EMR System Purchase Financing Information | medicalrecords.com
Purchasing an EMR system I can be a significant investment decision for any health care provider, whether working as a sole provider or as part of a group practice. With typical in-office installations ranging from $50,000 to $100,000 and more per physician, purchasing and installing an EMR system can represent a significant financial burden for a health care provider.
Title IV of the Health Information Technology for Economic and Clinical Health Act of 2009 (the HITECH Act) provides up to $63,500 per health care provider in funding for those who implement EMR systems which are certified by an Office of the National Coordinator for Health IT (ONC) Authorized Certification Body (ONC-ATCB). While these federal grants can in fact cover a substantial portion of EMR system costs, payments are made only once there is “meaningful use” of the system, and are staged over the course of several years, all of which obviously occurs well after the systems must be paid for.
In addition to simply paying for an EMR system from the cash flow of a health care providers’ practice, deferred payment or leasing programs programs are available from many EMR vendors, large corporate partners of these EMR vendors, and speciality finance companies. There are many varieties of leases, and if structured appropriately, the full purchase price of the system may still be deductible in the first year while spreading payments over three or more years, generating significant cash flow over the first half of the lease.
There are various provisions of the US Tax Code, including Section 179 and the related Bonus Depreciation provisions, which can allow health care providers to deduct the full purchase price of EMR systems immediately on their business tax returns. This deductibility of a major capital purchase can substantially improve near term cash flow for most health care providers. However, this is a complex area of the tax code, made even more complex by the uncertain status of Section 179 deductibility for purchases made after Dec 31, 2011, since final Congressional approval of extending this deduction had not occurred as of January, 2012.
In addition, some EMR vendors offer “cloud-based” or Software-as-a-Service (SaaS) systems, which provide EMR functionality through a web based application accessed over the internet. Most of these systems are priced on a monthly per-user basis, substantially reducing upfront capital expenditures.
While it’s always important to make sure that contract provisions set execution standards which align with your business needs, installment purchases or leases can give vendors leverage if there are installation or usability problems, so be sure to make sure that payment terms are tied to key milestone achievements. An excellent summary guideline can be found here.
TAKEAWAYS
There are available federal grants of up to $44,000 for installing and making “meaningful use” of an ONC-ATCB certified EMR system, but this incentive money is available well after purchase and installation.
“Cloud-based” or SaaS EMR solutions may substantially reduce upfront capital expenditures.
In addition to outright purchase, there are installation purchase or leasing plans available from some EMR vendors and from speciality finance companies.
Deductibility of EMR systems purchases for federal tax purposes is a complex area, with several tax rules directly affecting this still in a state of flux. Consulting with a professional tax accountant or attorney is essential.