HIT System Procurement Issues and Pitfalls · 2006-09-25 · HIT System Procurement Issues and...
Transcript of HIT System Procurement Issues and Pitfalls · 2006-09-25 · HIT System Procurement Issues and...
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HIT System Procurement HIT System Procurement Issues and Pitfalls Issues and Pitfalls
Session 2.03Session 2.03
Presented by:Gerry Hinkley
Davis Wright Tremaine LLPand
Joseph M. DeLucaIT Optimizers®
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Session Goals• Provide you with• A best practices approach to system
procurement methods, tools and results
• An overview of usage/business models and procurement implications
• The crucial role of the RFP• An understanding of software
licensing and system purchase guidelines
• Tips for negotiating with vendors• Insights into managing the
implementation from a contractual perspective
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Business Alignment-Framework for Success
Business/TechnologyOpportunity
New Directions
Rapid Prototype, Pilot & Evaluation
Rollout
Evaluation Cycle
Change Management
“Required for Success”
• Evaluate current business & technology environments
• Establish & prioritize new business initiatives
• New technology can drive new business
• Confirm and establish measures of success, ROI
• Select technology approach• Confirm participants, pilots,
resources & relationships
• Value CREATION• ROI Confirmation• IT validation• Business Plan validation• Continuous value
enhancement
• Value CAPTURE• Benefits realization
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The Systems Lifecycle Process
Envisioning Evaluating Implementing Value AttainmentSelecting
Defining Goals
Detailed Implem
entation Planning
Initial Benefits Planning
Identifying Requirements
Prioritizing & Expectations
Vendor Research & RFP
Demonstrations & Labs
Reference VerificationSite Visits
Benefits Plan/Validation/Pilot
Refined Cost/Benefit AnalysisVendor Negotiation
Implem
entation TrainingClinical Design
Integration/Interface Development
System Configuration
Go Live & Rollout
Testing
Contingency Planning
Workflow
/P&P Changes
The Plan
End User Training
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Vendor Selection Methodology & TasksProject Governance
Executive Sponsorship, Design Advisory Committees, Project Team
Project Vision“Framework for Success”
Workflow & Process Design
FULCRUM Vendor Selection ActivitiesRFP>>Vendor Demonstrations>>Vendor Lab>>Site Visits>> Corporate Visits
FULCRUM Vendor Selection Decision Points & ToolsBuyer’s Guide>>Proposal Response Analysis>>Demo Scenario Scoring>>Vendor
Lab Scoring/Future State Validation>>CBA>>Site Visit Evaluations>> Corporate Visit Evaluations
Vendor ContractingOutcomes-Based Contract Terms,Management Incentive Alignment
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Creating the Business Model
7-Year Return on Investment
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%Cash Savings Cash & Efficiencies
Cash, Eff iciencies & NewRevenue
Cash , Eff iciencies, NewRevenue & Strategic Impact
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
Cumulative Returnon Investment
CumulativeExpense Flow
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Contracting Method Drives The Model
Traditional Contract• Software/Hardware/Installation
• Based on delivery and acceptance
• Monthly maintenance charge• Penalties for non-performance
Performance Incentive Contract• Traditional Contract• Final payment is tied to achieving a business goal (i.e. No increase in AR
days)• Bonus incentive potential (i.e. Extra payment for a reduction in AR days)
Metric Driven Performance Contract• Minimum base payments by month or transaction• Business or quality metric used to drive goal achievement and payment• “Attainment of a 25% decrease in adverse drug
events will result in a payment of Y”
Joint Venture Contract• Both parties share profit
if goals are attained
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Using the RFP To Determine Value
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Using the RFP To Determine Value
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Using the RFP To Determine Value
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Using the RFP To Determine Value
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Standard RFP Questions-Still Relevant
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The Value of a Learning Lab…..
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Functionality and System Scores vs. Total Cost-5yrs.
500
600
700
800
900
1000
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000Thousands
Total 5 Year Cost
Tota
l Fun
ctio
nalit
y an
d Sy
stem
Sco
re
Vendor E
Vendor D
Vendor B
Vendor C
Vendor AVendor F
RFP Functionality vs. TCO
$1,000 per MD per month
$600 per MD per month
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"Excellent" Category Scores on Clinical Demo vs. Total Cost-5yrs.
-1
0
1
2
3
4
5
6
7
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000Thousands
Total 5 Year Cost
# of
"Ex
celle
nt"
Cat
egor
y Sc
ores
on
Clin
ical
D
emo
Vendor E
Vendor D
Vendor B
Vendor CVendor A
Vendor F
Learning Lab “Excellent” Scores vs. TCO
$1,000 per MD per month
$600 per MD per month
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Comparing Economic Value
Vendor Comparison - Net Cumulative Cash Flow by VendorCash, Efficiencies, New Revenue & Strategic Impact
-$25,000,000
-$20,000,000
-$15,000,000
-$10,000,000
-$5,000,000
$0
$5,000,000
$10,000,000
2004 2005 2006 2007 2008 2009 2010 2011
Years
Vendor AVendor BVendor CVendor DVendor E
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Using the RFP To Set Contract Expectations
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Structuring the Contract Analysis
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Questions to Ask the Vendor
• Project management– Staffing
• Choice of who is on the vendor implementation team
• Clause for not soliciting the hiring of practice staff– Timing
• Implementation and payment milestones– Technical environment
• Practice requirements for readiness• Hardware specifications
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Questions to Ask the Vendor
• How will acceptance testing work?– Define what is the requirements for completion of
acceptance testing– Give the vendor what the requirements are
• Where are the functional specifications?– In the contract, rely on the RFP, others?
• What training support is provided?– Initial training and on-going– Included in the maintenance agreement
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Questions to Ask the Vendor
• What maintenance support is provided? – 24/7 help desk– On-site within 24 hours, if issue
cannot be resolved remotely– Financial remediation
• What updates will be provided?– Fixes to minor issues– Commitment to provide regular
updates– Included in the maintenance
fees
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Questions to Ask the Vendor
• What enhancements will be provided?– Vendor developed versus practice initiated– Practice obligations to purchase vendor
enhancements• Do I have to buy new releases to be supported? • What happens if I have problems?
– Critical errors– Repair/replace– Substitute software/equipment
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Questions to Ask the Vendor
• What happens if you go out of business?
• What taxes will I have to pay?– Physical media versus electronic
transmission– Strategies to mitigate
• What happens if the software infringes third party software?– Vendor buys rights for practice to
continue to use the software– Purchase price refund
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Questions to Ask the Vendor
• Who is responsible if a patient gets hurt?– Typically, practice maintains responsibility– Ensure adequate insurance for software
malfunction• How do I terminate maintenance and what
happens?– Requirements to return or destroy software– Timeframes for notification
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Key Concepts
• Licensing vs. purchasing• Functional specifications• Documentation• Acceptance testing• Pricing methods• Change orders• Proprietary rights
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Key Concepts (cont.)
• Is the vendor your HIPAA business associate?• Warranties• Indemnification• Damages, disclaimers and limitations on liability• Reciprocal obligations• Software escrow
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Key Concept – Licensing vs. Purchasing
• Licensing– Rights to use the EHR software in your
practice– Vendor determines who can use the EHR
software• Purchasing
– Typically, custom software– Unusual for the vendor to provide the practice
with rights to EHR software code
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Key Concept – Functional Specifications
• Definition of what the practice will receive from a functional perspective
• Protects the practice if there are performance failures by the vendor during or after implementation
• Based upon documentation outlined in the agreement
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Key Concept – Documentation
• Provides warranty that the EHR software will perform as described in the documentation
• Typically included are the User Guides and supporting implementation documentation
• There can be a difference between what the sales persons verbally promises and what is documented in the functional specifications
• Request for Proposal (RFP) response should be designated as part of documentation
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Key Concept – Acceptance Testing
• Understand what the EHR vendor identifies as to when testing begins and ends– Installation and ability to use the equipment– Users have “signed-off” on full production
testing• The practice should understand when testing
can begin and the criteria for acceptance• Incremental payments should be tied to
acceptance testing
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Key Concept – Pricing Methods• License
– Typically, 30-40% upon installation– Then incremental based upon milestones
• Maintenance– Typically, monthly fee based upon a metric– Can be variable based upon practice satisfaction– To maintain warranties, must be maintained and
software releases current• Implementation
– Understand contract requirements– Try to align with customary business practices– Travel management
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Key Concept – Change Orders
• Changes to functionality – Additional cost for
vendor upgrades– Obtain agreement in
writing• Changes to license
– Expand seats– Maintain volume
negotiated discounts
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Key Concept – Proprietary Rights
• Vendor will limit copies or changes to EHR software to be made
• Practice needs to retain the rights to the patient data– Agreement clearly identifies the practice as
owning the data– If there is a termination of the license, an
orderly transition exists to extract the data
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Key Concept – HIPAA Business Associate
• The vendor is a Business Associate if the vendor provides services that the practice would normally related to patient care, payment or business operations provide and vendor has access to “protected health information”
• Appropriate agreement is required
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Key Concept – Warranties
• Performance– EHR software, as delivered performs to the functional
specifications and documentation– Clause for the vendor to comply with state and federal
regulatory compliance• Infringement
– Assurance against the risk that the vendors software doesn’t infringe on another vendor’s proprietary software
– Practice rights to the data need to be maintained
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Key Concept – Indemnification
• Infringement– Protects against infringement claims against the
vendor that the practice can continue to use the software
– Practice can continue to utilize the EHR software and the vendor will provide defense and pay damages
• Confidentiality– HIPAA violation, the vendor will be accountable
• Compliance– Comply with state and federal regulatory bodies
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Key Concept – Damages, Disclaimers, Limitations on Liability
• If software is not functioning to specifications and the EHR system cannot be repaired by the vendor the practice has the ability to:– Withdraw the EHR system– Obtain a refund from the vendor– Vendor pays the additional cost of
replacing the system
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Key Concept – Reciprocal Obligations
• Site preparations– The practice has responsibilities and penalties
if the practice site is not prepared to receive EHR software
• Installation– Equipment delivery and storage– Adherence to project plan– Determining testing start
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Key Concept – Software Escrow
• Protection if the vendor goes out of business or ceases to support the practice
• Ensures practice has access to the source code and can provide for alternate maintenance of the system
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Thank You for Participating
For more information, contact us:Gerry HinkleyPartnerDavis Wright Tremaine [email protected]
Joseph DeLucaManaging Practice DirectorIT Optimizers®[email protected]
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The purpose of this presentation is to inform and comment upon transactions in the health care industry. It is not intended, nor should it be used, as a substitute for specific legal advice, as legal counsel may only be given in response to inquiries regarding particular situations.