Financing Resources

Section 1.1 Adopt – Assess

Section 1.1 Adopt – Assess – Financing Resources - 1

Financing Resources

Finding the funds to finance a major health information technology (HIT) and electronic health record (EHR) investment is challenging for every organization. This tool describes the various sources of funds that may be available for HIT. While not every source is applicable to every office, the list may generate ideas you may not have considered previously.

Instructions for Use

As you approach your HIT and EHR projects, review the list of financing resources, check off those you think are worth pursuing, and assign individuals to explore each. Keep track of the funds that may be available, their timing and risk (i.e., high, medium, or low likelihood of receiving the funds).

Sources of Funds

□  Cash flow from operations/use of reserves. Often offices attempt to finance HIT through operational cash flow, which can be difficult depending on the type of EHR desired and how it is acquired. More sophisticated and expensive kinds of HIT and EHR that can result in strong value propositions are becoming increasingly available. Alternatively, low-cost options for both the type of product and how it is provided are available. These options can position a chiropractic office to earn federal meaningful use incentives, but may be limited in scope in other respects. While a benefits analysis should be performed for any HIT investment, the benefits may not be in the form of direct cash flow, but in the form of downstream value such as more favorable contracting, greater number of referrals from patients and other providers, etc. (1.2 Business Case: Total Cost of Ownership and Return on Investment).

Estimate of available funds: $______Timing: ______Risk: ______

□  Malpractice premium relief. Some malpractice insurers are willing to provide a discount or will not increase premiums when certain HIT and EHR investments are made. This option may not apply in states with already high EHR adoption, but is still worth investigating.

Estimate of cash or value of other contributions: $______Timing: ______Risk: _____

□  Tax advantages. An accountant can identify tax advantages for chiropractors who are for-profit.

Estimate of cash or value of other contributions: $______Timing: ______Risk: ______

□  Group purchasing. Group purchasing may provide a substantial discount on the price of either hardware, software, or both, if several organizations form a cooperative network. In addition to a larger discount for more users, group purchasing of a single product aids in the formation of health information exchange that enables better sharing of data across the continuum of care. Even without a group discount, several organizations purchasing the same product in a given locale can benefit by sharing lessons learned, using the same local consultant, etc.

Estimate of cash or value of discounts: $______Timing: ______Risk: ______

□  Vendor financing options. Many vendors offer an application service provider (ASP) or Software as a Service (SaaS) model that finances the software as well as management of IT operations. More information about these models is provided below. Vendors also offer traditional financing options, which should be compared with your local bank and other sources.

Estimate of impact on cash flow: $______Timing: ______Risk: ______

□  Remote hosting or outsourcing. Typically refers to remote or local management of the data center and its hardware and telecommunications for organizations that want to reduce IT staffing and hardware costs, but maintain their own software.

Estimate of impact on cash flow: $______Timing: ______Risk: ______

□  Leasing. This option generally applies only to the hardware you acquire and manage yourself or that you include in an outsourcing arrangement. It is, however, a good way to keep current with computer equipment without having to make outright purchases.

Estimate of impact on cash flow: $______Timing: ______Risk: ______

□  Debt and equity financing. Bank loans and lines of credit are frequently tapped to support HIT and EHR purchases. Investigate no-cost or low-cost loan options with your local bank.

Estimate of amount available net of cost: $______Timing: ______Risk: ______

□  Open source products. Evaluate HIT based on open source code, or even the VistA EHR that was made available by the federal government in fall 2005. VistA EHR is a modification of the system that has been successfully used in the Veterans Health Administration hospitals and clinics. The software code is available for free through the Freedom of Information Act (www.ehealth.va.gov). Fees apply for licensing the underlying database system, various subscriptions to support code sets, etc. Vendors who help implement the system will charge implementation fees and may charge fees for associated interface development. See WorldVistA (www.worldvista.org) or set your browser to VistA suppliers for additional information.

Estimate of value: $______Timing: ______Risk: ______

□  Grants. Many small and rural health care providers have experience obtaining grants to finance major projects, an important source of funds for HIT and EHR projects prior to the federal meaningful use incentive program. Chiropractic offices should still look for such opportunities, but be aware of costs associated with grant seeking, including writing the grant, reports, and research that may be required.

Estimate of amount available net of cost: $______Timing: ______Risk: ______

□  Incentives. The federal government’s meaningful use of certified EHR technology incentive is currently the largest incentive offering available, although there may be other incentives applicable to you. Under the federal incentive program, chiropractors are designated as “eligible professionals.” Eligible professionals may receive 75 percent of their Medicare charges up to the payment year limit per year for five years. For example, if your first reporting year is 2011 or 2012, the Medicare cap is $18,000 per eligible professional, so an eligible professional earning $10,000 under Medicare in either of those years could receive 75 percent of $18,000, or $7,500. The caps for the incentives in the four subsequent years are $12,000, $8,000, $4,000, and $2,000. You do not have to be a participating physician or supplier to earn the incentives as long as you acquire an EHR that is certified for the incentives, use it in accordance with the specified criteria, and submit claims to Medicare for Part B services on behalf of Medicare patients. Information on the registration process and program is available at http://www.cms.gov/EHRIncentivePrograms. Those with 30 percent of their patient volume from Medicaid may qualify for the Medicare meaningful use incentive program and may earn additional incentive dollars. Contact your state Medicaid representative for additional information. Medicare participants not adopting EHR technology by 2015 will face a financial penalty of 1 percent, 2 percent, and 3 percent deductions in the three years following 2015 and thereafter.

Shared Services vs. Straight Licensure

Consider whether shared services or straight licensure is the right approach for your organization. In assessing financing options, consider the following factors in addition to price, such as payment structure, how the product is delivered to you, service level agreements, and how the product was developed. A shared services model provides both a method for financing and for providing software. The shared services model can be compared to renting an apartment while the straight licensure model can be compared to owning a home. The shared services model has lower up-front costs. The vendor generally provides services on a subscription type of financing basis, with little down payment (perhaps a set-up fee), demands less staffing, has lower hardware costs, and allows you to pay as you go through a steady subscription fee over time. However, it offers less control and ability to customize, and the total long-term cost may be higher. Generally, HIT and EHR offered through the shared services model has less functional sophistication. The lack of customization allows hosting vendors to achieve economies of scale and offer this service as a lower cost alternative to licensure.

Evaluate the method used to deliver the application to your organization. In the shared services model, the hosting company maintains the server(s) with the applications and your data. You utilize clients (i.e., input devices of all types) in and through your organization to gain access to the remotely hosted server(s). This access may be provided through a Web front end to a traditional client/server set up, in which case the model is often referred to as an application service provider (ASP). Remote connectivity option (RCO) is another term used to describe how the vendor of the application hosts the primary servers and your data. Newer models utilize applications that have been developed from a Web-based platform, using Web services architecture. These are referred to as Software as a Service (SaaS), on-demand, or cloud computing systems. Note that the term “web-based” is often used to describe both the older ASP option and the newer SaaS option. It is important to understand which you are considering. The ASP option is often more customizable than the SaaS option, and may have more secure and reliable connectivity options. Both the software and computers you use in the office may be somewhat more expensive than for the SaaS model.

In the straight licensure model, you acquire a client/server system. You host and maintain the server(s) for your EHR and the application software, and your data are located on these servers. You utilize clients throughout the organization as well as remotely at your discretion (e.g., you permit access to chiropractors from their home through a portal).

In whichever model you choose, negotiating the contract with respect to service levels is important. However, in the shared services model or even if you only opt to have your hardware hosted, service level agreements with the company are critical to ensuring optimal connectivity, support, disaster recovery, and contingency planning. Obtain in writing and verify what will happen in the event of downtime, and assure your data are protected and recoverable. Also consider the Internet connectivity you will need to maintain. Back up is essential, even if you must back up a T1 line with a dial-up modem connection. One area of concern about the shared services model that is often misunderstood relates to security. Vendors who offer the shared services model do not co-mingle data and often have more robust security than most health care delivery organizations are willing to pay for on their own.

Assess the risks of the models. Most HIT vendors providing applications through the straight licensure model or ASP form of shared services have been in business for a number of years, are sufficiently stable, and have less risk of failure than new vendors who offer only the ASP or SaaS model. This has been especially true in cases where an EHR vendor offers only one model for acquiring its product. Vendors who offer both straight licensure and ASP options and have a full suite of products are less likely to go out of business without appropriate provisions to keep their clients up and running. When considering a shared services model, ensure in your contract that not only do you own the data, but if the data are housed by the vendor, you will have your data returned in an industry-standard format if the company goes out of business. In addition, the contract for any vendor should include a provision that the software’s source code be placed in an escrow account for you to access should the company go out of business. These measures will enable maintenance of the systems for a period of time and will provide a somewhat easier process for converting the data to another product.

Many small offices license HIT/EHR products directly from a vendor and hire another vendor to manage the primary servers at a central location and provide connectivity support. In this case, the vendor does not have to be health care related. This form of straight licensure can be compared to owning a townhome or condominium; you own a portion of the building (with some restrictions) and have a maintenance company oversee some core components.

Community Offering

Another form of acquiring HIT is the community, or enterprise, offering. Typically, a hospital or large clinic licenses the product, hosts, builds, and maintains it, and in turn supports other providers in the community, using their software foundation. In this case, the large facility becomes the vendor for implementation and support. This can be a way for a small organization to obtain an application it may otherwise not be able to afford. Many of the advantages of the shared services model exist in the community offering. You will have fewer options for customizing the application to meet your specific needs (even less than in the ASP version) because you will only be able to contribute suggestions to a collective committee making decisions. One distinct difference is that these offerings co-mingle the data of all health care organizations they serve in the community via a single active directory. Access controls are provided to ensure that only treating provider organizations have access to the data. Community offerings support excellent coordination of care for patients by serving as a means to share data about patients—which is the goal of health information exchange. However, withdrawing records at a later date may be difficult if organizations no longer wish to be part of the community offering, or want to change to another product.

ARRA Opportunities

As part of the American Recovery and Reinvestment Act of 2009, Health Information Technology Regional Extension Centers are being developed to provide education and technical assistance to help providers select, implement, and achieve meaningful use of certified EHR technology, as well as exchange health information with other providers and agencies. Achieving this goal will enable providers to become eligible for bonus payments for their Medicare and Medicaid patients.

Although chiropractic offices are outside their scope of service, regional extension centers offer outreach, education, workforce support, tools, and resources in all aspects of EHR/HIT adoption, implementation, and meaningful use for primary care providers that you can access as well.

To find the regional extension center servicing your area, visit the following website: http://healthit.hhs.gov/portal/server.pt/community/healthit_hhs_gov__listing_of_regional_extension_centers/3519