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Top 5 Reasons to Lease or Finance Your ASC's EHR System and Software

Written by Mike Moran, Vice President, OneWorld Business Finance | March 27, 2014

It's not cheap to implement and maintain an electronic health record system.

A Health Affairs study put the implementation cost for an average five-physician practice at $162,000, with an additional $85,500 in maintenance expenses during the first year alone, while the federal government points to studies that estimate the cost of purchasing and installing an EHR ranging from $15,000 to $70,000 per provider. Depending upon the size of the organization, an EHR system purchase can total several million dollars.

Even on the low end of the scale, implementing an EHR system requires a significant investment — one that not all ASCs have the resources (or desire) to make upfront. If a provider is not in a position to purchase its EHR outright, a viable alternative is to finance some or all of the costs involved in implementation.

The most common method of acquiring an EHR system is through leasing or financing that purchase. It is an approach more surgery centers are taking to bring this essential technology to their organization. Here are five of the top reasons to consider leasing or financing your EHR.

1. Eliminate capital investment. Leasing requires little or no upfront investment, so providers do not need to tie up substantial dollars in the technology. The lease terms can be matched with the useful life of the system. Spreading payments over time is more manageable, and the capital that would have been allocated to purchasing the EHR can go toward expansion costs, emergency expenses or investments that help grow the business.

These leases can be structured different ways. Usually they are structured as capital leases, often referred to as "finance leases," because the customer owns the equipment at the end of term and depreciates the asset. However, some lessees prefer "fair market value" or operating leases. Either structure allows lessees to preserve their working capital line with their main bank.

2. Customize your plan. By working with a lessor that understands healthcare and the equipment that drives the industry (such as EHRs), providers should be able to customize a lease plan that is most appropriate to and best serves their operations and needs.

For example, if ASCs anticipate an uptick in services during particular times of the year (e.g., providers in warming locales taking care of snowbirds), they can work with a lessor to make higher payments during these periods. If a provider anticipates making a significant investment in the business while it is leasing the EHR, it can work to reduce payments during this period when large amounts of cash are going toward the investment.

A lessor that understands EHRs will also work with providers to ensure the lease includes those expenses associated with the system the provider would like included in the plan, such as upgrades (see #5 below), installation, training and support, often referred to as "soft costs." A lessor familiar with the healthcare industry will usually finance these costs as they are a major component in the overall EHR project.

3. Maintain flexibility. It is not unusual for ASCs to experience significant changes in operations every few years. These can include changes in the number of physicians, staff, types of services (specialties) and sometimes even location. Leasing gives surgery centers the flexibility to modify their EHR needs throughout the lease term, with payments adjusting accordingly.

4. Take advantage of tax benefits. The IRS views many leases as tax-deductible expenses. If the lease of the EHR qualifies (check with your accountant), 100 percent of the lease payment may be deductible as a business expense, reducing the overall net cost of the lease.

5. Save on upgrades. While updates are typically included in the purchase price of an EHR, upgrades, which are much bigger changes that address features of the system (comparable to upgrading from Windows XP to Windows 7), are not. Upgrades are critical as they not only usually provide users with new tools and resources, they often also address deficiencies. Many EHR vendors will only support the most recent versions of their software, so opting out of an upgrade may cut off vendor support. This could lead to unaddressed security problems with the system, potentially causing a provider to fall out of compliance with HIPAA security.

Upgrades are often covered as part of the lease terms and factored into the payment plan, ensuring providers can keep their technology current and remain HIPAA compliant.

Note: Electing to lease the equipment used to power the EHR (e.g., servers and computer workstations) can assist ASCs in a similar fashion as leasing the EHR. Leasing gives more flexibility to make cost-effective hardware changes. When hardware becomes outdated or can no longer effectively support the EHR, a provider can upgrade to meet its changing needs. It is important for surgery centers to ensure any protected health information stored on leased hardware is deleted — and irretrievable — before the hardware is returned to the vendor or the provider will be in violation of HIPAA (as was recently the case with Affinity Health Plan and a leased photocopier).

Put your trust in leasing
The benefits that come with equipment leasing are plentiful, which is why it comes as no surprise that research data from the Equipment Leasing and Finance Foundation indicate most companies lease equipment (or real estate) as part of their day-to-day operations. Lessors are specialists in leasing and financing equipment, and understand capital equipment markets. When ASCs partner with a lessor that specializes in healthcare, these benefits become even more significant.

For surgery centers interested in investing in or changing their EHR system, it is worthwhile to explore whether leasing the system will provide their organization with the financial flexibility needed in this challenging, ever-changing healthcare environment.

Mike Moran (This email address is being protected from spambots. You need JavaScript enabled to view it. ) is vice president of OneWorld Business Finance (www.oneworldbusinessfinance.com), an Austin, Texas-based independent lessor that provides various forms of commercial finance to companies throughout the United States.

More Articles on Surgery Centers:
Eliminate Staffing Overlaps: 7 Strategies to Run a Lean ASC

Selling ASC Real Estate: 5 Things to Know for Flawless Transactions

River Valley ASC: Mapping Out a Game Plan for Efficient In-House Billing


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