Dear HIS Pros,
I have been searching and searching for information regarding costs of implementing the Epic and Eclipsys Acute Care EMR systems and can’t find a hint anywhere! Any chance you have a second to give me a ballpark range for a 300-bed independent hospital? — Emilie Hedlund, Master of Healthcare Administration Student, University of Minnesota
The reason you can’t find much published about costs is because vendors are very protective of their prices, considering them confidential and proprietary. As consultants, we receive dozens of proposals from vendors every year, and are sworn to keeping the individual details private. What we can reveal are averages among many vendors, which might be better for you than just picking on Epic and Eclipsys (now called AllScripts) in particular. But, before we go into the gory details, however, some definitions are in order.
First, hospitals come in three basic sizes:
- Small = 100 beds and under, including Critical Access Hospitals (CAH) of 25 beds and under, mostly in small towns and rural areas.
- Mid-Size = roughly 100 to 300 beds, sometimes referred to as “community” hospitals, usually found in larger (s)urban areas.
- Large = 300 beds and up, usually in big cities, and including Academic Medical Centers (AMCs) and Integrated Delivery Networks (IDNs).
Of the roughly 5,000 hospitals in the US, the median size is about 168 beds (per recent AHA statistics). The size you picked, 300 beds, is right on the borderline between mid-size and large, so let’s look at average pricing for all three sizes.
First, some more boring details: there are many facets to IT costs, usually broken into two major categories:
- Capital = one-time costs, comprised of hardware (which some vendors like Meditech and Epic do not sell), software, implementation and “other” (file conversions, interfaces, travel, etc.).
- Operating = ongoing costs, usually expressed in annual terms: hardware & software maintenance, processing or remote hosting fees, “subscription” fees, etc. Some “other” capital costs have maintenance fees too, such as interfaces.
Still with me? Good, because I’m getting a little confused myself…
The list below gives some examples of HIS vendors whose client base has a preponderance of each size hospital (and there are always exceptions!):
- Small = the “Big Three” are CPSI, Healthland and HMS, with hundreds of small hospital clients each. Other small players include IntraNexus and NextGen.
- Mid-Size = the major player is Meditech with over a thousand suckers, er, clients. Older entrants include Siemens’ MedSeries 4 and McKesson’s Series and Star, with hundreds on each. A “hot” new seller is McKesson’s Paragon and also in this space are QuadraMed’s QCPR, and Keane’s new “Optimum.”
- Large = a crowded field, due to the mega-bucks these monsters pay for IT. In order by company total revenue, the major players here are McKesson’s Horizon, Cerner’s Millennium, Siemen’s Soarian, AllScript’s Sunrise, GE’s Centricity and Epic’s EpicCare. Yes, Epic is the smallest payer in this monster market in terms of annual revenue, but from current trends, not for long!
Finally, we can talk almost intelligently about what each size hospital should expect to pay on average to one of the vendors appropriate for their size and complexity:
- Small = from $1M to $2M in capital, for all systems, clinical and financial. Yes, all systems – these vendors are amazingly integrated; CPSI for example even offers an integrated (not interfaced) PACS and Time & Attendance. Operating costs range from $150 to $250K per year.
- Mid-Size = from $3M to $5M in capital, for most systems, clinical and financial. None of thee players includes PACS or T&A, so there is a modicum of extra-cost, standalone systems required. Operating costs run about $500K and up per year, depending on the ocean temperature off the Steel Pier in Atlantic City…
- Large = please sit down and take a deep breadth first! A single large hospital typically pays from $10M to $20M in capital alone, with operating costs in the multiple millions due to the growing popularity of remote hosting and subscription fees. With few ancillary systems: e.g., most don’t even often an ERP suite, adding a few million more for Oracle or Lawson to the tally…
So if you combine the capital and operating expenses over, say, 10 years, to get the cumulative costs (also known as TCO or Total Cost of Ownership), with a little CPI, you get:
- Small = about $3-5M
- Mid-Size = about $10-15M
- Large = $30-50M, and up
This begs the question: are these “high-end” systems rally ten times better? Hardly! After all, they all have to offer the same “Meaningful Use” functionality, in essence, the same 14 mandatory and 10 optional characteristics of an EHR mandated by ONCHIT. So why do these large AMCs and IDNs shell out so much dough?
To be fair, the high-end systems do offer far more functionality than their smaller competitors. Our firm doesn’t believe in RFP feature checklists (we call an RFP a “Request For Prevarication!”), however, we are occasionally forced to issue them, for example, in the case of a state-owned facility or a conservative CFO who wants one to present to the board. From these past RFPs, we have seen about a 10% to 30% increase in functionality as you go from a small to a mid-size to a high-end vendor. And it is mainly in flexibility and customization that these pricier systems excel (no pun intended), thanks to their “tools” such as workflow engines, screen painters and report writers. Yes, the “little guys” have tools too, but nothing like the incredible power of the high-end systems where, if you can only find a dozen clinicians to lock in a room for a year or two, you can design a entire customized EHR that looks like no one else’s.
And there’s the final rub, these high-end systems cost another fortune in terms of IT and user department personnel who have to slave away building reports and screens during implementation, then slave away modifying them to every release and patch issued but the vendor.
So, Emilie, back to your hypothetical 300-bed hospital, what would they pay? If owned by Bill Gates and money was no object, they’d pay 8-figurs for a “high-end” system, and get the ultimate in flexibility (and costs!). If owned by Columbia/HCA, they’d buy Meditech or Paragon and pay 7-figures for a less flexible but perfectly capable HIS. And if they bought a “low-end” vendor to try to save some bucks, they’d spend far more than they save in extra FTEs (and maybe lawyers!) struggling to ever get it to meet their complex needs.
Any questions, please don’t call – answering this simple question gave me a headache…