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EPIC Costs

February 16, 2009
by vciotti
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We may not need an economic stimulus package for Healthcare IT, one seems to have already started in Wisconsin:


Kaiser - took out a full page ad in USA Today last month bragging about the $4

Billion (yes, b as in "bankrupt") they have spent on Epic's EMR so far. The original budget was about $1.8B per new reports several years ago. Â Keep in mind Kaiser represents over 200 hospitals, so that's "only" about $20M per hospital...


Sutter announced they were acquiring Epic for 5 of their largest facilities (like CPMC and Santa Rosa Medical Cetner, which were running legacy mainframe systems). First quote of costs was about $150M, most recent pegs it at $500M...


Sentara announced they were budgeting over $200M for their half-dozen Virginia hospitals. Bert Reese is an extremely sharp CIO, so I trust his numbers implicitly: this really is what it will cost.

4. NYU recently announced a cost of $180B for Epic in ambulatory setting only...

Add them up, and we've got quite an economic stimulus package going in healthcare IT already. What else can the government do? Maybe appoint Judy to one of their committees to dream up ways to spend even more!? Or, wake up the other HIS vendors like McKesson, Cerner, Siemens, et al, to start ramping up their prices (if they can fit so many zeros in their price books).



Vince — I alluded to this type of spending, and the problems it can present, in my yet-to-be-published March edit memo. My main point was that just as the automotive and financial industries are finding that the monies they received have long and sturdy strings attached (see executive pay limits slipped into the stimulus bill by Senator Chris Dodd), so healthcare may find that with free money comes the high price of having someone run your business. Will the secretary of HHS (whoever that might turn out to be) find the figures you cite too high? Will Meditech seem like an irresistible and serviceable bargain by comparison? We'll see.

We met several years ago and talked about cost-effective HIM implementations. Glad to see you still have a "software sense of humor." You should post more often.

The costs you've noted in this post are, at best, obscene. Why would anyone question the low rate of adoption? At these rates, it's no wonder so little is said about ROI. The reality is I can see government stepping in at some point to address possible price fixing by the vendors coupled with the stimulus program.

To Anthony's first comment, I agree that the feds will have sturdy strings attached to stimulus grants. As a taxpayer, in light of what we know today, I will demand them. But there must be more alternatives than MEDITECH. Anthony, without sinking your editorial teeth too deeply into the hands that advertise in HCI, how about an in-depth feature or a research paper about costs vs. capabilities for the majority vendors? That would help to level the playing field. MEDITECH ain't the only game in town.

I liked Suresh's post, al be it a bit too vague in places such as the "why" of these systems being so configurable. Could it be that "configurable" is a cover for "don't work as advertised?"

From my experience, I do agree with him that consultants are over-priced, and too many are under qualified. Perhaps it's time for hospitals to take a page or two from some of the more recent government contracts. Namely, fixed price contracts, penalties for not meeting milestones (and bonuses for beating them), and qualifications/references that can stand up to intense scrutiny well in advance of signings.

On to Anthony's second comment. Training clinicians and some degree of lost productivity during system transition is a cost of doing business. Period. Instead of paying clinicians an extra stipend of some kind to attend training, etc., how about making it clear to them that these systems will soon be ubiquitous. Therefore, they either "learn to earn" and continue to grow in their profession, or they'll be replaced by those willing to do so. The military has an interesting approach: up or out. In other words, no matter how good you are at what you're presently doing, if you don't aspire to and succeed in moving forward with your career, you're out. Thanks for your service.

One final note. AHIMA and several other organizations have attempted to write guidelines and templates for hospitals to produce RFPs. Perhaps it's time for a pub with the scope and depth of HCI to embark on doing something more comprehensive (available as a paid service, of course), so that hospitals can produce an RFI and RFP that could help them to cost effectively vendors (and consultants) that can truly help them to achieve their EMR goals. In my opinion, such would certainly beat the hell out of the drivel we get from groups like HIMSS Analytics. And I'll bet that any number of the bloggers on this site could prove invaluable to providing such a service.


Thanks for the well thought-out post Suresh. What about the cost of training clinicians on the new systems, the cost of productivity lost during training and how the new systems, at least initially, slow them down? What about funding to provide incentives for learning the system, or directly to pay clinicians to attend training. Do these, or will these, become a sizeable part of the large-scale clinical-IT implementation budget?

Wow. Nice post to perk up my morning. I'm not sure that I agree with one single word, but I do like the opportunity to think about these issues. Before I do, I'd like to agree with Anthony - strings attached. Any responsible government entity should add strings-the million dollar question is whether these strings add value or cost.

Top 10 Misconceptions of About IT Project Price Tags

1. Any price tag in a press release is loaded up to include software, hardware, consultants, internal staff, marketing and every other cost to make the organization's investment seem as large as possible.

2. These systems are very large and very configurable. The single biggest cost is the labor cost to configure, and subsequently test the system and train everyone on it. Typically, unless the vendor has a consulting arm, they make very little of this nickel.

3. Other industries prove the consulting to software cost ratio. If you look at financial services, manufacturing or any other industry, the typical spread is $3 of consulting to implement for every dollar of license. That's why most major consulting firms have an enterprise apps service line.

4. Real cost. Most CFOs would fire their CIOs if the only project cost we counted were the amount that we pay Epic or any other vendor. The "real cost" in healthcare has much to do with the organizational and operational change that is necessary in hospitals to change the way they care for patients.

5. Epic doesn't get even 50% of the project budget (ever), and most of the time gets much less. As a longtime analyst who reviewed project budgets and contracts, the software provider gets a minority of the total pie.

6. Consultants are too expensive and under qualified. This legislation as well as our CEOs need for immediate results has placed tremendous time urgency on CIOs. This urgency has caused us to aggressively use consultants with previous implementation experience to assist us with putting in these systems. As a whole, the rates have gone up and the quality has gone down with consultants.

7. The pricetags for Epic, McKesson, Cerner and Siemens are all about the same. If we really want to help the industry save cost, we would want better products that require less configuration during the implementation process. That's why you save money on Meditech (by the way, I know of a hospital that spent $20M on Meditech).

8. If it weren't organizationally expensive, we would have done it by now. I'm not trying to minimize the true expense of these implementations or other barriers to adoption, but the cost to configure and implement is the single biggest barrier.

9. Cost overruns are too easy. These projects are difficult to manage, and quite often we take the wrong turn in the woods either because of the vendor's bad advice, poor consultant advice or our own poor judgment/lack of experience. I, for one, have been personally responsible for 2 of 3 conditions. Each mistake costs millions when you have such a large run rate with consultants/vendor staff.

10. This post misses the one big true cost in the industry. The software maintenance on these systems is far too great.

Hi Jack. You certainly cover a lot of ground in your post. A few points. First, you are right, there are many more companies than just Meditech which can come in at a low cost. I only cite Meditech because they are perceived as being a bit inflexible, but reliable and moderately priced compared to the Epic's of the world (though Epic would argue the idea that they are overpriced).

Your analysis of my second comment, I can't agree with. "Up and out" can work in the military because it's, well, the military. But doctors become Gods for what they can do in the operating room and elsewhere in the hospital. When it comes down to it, no hospital is going to tell a SuperDoc, as I'll call the type, to get up and out, as they bring in too much money and they are as close to being irreplaceable as they come. A long time ago, Sam Bierstock wrote an article which said that time will solve the problem we grapple with so mightily today, meaning older, less tech-savvy SuperDocs will retire, and younger, wired SuperDocs will take their place. Of course, this doesn't mean we shouldn't do everything possible to speed up the transition such as:

• Infusing HIT software into medical schools
• Improving software and hardware for ease of use
• Standardizing data formats to foster intersystem data transfer
• Funding HIT purchases and incentivizing their continued and effective use
• Lowering the barriers to physician practice EMR purchase and implementation

What we are up against, however, is really a change-management problem (see SuperDoc). And it's extremely hard to solve. Partners did an "up and out," but, as we know, not everyone is Partners.