How to Build your EHR Budget

By Rob Drewniak

Your hospital or medical practice group has begun searching for new electronic health record (EHR) technology and you’ve been tasked with developing a pro-forma budget for the project.  Where do you start?  It’s easier if you’ve done it before. You review the assumptions and categories and update it to reflect the parameters and specifics of this new project.  But what if you’re starting from scratch?  How do you know you aren’t forgetting something? Here are some tips for developing a comprehensive budget for an EHR implementation.

Sample Budget Categories
Vendors will provide you with estimated costs for their hardware, infrastructure, and third party fees. However, there are additional costs that vendors do not provide such as infrastructure costs, physician revenue protection, etc. Typical cost items for an EHR project include:

• Software licenses
• Implementation build
• Interfaces
• Data conversion/abstraction
• Server/infrastructure hardware
• Network/communications
• PC equipment
• Office furniture
• Physician champion income support
• End-user training
• Go-live support
• Production support
• Physician go-live revenue protection
• Disaster/downtime processing
• Contingency

Costs specific to your circumstances are additions to this list, such as new building or renovation costs, etc. All costs need to be grouped into two categories – capital and operating. You should consult with your chief financial officer and/or auditing firm to determine the correct category.

Below is a sample pie chart with the above categories, with the percentages intentionally left blank – because each project is different and there aren’t any hard and fast rules.  For example, two leading EHR vendors can have vastly different licensing costs.

Click the chart to view an enlarged version.

Category Contents
What’s included in the above categories?  Here are some ideas and tips about each.

• Software licenses:  Read the RFP/RFI or sample contract(s).  Vendor estimates may not include all the necessary elements (e.g., e-prescribing components, patient eligibility checking, etc.).  Make sure that all the software elements are taken into account, including third-party applications.
• Implementation build:  What is it going to cost to build out each of the application modules?  Some vendors require extensive work to construct and compile the final product.  Customization is always more expensive.  Estimating build costs requires a great deal of skill and foresight and is vendor-specific.
• Interfaces:  This is a topic that requires a great deal of research, thought and planning.  If you’re converting from an existing system, what interfaces exist today?  What do you need for the future?  Remember to include hyperlinks to PACS and other systems, file transfers, and electronic submissions to regulatory agencies.
• Data conversion/abstraction:  What data is going to be converted from existing databases and EHRs?  How much of that data can be electronically converted?  For physician practice systems, how much data will need to be abstracted and input into the EHR to accommodate the first patient visit?  Conversion and abstraction can be very costly and time-consuming activities; don’t underestimate the associated planning time and execution costs.
• Server/infrastructure hardware:  This includes decisions about virtualization, to host or not to host, etc.  This category is relatively straightforward.
• Network/communications: Depending on the condition of your existing network, this category can be relatively easy or difficult to estimate.  Regardless, plan for the future growth of the network and don’t forget security and HIPAA.
• PC equipment: PC also means desktops, laptops, tablets, PDAs, smartphones, etc.  Don’t forget provisioning costs, line drops, software and licensing for each and every device.  Printers, scanners, mounting brackets, chargers, extra batteries – they all cost plenty! And if your users need to move to another location in the middle of the project, you may have to purchase duplicates..
• Office furniture: You may need to consider furniture (ergonomic and otherwise) to accommodate the computing equipment. 
• Physician champion income support:  Physicians will be taking time away from their practices to act as champions and advisors on your project.  They are often compensated for this time.
• End-user training:  Training will require trainers, training facilities and lots of materials. Remember to allocate space and/or rent dollars for the conference and training rooms that will be needed.  Also, provide some dollars for feeding physicians (a necessary incentive).
• Go-live support:  You probably have a Help/Support Desk now, but you’re going to have to beef it up during go-live.  In addition to user support, you may need to have a large number of staff working three shifts to assist all the clinicians.  Physicians are going to require one-on-one support.
• Production support:  Supporting an EHR is not the same as supporting other systems. Unless you’re replacing a modern EHR with another one, you will probably have to add staff, extended support hours and perhaps some automated tools (e.g., knowledge management).
• Physician go-live revenue protection:  Especially for physician practice EHR systems, there is a ramp-up period where physician/provider productivity will slow down.   Depending on the physician compensation model, provisions may have to be made to keep physicians “whole” during the ramp-up period.
• Disaster/downtime processing: Many vendors offer automated solutions that provide downtime capabilities in the event that the system incurs an unscheduled outage.  These solutions can include hardware and software to provide downtime reporting capabilities from a recent checkpoint.
• Contingency: 10% of the project budget is a good benchmark.

EHR budget development is critical and can be complicated. However, with a thorough review and knowledge of environmental circumstances, a detailed analysis can be accomplished. In my experience, it is important to include a healthy contingency allocation. Like any project – even household projects - there will always be unforeseen events or expenses. If you would like assistance with your EHR budget planning, please contact us at info@hayesmanagement.com. We’d be happy to help.

Phil Kahn is a senior consultant on Hayes’ Strategic & Advisory Services team. He is currently serving as Interim CIO at Canton-Potsdam Hospital in Potsdam, NY.