How to accurately price a successful EMR implementation

Who should read this: hospital and health system CIOs, CDOs and CFOs, project teams and procurement teams considering an EMR implementation in the next five years.

Introduction

Implementing transformative digital health projects such as an EMR (Electronic Medical Record) solution is one of the biggest expenses a hospital or medical treatment facility can incur. It is rare for such a project to demonstrate a financial return on investment in the first five years unless supported by external financial subsidies. While financial benefits are certainly part of the reason to implement digital health, any suggestion of a short-term ROI should raise eyebrows; organisations should instead focus on the very real clinical benefits of using an EMR as the driving factor, while presenting a complete and accurate view of the associated costs.

In my review of numerous EMR business cases, both in the United States and Australia, I have observed that cost models for EMR projects are often flawed by erroneous assumptions or missing cost data. I have also seen organisations choose a specific, less experienced vendor because the cost looks more attractive on paper, only to find this a false economy after severely underestimating the actual cost of making the solution work. In the worst cases this results in termination of the project, which not only delays the realisation of EMR benefits, but undermines cultural confidence within the organisation, affects future implementations, and carries career-ending implications for those responsible.

Organisations also over-estimate their readiness to implement an EMR. Because Australian hospitals on average have a very low level of EMR adoption and maturity compared to other countries, the experience and skill set required to succeed is in high demand and low supply.

What belongs in the financial model

Even the most robust EMR offering available today will not meet all of your digital health needs on its own. You will be making decisions about what legacy software to keep and what new solutions to purchase. The total cost of ownership should reflect the expected cost of the digital health ecosystem as a whole, not just the EMR, and should include a cost analysis of the "do nothing" option, because supporting the current environment carries a substantial cost and delivers fewer benefits.

The detailed cost-category tables (vendor, internal labour, other internal, and readiness costs) are in the original LinkedIn publication.

Vendor costs

Use a standard pricing template, provided to each vendor, so costs can actually be compared, without one it becomes almost impossible. Use a standard template for vendor responses to your functional requirements: for each function, understand whether the solution meets your needs out of the box or requires customisation, and have the vendor quote the cost of any required customisation or development.

Once you have comparative pricing from all vendors, critically analyse the major cost differences between solutions. Don't assume the lowest bid is best; it may have been grossly undersized, or the others oversized. Go back and challenge any pricing that looks like an exception, too high or too low, until you're satisfied. Use KLAS as a resource on each vendor's history of working to project budgets; a vendor that consistently delivers on or under budget is a safer pricing bet than one that consistently exceeds. Where possible, negotiate contract terms that shift the risk of under-pricing to the vendor, firm fixed pricing, late penalties, on-time incentives.

Internal labour costs

You don't need everyone on your team to have EMR implementation experience, but leveraging experience will help you avoid unnecessary mistakes. Ensure your project executive has this experience, or is augmented by a project advisor who does.

Good change management is essential to minimising costs. Your project will run into resistance that leads to delays and inflated costs if you don't secure buy-in from key stakeholders. I've seen EMR projects struggle through inadequate staffing and focus, don't assume people can do it in their "spare time" while maintaining operational responsibilities. Provide operational backfill for project team members and clinicians in training. Consider that non-employed visiting medical officers may need incentives to contribute or learn the new system; sometimes a catered dinner is enough, in extreme cases direct compensation.

Other internal costs

Legacy systems and data can be your project's Achilles heel. Develop a sunset plan for every system being replaced: understand how it connects to others, plan its clean separation, and archive its data or import it into the new system. These costs are often missed or dismissed as inconsequential; they are frequently complex, time-consuming and very costly.

Readiness costs

Once implemented, the EMR becomes essential to clinical workflows and your clinicians depend on it being available. Best practice requires fully redundant power and data from the network core to the edge, an RTLS-grade wireless network, redundant wide-area and internet connections, and adequate commercial and emergency power to servers and key devices. In an established organisation there is a good chance the digital infrastructure is not ready and will require significant time and money.

Plan early for biomedical device integration, many legacy devices can't connect. Identifying this two or three years out lets you replace devices organically at end of life; left unchecked, you face blowing the budget or going live without integration. And clinical wards are architecturally designed for paper: moving to digital may require work surfaces redesigned, computers placed, devices charged, and downtime procedures that genuinely ensure continuity of care. Significant investments in power upgrades and ward renovation are not uncommon.

What about financial benefits?

Your financial model should include benefits to the extent they can be quantified, with care about timing, some arrive at go-live, others long after: administrative labour savings; possible clinical productivity gains once the system is optimised and users experienced; increased revenue from improved charge capture and coding accuracy; reduced transcription, paper and printing costs; reduced malpractice premiums; reduced medication costs; and fewer redundant tests.

Take these points into account and you are far more likely to deliver on time and on budget.

Originally published on LinkedIn, July 2021.