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

Negotiating the EHR Vendor Contract - Part 2


Implementation will be one of the most significant and crucial expenditures because its success is key to the project. Keep in mind that not all vendors offer implementation services and that it will be necessary to negotiate both the cost and payment terms associated with implementation. Initial implementation tasks may require the transfer and conversion of existing data, either from another system or paper records. It is important to agree as to who is responsible for those tasks and on the costs for accomplishing them. An essential component of this part of the process is agreeing upon the implementation project plan and timeline, which includes provider testing of the EHR product to determine if it meets the provider’s expectations.  Achieving “acceptance,” the successful completion of acceptance tests, will usually trigger first productive use or first live use of the software. In addition, acceptance is often used as a milestone for the final payment.

In the event a vendor fails to achieve acceptance of the EHR system or a particular component of it, the provider should retain the right under the contract to get a full refund of all fees paid, including all related license and implementation fees. Moreover, in this post-HITECH Act era, provider’s total damages for vendor’s failure to successfully complete acceptance testing may be greater than just the amounts paid to the vendor, and provider should consider a right to seek additional damages, as discussed below in the Warranties section. 


Interfaces, which allow disparate technology and systems to communicate with each other, are an often overlooked area of contracting. If a practice has preexisting hardware or software that will need to transmit or receive data in the EHR, it is essential that the vendor provide one or more interfaces to accomplish this task. Similarly, interfaces may be needed to communicate between the EHR system and hospitals or other practices with which the provider needs to communicate.

Pricing and Payments

It is best to negotiate objectively measurable performance milestones that the vendor must achieve before payment is required. These milestones should be coordinated with detailed acceptance testing criteria. For example, 10 percent of the contract price may be paid upon execution, 20 percent upon delivery, 30 percent upon completion of installation, and the remaining 40 percent upon final acceptance. As a general rule, it is better to link payments to vendor performance than to calendar dates.


Most vendors provide minimal or no warranties in their standard form contracts. It is crucial that surgical practices secure warranties dealing with system compliance with functional and performance specifications, compatibility of components, viruses and disabling devices, prevention of unauthorized access or usage of system, sunset issues, availability of support/maintenance, and so on.

If the vendor’s product is essential to achieving meaningful use, then the vendor should also guarantee to fully cooperate with the provider to achieve “meaningful use.” The vendor should warrant that its product is and will remain certified by an authorized testing and certification body. Considering the fast-approaching expiration date on qualifying for the maximum incentive payments, a vendor’s breach of these warranties would have a significant negative financial impact on the provider. Therefore, if a provider fails to qualify for the HITECH incentive payments because of its vendor’s failure to obtain certification, remain certified or cooperate fully with the provider, the provider should be entitled to a refund of all fees paid under the agreement. The provider may also seek refunds for additional amounts, such as liquidated damages or penalties related to the amounts of incentive payments lost or Medicare penalties incurred due to failure to qualify as a meaningful user of a certified EHR.

Additionally, the contract should include specific language that ensures the system will comply with all Health Insurance Portability and Accountability Act (HIPAA) and government requirements related to the confidentiality and security of patient and provider information.

Furthermore, the EHR contract should specify the conditions under which a breach of contract has occurred, including but not limited to the system not performing as specified in the software’s documentation or in the contract itself, consistent poor performance of the system, breach of contract terms or warranties, or negligence by the vendor. In the event of such termination for cause, the vendor should grant provider a refund of all fees, costs and charges paid under the contract, with the amount dependent upon when the breach occurs.

Training and Support

Staff training will be a key factor in the provider’s successful use of the EHR system and in receiving the meaningful use incentives. As a result, all aspects of training should be identified in the contract, including how many hours are included, who is covered, and what is included in the training (such as scope and subject areas covered, training materials, and procedures). In the initial contract, the provider should also specify how additional or follow-up training would be handled.

In addition, the preliminary contract should address and clearly define the hours and days support is available and what types of assistance are available. The contract should also address the consequences if the vendor does not meet the support requirements.

With any technology one can expect updates, and surgical practices should ask the vendor to specify how often updates occur, if they are required to install all updates, and, if appropriate, whether the updates are free.

Maintenance may add significant additional costs to the vendor contract, including for new software releases, new functional capabilities, and other product upgrades or enhancements. It is important that the contract specify what is included in the maintenance agreement and how the maintenance costs are calculated.