Negotiating Deals with Tech Vendors

December 15, 2009

Now that you’ve decided which vendor will supply your new EMR (or practice management system, or other large IT purchase), it’s time to hammer out a deal. How do you negotiate the best terms for one of the biggest purchases your practice will ever make?


The Birth Center in Bryn Mawr was sorely in need of some updates. Founded in 1978, the nonprofit center near Philadelphia had experienced unprecedented growth in the past three years - nearly 50 percent, according to executive director, Nancy Feldman-Kirsh. But as the staff celebrated the center’s increasing volume, it became painfully apparent that the paper trail it had created - dating back to the Carter administration - needed to go.

“We had the same procedures since we began and they were strangling us,” explains Feldman-Kirsh.

So the solution was to go digital. After raising the funds to acquire the updates, the center began the monumental task of selecting the perfect technology and vendor. Feldman-Kirsh and other practice leaders hired MGMA practice consultant Rosemarie Nelson to guide them through the maze of vendors and techno-speak.

“There are so many options for systems out there and we were really babes in the woods to a large degree,” says Feldman-Kirsh. “[Nelson] helped us narrow the field faster. She interpreted for us - technology people speak a language different from regular people - and helped us understand places where we were confused or needed clarification.”

Negotiations of any type have the potential for frustration and confusion, but negotiating with technology vendors can be particularly stressful. For one thing, EMRs and other IT tools are expensive. For another, the vendors know far more about them than you do. Finally, the stakes are higher for you than for the vendor - it has other customers but your practice is the only one you have. You can’t afford to mess it up.

Ready for some good news? Everything - absolutely every part of the deal - is up for negotiation. You name it, you can bargain for it. The vendors do want your business.

Plus, you’ve got us on your side. Now let’s get to the negotiating table.

Do your homework

For the purposes of this article, we’ll assume that you, like The Birth Center, are buying an EMR. But the negotiating principles we’ll discuss can be applied to other large tech purchases, too, like a new practice-management system.

Prices and financing options are all over the map but you can usually expect to pay a few hundred dollars per month, per user for Web-hosted products, or thousands upfront for the client-server versions. There’s also training, maintenance, and upgrades. It’s no wonder so many physicians in private offices have resisted EMRs so far.

So what’s the best approach to succeeding at this venture? First, do your homework. And unfortunately, many practices skip over this crucial due diligence.

“A lot of times the groups agree to buy and they don’t even read the contract, which is scary because they are basing it on trust,” says Daniel Hughes, managing director of the Claritee Group, a health IT provider. “I feel these practices are at risk because they are not doing the due diligence. That’s why we sometimes over-communicate what our deliverables are, just so we feel they know what is going on.”

So what exactly is due diligence? It’s a careful examination of your own practice’s needs followed by a thorough study of your chosen vendor’s ability to fulfill them. You can’t get a good read on the latter until you clearly understand the former, so make sure you know at the outset of your search what your practice needs to purchase: Do you want an EMR system with or without a built-in practice management system? What kinds of features do you need? An e-prescribing module? A voice-recognition transcription system? Specialists, do you need your EMR to be built specifically for your specialty, or can you consider a more generic system that’s open to modification?

Do you prefer a Web-hosted application service provider (ASP) model, or a client-server product? The former is less expensive month-to-month but you’re only leasing access, not buying a product. An ASP also tends to be easier for small practices to manage because the vendor takes care of updates and any technical glitches, but because they rely on the Internet, they can be slow.

Once you are clear on your goals and think you know which vendor best suits your needs, look outside. That means checking references. Don’t just trust your gut. Questions to ask EMR-users include:

  • What were the practices’ needs? Are they similar to yours?

  • How long have they been working with this vendor?

  • What are some positive and negative aspects they have found working with this vendor?

  • Were there any glitches? If so, what were they and when did they happen?

  • How responsive has the vendor been to problems?

  • If the practices had to make the same purchase again, would the doctors choose the same vendor?

You should also find out about practices’ work flow, compared with yours. How do the physicians like to work, and how well did the new EMR conform to their work habits? To what extent, if at all, did it force them to conform to the EMR? Even though such precautions can be time consuming, really knowing you are working with a vendor that has what you need and has been known to deliver good service will make the negotiation process much less intimidating.

“This is a marriage in two ways - between tool and you and between you and vendor. You have to feel confident that they are solid and have integrity,” says Feldman-Kirsh.

Wiggle around

In addition to doing your homework, be aware of some of the areas of wiggle room you can negotiate into a contract.

Payment terms. Of course everyone wants to get paid - vendors, too, naturally. But how and, equally as important, when you pay them is crucial. Remember, some vendors may have legitimate concerns about not getting paid in full, having been burned in the past. That’s why many vendors will ask for 50 percent upon signing a contract and then 50 percent upon delivery. Unfortunately for you, “delivery” can mean receiving a few discs in the mail for you to install and implement yourself. A better bet is to spread it out so that you hold final payment off until you know the product is working to your expectations.


“I usually recommend paying 25 percent when you sign the contract, 50 percent on delivery, and then the final 25 percent after the first electronic claim has been submitted, for example, or some [other] measure that you feel comfortable with. It has to be something that says to you that you are up and running,” says Nelson.

Maintenance fees. While you want to make sure your vendor is going to be there to make necessary repairs and keep you going, paying full maintenance on everything isn’t always necessary. Having a maintenance agreement on essential high-end equipment such as servers and scanners makes sense, but having one for a printer or PC might not. “After three years of maintenance, you could’ve bought a new [printer or PC] anyway. Besides, you’ll probably turn them over every three years,” says Nelson.

Training. As the digital healthcare landscape evolves, vendors will keep up by supplying you with updates to their hardware and software. To use them efficiently, you will need to have some ongoing training in your contract. Even though it seems like a lot of money and you might feel like you can learn it on your own, being trained by representatives who may have even developed the new updates can save you a lot of time. But the key is to lock in a rate early on so the vendor doesn’t keep escalating it. Then just spend it as you need it - not all within a certain time frame.

Giving notice. Stuff happens, things change, and you or the vendor might need to end a contract, change the terms of a contract, add new software, or whatever. While vendors will usually state that they reserve the right to make these changes, they need to give you enough time to make any necessary adjustments. Usually vendors will give 30 days’ notice, but by asking them to change it to 60 or even 90 days could make a big difference on your end.

Call in the lawyers

Health IT purchases can be very intricate. Having a second pair of eyes combing through the contract details is a good idea. Make sure you get someone with software contract experience.

“I always say to my clients, ‘Look, you don’t want to start all over. This has been long and painful. It took 12 to 18 months to find the right vendor. The last thing you want to do is get three to four months into implementation and cancel the contract,’” says Nelson. “Getting an attorney is well worth it.”

A software attorney’s job is to look over a contract and help identify and recast clauses that, under the worst of circumstances, could really foul things up.

“Healthcare is a different animal - you’re talking about interfaces and clinical data. The stakes are higher,” says David Schoolcraft, attorney with Seattle-based Ogden Murphy Wallace, PLLC. Plus, he says, with the recently passed stimulus bill, which includes money for health IT, having a lawyer look at a contract and scan it for future compliance issues is more important than ever. The bill promises as much as $64,000 to practices that demonstrate they are “meaningfully” using a “qualified” EMR.

“It’s really important for physicians doing deals now to ensure that somewhere in the contract the vendor guarantees that their product will meet this certification requirement so [they] can get that [EMR] incentive.”

The problem with not checking, says Schoolcraft, is that a vendor may later tell you that its product is not certified to the government’s standard for stimulus-money purposes - or that, yes, it can provide a service pack that will put you in line with certification standards, but will charge you extra. If you ask for it up front, however, you may be able to negotiate that as part of the original price.

But it’s not only the incentive that attorneys can help you secure, it’s also the data security obligations that will go along with it. Say, for example, in the future a patient wants you to account for all disclosures of his record. You’re going to have to do it and you’re going to want a system that can help you do it easily. “Most systems will have log file information available, but I don’t know if today’s systems can easily generate these reports,” says Schoolcraft.

Please play nice

Although the term “negotiation” can seem somewhat adversarial, it really doesn’t have to be. Don’t approach negotiations assuming the vendors are out to trick you. You are in the market for something to make your practice run more efficiently and they have a widget that will fill your need. Simple, right?

In between, however, is a lot of gray area that needs to be sorted out. Nicely. So when you come to a point where there’s a disagreement, don’t immediately throw up your hands and call it off - just explain where you are coming from and why. That’s what happened during vendor negotiations with The Birth Center when the practice asked for an altered pay schedule. The vendor wanted final payment when the hardware was delivered, but Feldman-Kirsh asked to withhold final payment until the system was up and running. After explaining that the center needed this schedule to feel secure with its purchase, the vendor explained that it was fine with that plan, but needed a specific date so the money wasn’t hanging out there indefinitely. The result was that both parties agreed to the altered pay schedule, but pinpointed a date when Feldman-Kirsh was confident that the center would have submitted its first electronic claim and would know whether or not everything was working.

“It has to work for both parties,” says Feldman-Kirsh. “I think that when you present yourself as someone who wants to be reasonable, the other party will also be reasonable. While hopefully problems won’t arise, he says, it’s better to keep all lines of communication open through the whole process.

“Sure, we make sure we protect ourselves,” Hughes says. “Our risk is the client expecting more than we’re going to deliver and that’s the worst thing that can happen. Even if the contract states it, for the customer not to understand what the true deliverables are - well, that’s our worst fear.”

Kellie Rowden-Racette is a former associate editor with Physicians Practice. She can be reached via physicianspractice@cmpmedica.com.

This article originally appeared in the 2009/2010 Physicians Practice Technology Guide.