Is EMR lease financing at risk?

Everyone reading FierceHealthFinance knows that as much as they may want to bring electronic medical records into their institution, paying for them is a big question mark. After all, EMRs were challenging to pay for even before the subprime mortgage crisis and subsequent Wall Street nightmare, and now it has become even harder.

However, some discussions I had at the Medical Group Management Association's 2008 annual meeting suggest that things may be even tougher than they appear. While in the past, it's been standard for group practices and health systems to lease EMRs--which, for one thing, avoids having to come up with a big down payment--banks seem to be a lot less comfortable with this arrangement. In fact, if you turn to your bank to arrange lease financing for your EMR, you may get a flat "no" in return.

"We used to lease EMRs, but now we treat the financing as an unsecured loan," said one bank representative I spoke with. "The leasing division just isn't comfortable with EMRs anymore." After all, he noted, when a practice brings in an EMR, they usually need a lot of consulting hours, including installation and technical support. And those hours can't be use to recover loan balances if the practice or IDS gets into a financial jam.

At the moment, I'm just passing on chatter from the show, so I don't know if this is a widespread trend in the financial industry, but it certainly wouldn't surprise me if it was. After all, my contact's point was a reasonable one, and given that banks travel in herds, it's unlikely his peers have ignored this issue.

Of course, there are still other options for cash-strapped practices and health systems. For example, my contact's bank does offer a form of lease financing through EMR vendors. The bank likes this approach because if the provider gets behind in their payments, the vendor can pull the plug on its product licenses. Also, EMRs which are provided entirely online can sometimes be used on a flat fee-per-month basis.

That being said, the tightening up of the lease market for EMRs is a scary sign, given that health systems and practices are having enough trouble coming up with EMR funding as it is. Let's just hope that the financial industry comes up with some new financing options for EMRs even as it takes away others. - Anne