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Avoid the Vendor Upsell

Carrie Vaughan, for HealthLeaders Magazine, December 8, 2009
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Here are some strategies to manage the vendor-provider relationship in the era of the HITECH Act.

Vendors are salivating over the $20 billion stimulus pie for electronic health records as outlined in the American Recovery and Reinvestment Act of 2009, which is why it has never been more important for healthcare providers to build a partnership with their technology vendors characterized by trust, with an eye for the long-term goals of the healthcare institution.

Hospitals and physicians are under enormous pressure not only to install electronic health records, but also to prove that they are meaningful users of the technology, if they want to collect their share of the incentive payments offered in the stimulus package. And those incentives can be quite sizable. Some health systems have estimated they stand to receive upwards of $15 million. But first they need to be meaningful users of a certified EHR by 2014. Otherwise, physicians and hospitals will incur a reduction in their Medicare reimbursement rates. Physicians will see a 1% decrease in their 2015 Medicare fee schedules, a 2% decrease in 2016, and a 3% decrease in 2017 and beyond. Similarly, hospitals would see a 33% reduction in the applicable market basket update in 2015, a 66% reduction in 2016, and 100% reduction in 2017 and beyond.

The good news is that the Centers for Medicare & Medicaid Services is expected to finally define meaningful use this month. The bad news is there are a lot of opportunities for providers to buy systems that won't quite meet their needs or meaningful use requirements in the long term.

Healthcare providers are still grappling with the recession—66% of chief information officers said they expect to be asked to make further cuts in IT spending before the end of 2009, according to a survey earlier this year by PricewaterhouseCoopers LLP Health Research Institute. But implementing EHRs and achieving meaningful use is not an area where providers can afford to cut corners or misstep.

Providers should select a vendor that is known in the healthcare community and has a proven track record, says Sandra McRee, president and COO of Iasis Healthcare, which has 15 acute care hospitals and one behavioral health hospital spread across six states. "I wouldn't look at it just on pricing, but look at it on service. You can spend less, but you may not get the service you need to implement it."

Red flags
Healthcare providers need a vendor that is more concerned about their long-term strategy than making a quick sell, says Brian Loflin, chief information officer at Franklin, TN-based Iasis Healthcare. "You need to work together as a team to make sure your company is aligned with all regulations," he says. "Make sure the vendor understands your company. If they are not asking the right questions to learn more about your company and what you are trying to do and what your strategy is in the next three to five years, then that should definitely send up some red flags that they are just looking to sell and get out of there."

There are a lot of vendors using the HITECH legislation in ARRA for their marketing campaigns and guaranteeing that if you buy their system it will help you meet meaningful use. Because the meaningful use criteria is still being defined, it's likely premature for some providers to make those promises," says Loflin.

Providers should be looking for vendors to give them some assurance that if they buy and install their products, they will meet the criteria for meaningful use and certification. "That is what we are expecting from our vendors," says Ed Lovern, executive vice president and chief administrative officer at Piedmont Healthcare, a four acute care hospital system based in Atlanta. "If someone cannot give assurance that we are going to be eligible for reimbursement from what we have put in place, then you have to look to the next vendor who can give you that assurance," he says.

There will be payments based on achievement of the meaningful use clause, and those elements will be more and more commonplace in vendor contracts, agrees Paul Ceverha, a director in PwC's Health Industries Advisory Practice. "Providers will demand that language," he says.

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