EMRs for sale: Do hospitals have a deal for you

Major health systems are beginning to offer physicians a link to the hospital's electronic medical records system -- for a price. Here's what to know before you take or reject an offer.

By Tyler Chin — Posted Oct. 10, 2005

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There's a new technology vendor trying to sell you an electronic medical record system. That vendor -- your local hospital. Recently, an increasing number of hospital systems have offered to hook up physician offices, for a fee, to the systems' brand-new electronic medical record system.

The hospitals hope to improve patient care and quality, as well as forge closer ties to physicians, by enabling them to have access to the same comprehensive, real-time patient record for the office and the hospital.

Although the Stark law provides some safe harbors, it generally bars hospitals from offering free or discounted goods and services to referring physicians. To comply with Stark and anti-kickback laws, hospitals must sell goods and services at fair market value to referring physicians.

The problem is that what constitutes fair market value is somewhat vague. Is it what comparable goods and services fetch in the open market? Or what it costs hospitals to connect you to their system?

"You have to recognize that there's a fairly broad range of what is fair market value," said Paul T. Smith, an attorney and co-chair of the health information technology workgroup at Davis Wright Tremaine LLP, San Francisco. "But one of the things people are talking about is how do you determine fair market value? Is the incremental cost of adding one more physician to the network fair market value, or do you have to load it up with some overhead or whatever? The jury is still out on that."

Should you bite if your hospital comes calling? That's a decision only you can make -- after considering the pros and cons, and consulting your attorney. Getting a proven EMR at a cost likely to be lower than you could get on your own is the main reason for accepting the offer.

On the other hand, lack of vendor choice and high start-up costs are some issues that might give physicians pause.

Right now, few physicians have to make that decision, because hospitals -- wanting to work out the kinks on their technology first -- have only just begun reselling EMRs to physicians. But those that are doing so have ambitious plans.

Plowing ahead

Evanston Northwestern Health care in Evanston, Ill., is one health system taking the plunge into offering its system to physicians. It charges doctors a one-time licensing fee of $12,000, which represents the incremental cost it incurs when it adds an additional user to the system. The health system's 500 employed physicians have been using an EMR from Madison, Wis.-based Epic Software Systems Corp. since 2003.

"That's what Epic is charging us," said Thomas Smith, the health system's chief information officer. That one-time software licensing fee is not a discount but a reflection that the system already has a large installed base of users, he said.

Also, "there is no fair market rate for Epic [software] because Epic wouldn't sell it to [solo or small groups], Smith said. "So, it's kind of tough to come out with a fair market rate."

The health system hopes that its EMR resale effort will enable affiliated physicians to have access to employed physicians' patients' data and vice versa at the point of care, creating a virtual medical group.

To encourage physicians to participate and help it develop an EMR implementation blueprint in the outpatient environment, Evanston Northwestern is waiving the licensing fee through the end of the year. The waiver does not violate Stark because doctors must install and support a network in their offices at their own expense, Smith said. They also must pay $1,700 annually per physician to Evanston Northwestern for application services provider (ASP) software and hardware maintenance, Smith said. ASP uses the Web to store and distribute patient data.

Despite the waiver, cost remains a barrier for physicians, said Arnold Wagner Jr., MD, an obstetrician-gynecologist at a five-doctor ob-gyn group in Evanston.

Since 2004, three groups representing 10 physicians have accepted the waiver, including his five-doctor ob-gyn group, which paid $70,000 to put in a network at its two locations, said Dr. Wagner, who is getting paid by Evanston Northwestern to recruit up to 700 affiliated physicians to buy the EMR.

Physicians also have been reluctant to buy the EMR for office use because it would drastically change their office processes. "A lot of those physicians were exposed to the difficulty of the change because they were all using it at the hospital and getting them to undergo that change in the office environment voluntarily is a difficult struggle," Dr. Wagner said.

"Since they come to the hospital casually and infrequently, they see it as a burden, and they have to get more demonstrable testimony [of the benefits of using an electronic medical records system] from people other than me, whom everybody sees as the chief advocate of the EMR," Dr. Wagner said. "When that is spoken by somebody other than myself, then the tide will begin to turn."

Information exchange

Like Evanston Northwestern, Sutter Health, a San Francisco-based health system, is reselling its EMR to physicians. Although it won't finish installing a $154 million electronic medical records software at its hospitals and clinics until 2006, it already is laying the groundwork to resell its EMR to community-based physicians.

"Our goal is to provide a needed tool to help doctors practice better medicine ... and to provide a better service to patients within our communities," said Gordon C. Hunt Jr., MD, senior vice president and chief medical officer of Sutter, which includes 26 hospitals and several clinics.

Sutter hasn't yet determined how much it will charge doctors who want its EMR via an ASP arrangement. But the price will be "consistent with the price of major vendors who are currently selling [EMRs] to individual doctors," Dr. Hunt said.

For doctors who aren't interested in buying an EMR from Sutter, the health system is developing a software interface that will enable those who own EMRs from Allscripts LLC, Chicago, and NexGen Healthcare Information Systems, Horsham, Pa., to connect those systems to the hospital's.

Using the interface, office-based physicians will be able to access and import inpatient lab results from the hospital system into their EMR, Dr. Hunt said.

The health system will provide the interface at no cost to physicians -- a decision that Sutter's attorneys already have cleared.

"Right now, we already provide [the information] in paper form, phone form or other ways to doctors," Dr. Hunt said. "No one has ever insisted that we charge a doctor to send or mail a piece of paper with a lab result on it. This is actually a cheaper way to deliver the same information."

While some hospitals are reselling their EMR software directly to physicians, MedStar Health, a seven-hospital system in the Washington, D.C., area, is considering negotiating deals under which vendors could either sell or lease their ambulatory EMRs at substantial discounts to its affiliated physicians.

The health system is thinking of taking that step at the request of office-based physicians who wanted its assistance in choosing a vendor out of the hundreds in the market, and who felt that the current retail price of EMRs was just too high, Dr. Basch said.

"If we can help physicians narrow their choice down to a handful of quality vendors, then we think we'd be doing physicians a huge service," because it will reduce their chances of making a costly mistake, Dr. Basch said.

MedStar would not receive any revenue if it decides to arrange discounts for its physicians, he said. "Our benefit in helping move doctors [to EMRs] is better and safer medical practice, which we think benefits everybody," he said.

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Check before you leap

Here are some things you should consider if a hospital offers to sell you electronic medical records software:

  • Ask your attorney about potential Stark and antitrust implications.
  • Consider whether the EMR the vendor is selling is right for your practice.
  • Compare the price of the hospital EMR with other EMRs in the market to make sure it is at "fair market value."
  • Check what support and maintenance services the hospital is offering and whether it includes office support.
  • Address potential concerns in the service agreement, including making sure you will have access and get a copy of all your patients' records if you and the hospital part ways.
  • Make sure that the information technology relationship doesn't direct your referral patterns in ways that otherwise would not have happened before that relationship. That's a Stark law red flag.

Sources: Peter Basch, MD; Davis Wright Tremaine LLP; Miller Law Health Group

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External links

Government Accountability Office on the Dept. of Health and Human Services' efforts to promote health information technology and legal barriers to its adoption, Aug. 13, in pdf (link)

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