Your Healthcare IT Budget: 7 Important Considerations

December 27, 2013

Here are seven important considerations when putting together a budget for your medical practice's IT needs for next year.

With 2014 just around the corner, you're likely on your way toward completing your practice's budget for the upcoming year. But how effectively have you addressed your IT expenses in the budget? Your practice's IT expenses will easily run thousands of dollars next year, so failure to adequately budget for IT will significantly affect your planning.

If you're interested in determining a rough estimate of what you should budget for IT, take a look at what you spent last year. You should include services and support, voice and data telecommunications, software purchases, and hardware purchases. This will give you a general idea of where your IT budget may need to be this year.

But this is only a rough estimate. It is worth taking the time to identify - to the best of your ability - exactly what you will need to spend on IT. This process will not only help with budgeting, but also help prepare your practice for what could otherwise be unexpected IT changes.

Here are seven important IT considerations when putting together your budget.

1. Security and compliance. The deadline for when physician practices had to be in compliance with the HIPAA Omnibus Final Rule has come and gone. The rule, which marked the most sweeping changes to the HIPAA Privacy and Security Rules since they were first implemented, places more pressure on practices to take steps to ensure their protected health information (PHI) is secure. If you didn't invest in conducting risk analysis and remediation in regards to HIPAA and the HITECH Act, this is definitely something you will need to do and budget for in 2014.

2. Windows XP end-of-life. On Apr. 8, 2014, Microsoft will no longer provide automatic fixes, updates, or online technical assistance for Windows XP and Office 2003. While the operating system and software will continue to work, practices will not want to use either after Apr. 8. Since they will no longer be supported, both are considered vulnerable to security issues, and a practice using them for anything involving PHI will be technically out of compliance with HIPAA.

It is worthwhile to have your designated IT person run a report to identify which machines are using Windows XP, and then differentiate which machines have the hardware capable of running a newer operating system (such as Windows 7) and which do not. For those machines capable of handling a newer operating system, you should be prepared to pay for the license upgrade plus the fee to configure the computer for its use. If there are any machines that do not meet the hardware requirement, they will have to either be replaced or, if possible, the technology inside upgraded.

3. Maintenance for mission-critical software solutions. These include your practice management software and EHR system. Those vendors have maintenance costs for their software, which is typically 17 percent to 23 percent of the original licensing cost for the software. For a $100,000 system, that's $17,000 to $23,000 in maintenance expenses, so you will definitely want to factor this into your budget.

In addition, ask these vendors if significant upgrades are coming down the pipeline, because if there is, you need to determine whether your existing hardware can support it.

4. Renewals. A few of your IT contracts will likely be up for renewal next year, and it's important to look into each of them. It is worthwhile to give yourself some time prior to the renewal deadline to determine whether the contract still meets your needs or whether you need to upgrade or downgrade. This is best to address prior to the contract renewing or you may need to pay a premium for changes after the fact. Important contracts to review are as follows:

• IT managed services agreement. If you have an IT managed services agreement, do you know when it is up? Do you need to make any changes to it? IT managed services providers may charge based on the amount of users or peripherals (e.g., computers and servers). If either of those is going to change, you want to be prepared to have the new agreement factor in more or less users/peripherals.

• Telecommunications (voice and data services). It is not uncommon for practices to sign three-year contracts with telecommunications vendors. Those contracts will usually require practices to give some amount of notice (e.g., 60 days) or the contract will automatically renew at the original terms.

• Phone system vendors. Once again, you will want to determine whether you need to make a change to the system. Do you need more or less headsets? Is the system's  warranty  expiring?

5. Warranties. It is imperative that you know what warranties you have on your practice's major equipment, such as servers, switches, and firewalls, and when exactly those warranties will expire. You will want to know when warranties will run out (both initial and renewed warranties) and determine whether to renew the warranty (if you can). When considering whether to renew a warranty, it's important to take into consideration the age of the equipment. Is it worthwhile to renew the warranty or is the equipment old enough that you would be better off replacing it? If you cannot renew a warranty, are you prepared to continue using equipment not under warranty? Do you have a response plan in place in case equipment not under warranty breaks?

6. New systems. The decision to purchase a major new system is usually not made overnight. When planning your IT budget, try to identify any new systems you're going to invest in during the upcoming year and when you're going to be installing them. Always let your IT point person know your intentions to allow ample time for research and planning.

7. Growth. If your practice is going to grow - anything from adding new physicians and staff to moving to a larger building or adding locations - you should definitely factor such growth into your IT budget.

By taking the time to look into these seven areas, you will put your practice in a better position to forecast the cost of IT services as well as prepare for the many IT changes you may experience throughout the year. This will not only help keep you on budget, but also ensure you continue to operate efficiently and effectively, and avoid any interruptions caused by poor IT planning.