leveling off of EMR pricing. However, I have seen one major thing happen with EMR pricing since the EHR stimulus money was introduced. The new bar for EMR pricing was set at $44k over 5 years. You can be certain that every EHR vendor has looked at their EHR pricing and compared it to the $44k over 5 years.

While I can’t say I’ve seen long time EHR vendors increase the price of their EHR to match the $44k of EHR incentive money, what I have seen is new EHR vendors pricing their EHR software accordingly. Instead of pricing their EHR according to market pricing, they’re generally inflating their EHR price to match the EHR incentive money. I believe this has driven the overall cost of EHR software up thanks to the EHR incentive money. Plus, it has held the EHR pricing of some EHR vendors higher than it would have been if the EHR incentive money weren’t there.

One other thing worth considering is the long term effect on EHR pricing because of the EHR incentive money. EHR incentive is creating an artificial pricing bubble, but eventually the incentive money will run out and I expect a number of EHR vendors to drop their price when that happens. However, what might have an even longer term impact on EHR pricing is the increased number of EHR vendors thanks to the EHR incentive money. Standard economics says more EHR competition leads to lower EHR prices.

What have you seen related to EMR pricing? I’d love to hear your thoughts and experience.

The Risk of Free EHR Starting to Cost

Posted on May 10, 2011 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

I’ve been writing about Free EHR since I first started this blog in 2005. Initially I was mostly writing about the “free” open source EHR model like I did in this Open Source in Healthcare post in 2006. I still remember when I found out about Free EHR vendor Practice Fusion and wrote this post in 2008 about Free EHR Software and Some of the Hidden Costs. I think it’s fair to say that I was a bit more skeptical of the Free EHR model then than I am now. Practice Fusion and Mitochon Systems are both Free EHR vendors that advertise on this site (Full Disclosure). So, I’ve had a chance to talk at length with both companies. I must admit that the more I talk with them, the more intrigued I am with the Free EHR model.

However, there are still challenges that are faced by the Free EHR model. This struck home quite strongly when I saw the relatively recent news about Free accounting software vendor, Outright, changing from a free model to a paid model. Funny thing is that I was really close to using Outright for my accounting, but then opted to go instead for the Free open source software Gnucash. However, this change in direction made me pause and wonder what would happen if a Free EHR vendor chose to switch from the free model to a paid model.

No doubt that any change in Free EHR business model would likely be similar to Outright where they provide a fair amount of time for users to remain on the free model. They’d also have to provide some way to get your data out of the EHR or else their paid model would not likely survive. The bad will that would be created from holding the practice’s data for “ransom” would be terrible for a company. Although, switching from a free EHR model to a paid one would be even more detrimental I think.

Of course, the EHR company could easily argue that at some point they’re faced with only a couple options: close the company or switch from the free to a paid EHR model. Faced with those options, would you rather have your EHR company go under or be able to pay them for the services you’re receiving? Although, as I’ve discussed in other Free EHR posts, just closing the company down completely wouldn’t likely be an option. Instead, the company would instead be acquired for some discounted rate by another EHR vendor. So, the real options would be to switch EHR companies since the acquiring company would likely want you to switch to their EHR or start paying for the EHR services. I think in most cases, EHR users would prefer to start paying for the EHR services. Even if deep down they’d feel like it was wrong and unfair.

As I argued in the post above, the real problem with all of this is that transferring EMR and EHR data isn’t as simple as even accounting data (like the Outright example above). Moving from one EHR to another is a pretty intense process and leaves much to be desired. Although, it’s not like Free EHR software are the only EHR companies that could go under, be bought out, be merged, etc. Everyone says that EHR company consolidation has to happen and so the transfer of data from one EMR and EHR company to another could happen for all sorts of EMR companies large (see Misys) and small.

Also, I think one other difference between the Free EHR companies and the Outright example above is that Free EHR companies aren’t just an ad only business model like Outright. For example, there’s a lot more value in aggregate healthcare data than there is in aggregate accounting data. Even anonymous healthcare data is incredibly valuable if done right. Not to mention a number of other possible business models that could be placed on top of a Free EHR offering.

As always, I’m not trying to scare people away from the Free EHR model or drive people to that model either. My point is to just bring to light all of the possibilities of what can happen if someone should choose to go with the Free EHR model. I’m sure there are even more angles to this which will be brought up in the comments. I look forward to the discussion.

I also sent an email to my contacts at Practice Fusion and Mitochon Systems saying I was going to write an article about this and asked them for a response. Here are their responses and I’m quite sure they’ll join us in the comments as well.

Practice Fusion’s response:
It’s hard to see a young company like Outright struggle with their pricing, but the truth is that being a free, web-based business is not for everyone. Practice Fusion does not succeed by being free alone. Our dedication to delivering the easiest to use product, our phenomenal support team, the support of 80,000 healthcare providers across the country, our sustainable platform – these are the elements that have made us the largest EHR community in the country. We are 100% committed to bringing free EHR technology to every doctor in the country and that will never, ever change.

Mitochon System’s response
There are two key differences between Mitochon’s free EHR model and the small software service company you cited, Outright.

First, Outright offers its services directly to individual consumers. There is no third-party payer involved and the service does not provide value-added for anyone but the individual purchaser. In contrast, healthcare is often compared to a three-legged stool: patients, providers (physicians, hospitals) and payers (health plans, employers). When a physician provides care to a patient, a third-party usually picks up all or part of the bill. Free EHRs can potentially add value for all three parties involved. Our experience has been that both payers and providers are willing to subsidize or support free EHRs through paid clinical messaging (ads, health message reminders).

Second, it appears that Outright tried the ad-supported model and it failed for them. Although the article does not state exactly why the advertisers were dissatisfied, it might be that the user demographic was poor. Perhaps the Outright users just didn’t buy enough of the advertised products.

In contrast, physicians are major purchasers of goods and services for their patients and their organizations. According to Dr. John Eisenberg, a leading medical economist, physicians’ professional fees alone represent about 20% of all health care expenditures and they are responsible for decisions that govern how 90% of each health care dollar is allocated. With annual health care expenditures in the U.S. now topping $2.5 trillion, clearly physicians are a highly desirable audience for paid messaging delivered by many different organizations.

In conclusion, we know for a fact that the free EHR model works now and we believe it will grow and expand dramatically in the future.