EHR Incentive Inflates EHR Pricing

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.

About the author

John Lynn

John Lynn

John Lynn is the Founder of the HealthcareScene.com, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference, EXPO.health, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.

5 Comments

  • It sounds lame when I say it this way, but this was an easy prediction to make…even back in 2009, before anything was defined or money started flowing:

    http://www.pedsource.com/chipsblog/american-recovery-and-reinvestment-act-2009-and-pediatricians

    Here’s the salient paragraph:

    “Think back to Microeconomics 101 and what you learned about the effect on a market when there is a known subsidy. Although there are many variables to consider (the elasticity of demand, whether the subsidy is given to the purchasers or producers, etc.), don’t you know what will happen in the EHR world? When the EHR companies know that you will qualify for $40,000 of subsidy money over 5 years, what will happen to the price? Isn’t it more likely that the price pressure will be, in fact, negative? Will you also follow the lesson learned a million times a day in retail stores that your “rebate” will actually drive you to purchase more than you need?”

    I’m hardly a genius.

  • Of course EHR prices have gone up. This is what happens when government mandates are thrust upon any free-market product: the cost is passed on to the consumer. A business that can’t maintain a profit is not a business.

    Vendors have to put significant effort towards meeting meaningful use requirements. MU requirements also increase Implementation effort to ensure customers actually understand and will qualify for the incentives. Many vendors have had to put long-desired enhancements on the back burner (or have had to outsource some development) because of mandates like immunization registry reporting, PQRI, ICD-10, SNOMED, biosurveillence, etc.

  • Although this might happen in certain circumstances and by few companies, I see the EHR pricing on par w/ the industry in terms of SaaS pricing; and comparatively lower than the Client/Server licensing models.
    Having said that, we see the pricing more or less trending down – as far as the base pricing is concerned.
    As new features are added such as the Mobility App or a Patient Self Check-In, Patient on-line scheduling, etc., each of these features are priced individually after consulting with the ‘Focus Group’ of clients and is based on their feedback.
    Although the base EHR pricing will trend down, the overall payment will increase with associated features and levels of automation across a practice. This is what we see in the market place today.

  • To imply that the cost of an EMR is directly pegged to the amount of incentive funds ($44K per provider) is an interesting debate. Just as interesting to me is why a provider would not expect to spend every last nickel of that $44k on EMR? To think otherwise would imply that government funds made available to OFFSET the cost of an EMR are being provided for another purpose. There aren’t supposed to be excess funds to cover operational expenses, office furniture, vacations, etc. These funds are available to providers who purchase, implement and adopt a certified EMR that will someday contribute to the overall good in healthcare.

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