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.