Physicians nationwide are facing the reality of compliance with the Health Insurance Portability and Accountability Act (HIPAA)and our government’s goal for all medical practices to have electronic healthcare record (EHR) systems in place within the next several years.
Of even greater short-term concern for medical professionals is the seemingly never-ending healthcare reimbursement cost-cutting by government agencies, employers and insurance companies. Medical practices, consequently, are searching for ways to combat this lost revenue.
The fact is today’s EHR technology helps run practices better with a greater degree of patient privacy and security. Insurers and reimbursement agencies recognize this and, in many cases, are rewarding physicians who have already installed EHR systems by providing greater reimbursement rates.
These practices have actually seen their annual revenues increase 8 to 9 percent through greater substantiated documentation, resulting in higher reimbursements and more accurate and efficient record-keeping and billing processes. In some cases, their cost for malpractice insurance has even decreased due to the integration of EHR technology.
Unfortunately, the software and hardware needed to run these records management systems can be quite expensive, especially for private medical practices (sole practitioners and doctor groups). Some early EHR systems also failed to live up to expectations. Consequently, it is estimated only 20 percent of physician practices nationwide have installed EHR systems to date.
Often times, the best way to convince jaded physicians to change their thinking is to tap into their peers’ experiences. In addition to gaining improved technology, more doctors are recognizing that lease financing provides a viable alternative to paying cash for this mission-critical software and equipment. They are more amenable to a “monthly technology investment” providing a total solution – software, hardware and support services.
With medical practices looking for ways to conserve cash, leasing also enables them to defray costs over a set period of time and preserve their traditional lines of credit for other needs, such as rent, utilities, supplies and payroll, among other expenses.
According to many leading vendors that offer finance programs, once a practice decides to move forward with an EHR system, lease penetration is quite high, approaching 60 percent in many sectors of the medical community. Physicians typically enter into capital lease agreements, which fall under Internal Revenue Code 179 and provide significant tax savings. According to the IRS, a qualifying taxpayer can elect to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property, after the relevant section in the Internal Revenue Code.
Under the new law, a qualifying business can expense up to $250,000 of section 179 property purchased by the taxpayer in a tax year beginning in 2008. There is a 50 percent bonus depreciation available in tax year 2008 as well.
Like any equipment lease, the challenge is to match the useful life of the EHR software and required hardware to the lease terms, which are usually 36 to 60 months. These leases typically have upgrade provisions to keep the software updated. Hardware and operating system obsolescence, however, is usually the biggest reason why practices enter into new lease agreements. These small- to mid-ticket leases typically range in value from $15,000 to hundreds of thousands of dollars, depending on the size of the practice’s staff and its needs.
Whenever new technology is introduced to a practice, the goal is to minimize any disruptions to patient care. Some medical practices negotiate lower initial lease payments, which gives them the opportunity to migrate from their current computer software and hardware systems in a gradual manner. Their lease payments rise as their use of the new system increases. Such a customer-centric approach and flexibility are keys when working with physicians who are becoming EHR compliant. Vendors that support the healthcare market must realize this and choose their recommended funding partners carefully, assuring they are aligned with the practice’s desire to grow and the medical profession’s ultimate goal of providing quality patient service and care.