American College Of Surgeons - Inspiring Quality: Highest Standards, Better Outcomes

Negotiating the Electronic Health Record Vendor Contact

Nationwide adoption of electronic health records (EHRs) is the goal of the Health Information Technology for Economic and Clinical Health Act (HITECH Act) included in the American Recovery and Reinvestment Act of 2009 (commonly referred to as the stimulus bill). The HITECH Act provided funding for health information technology (HIT) infrastructure, training, dissemination of best practices, telemedicine, inclusion of HIT in clinical education, and other types of federal and state aid to health care providers seeking to implement EHR systems. In addition, the legislation provided significant financial incentives through the Medicare and Medicaid programs to encourage health care providers to adopt and use certified EHR. Eligible professionals may qualify for significant incentive payments for demonstrating that they are meaningfully using their EHR systems by reporting quality measures. Hospitals will be eligible for up to several million dollars in incentive payments if they can successfully achieve meaningful use of HIT. Incentive payments for physicians and hospitals will continue for several years, but phase out over time. Starting in 2016, Medicare proposes to initiate penalties for health care providers who fail to achieve meaningful use of certified EHR technology.

Given the HITECH Act’s incentives and the dramatic changes occurring in both the hospital and the physician practice environments, there is much to think about when it comes to purchasing and implementing an EHR. One of the most significant challenges many hospitals, surgeons, and affiliated providers will face is the daunting task of negotiating an EHR vendor contract. These agreements outline various areas of vendor and provider accountability. A carefully negotiated contract can minimize future problems with the EHR vendor and create an equally beneficial relationship for the vendor and provider. A successful EHR contract negotiation should include the important issues discussed below. The American College of Surgeons anticipates these guidelines will help to ease the contract negotiation process for its members.

General Considerations

Before reviewing the vendor’s contract, remember that everything is negotiable, including price, payment terms, limitations of liability, and warranties. Also, some providers make the mistake of advising a vendor that it has been selected as the vendor and all that remains is to enter into a contract. By doing so, surgical practices may inadvertently undermine their bargaining position. It is much more effective to select two vendors, then advise the preferred vendor that if negotiations break down, the second choice is waiting in the wings. In certain cases, a dual-track negotiation process may even be worthwhile. These methods tend to keep the pressure on the preferred vendor and generate additional concessions.


When negotiating the EHR contracts, surgeons should keep the following keys points in mind:

  • The contract should outline the minimum hardware and any third-party products that are required to run the system’s applications.
  • The contract should give full ownership of all data to the provider and state that all data will be returned to the provider if the contract is terminated for any reason.
  • The vendor should provide information about what happens if the firm is acquired by another company, files for bankruptcy, goes out of business, or otherwise experiences financial difficulties that affect its ability to deliver services to the provider. In any of these scenarios, it is essential that a provider has the ability to continue operating the EHR system and have immediate access to all data.

User License

Surgeons need to determine the correct type of license for their unique needs and proposed use. For example, shrink-wrap licenses typically are used for off-the-shelf software; site licenses cover a specific geographical location; and enterprise-wide licenses encompassing an entire business or institution. Other types of license include named user or concurrent user licenses and ASP or SaaS licenses, governing the right to use software on a subscription-type basis. Each type of licenses has its own inherent set of issues, which must be carefully analyzed and addressed.

Another important aspect of the user license is the process of defining the user. An EHR contract can define a single user as one physician, several mid-level providers (nurses and physician’s assistants), as well as administrative staff. However, costs may be associated with each user and each computer housing the software. If so, surgeons should negotiate additional license fees up front, rather than agreeing to pay “then current” fees in the future. Thus, it is important to define the pricing for the number of users, how many computers will have the software, and if it may be used in multiple offices. Other questions to consider are as follows: Will the license be perpetual, for a fixed term, or renewable annually? Will there be a single payment of license fees or are they to be paid for as long as the license remains in effect? Is any third-party software included in the system that may require a sub-license?