John Haffty: Lower MEDITECH Expanse TCO Helps Hospitals Stay Independent
Haffty Consulting is happy to provide our audience with a third post from our “guest” blogger John Haffty. John agreed to share his thoughts on the differential in total cost of ownership for hospitals when they choose Epic versus MEDITECH Expanse and the impact of that choice on both a hospital maintaining its independence and providing the best patient care possible. Here are John Haffty’s thoughts….
Let’s start with something that was posted a few months ago on HISTalk.com and was sourced from the 2023 Digital Health Most Wired survey. Below is a chart showing that IT Expense as of Percent of Total Revenue “…stabilized, with most returning to pre-pandemic levels and likely to increase as they acquire technology to address labor shortages, wage inflation, and reduced margins…”
Note that the 2023 average was 4.3% of total revenue.
There are two key points I want to make.
Epic and MEDITECH represent the two top choices for an EHR based on KLAS ratings and there is a huge gap between them and everyone else.
Costs matter and the difference between Epic and MEDITECH is significant and should be a key factor in EHR selection and retention decisions.
First Point, the majority of the function of an EHR is operational – placing an order, billing insurance carriers, providing results to caregivers – the strategic advantages of decision support and clinical excellence tools are similar between MEDITECH and Epic. In my recent past at NHA, we used the CMS Quality Measures as a metric when focusing on delivering measurable value during our implementations and optimization projects. We found that, on average, MEDITECH hospitals outperformed or equaled hospitals using all other EHR systems on these measures which tie directly to Medicare reimbursement. Also, in speaking with respected colleagues who work with other EHR systems, we acknowledge that the differences in outcomes are tied to the quality of the implementation process. Frankly software from all vendors, including MEDITECH, is often not used to its fullest and efforts to optimize existing software often drives the improvements that some hospitals seek and should consider before deciding to replace their software. Given the gap between MEDITECH and Epic and all other EHRs, it has always been my opinion that assessing and potentially optimizing your software drives the biggest improvements for the lowest cost. Also, on this theme, over the past years MEDITECH has invested significantly in their Clinical toolkits and many hospitals have not taken full advantage of these. Beyond directly impacting care, improved quality outcomes have a direct and favorable impact on hospital finances.
A brief tangent: While AI is drawing significant press these days, for most hospitals it will be best to leave the investment in AI to the vendors as only the largest health systems have the dollars to expend on leading technologies, including the computing resources to leverage AI. For all the talk of the potential benefits of AI, in the near term, the cost of these investments will likely outweigh the potential benefits for those doing this on their own.
Second Point, according to the chart above, IT spending represented approximately 4.3% of operating revenue in 2023. My experience has been that MEDITECH hospitals spend significantly less (2 - 2.5% for sites still running Magic and C/S; 3% for those running 6.x and Expanse). If you extract MEDITECH hospitals from the average, the expense likely goes up to over 4.5% of operating revenue to run Epic or Oracle/Cerner. If the gap is 1.5% that means the average MEDITECH hospital with operating revenue of $200M spends $3M less on IT than these others. $3M is in most cases the difference between running in the black or operating at a loss. It is noteworthy that while most large academic health systems have gone with Epic, the largest for-profit health systems (HCA, Steward) have committed to MEDITECH’s Expanse. We continue to read, in HISTalk and other sources, of hospitals that had to give up their independence because the cost of Epic was too great for them to continue to operate. In my opinion, the most important goal for a community hospital is to maintain its independence as larger hospitals use community hospitals as a feeder to their hospital network and invariably the community hospital loses some services.
A second brief tangent: Note that while some consulting companies that lead EHR selections are objective, others are clearly biased towards Epic. (Ask a potential consulting company for the results of their last 10 selection processes!) This serves them as they get large consulting contracts to help them when they lead their clients to an Epic decision as implementing Epic has been significantly more costly than implementing MEDITECH. These consulting companies sometimes justify this cost difference on their portrayal of projected cost savings which would reduce the gap in the cost of ownership. However, most of these savings are either unrealistic (i.e. efficiencies with clinical documentation will lead to a reduction in nursing costs) or are equally achievable with MEDITECH Expanse. When NHA was doing cost-benefit studies for our clients, the biggest potential areas for a realizable return on investment were with Medicare Quality Measures and as we documented in the past, MEDITECH hospitals equaled or outperformed hospitals in these measures compared with all other EHRs.
At the end of the day, there are 2 tiers of costs in hospitals, direct patient care (nurses, technicians, medical supplies) and support services. IT is a support service and while impactful, would your hospital be better served if it could afford more nurses or more IT staff? As we noted in a prior blog post, one hospital found that the total cost of ownership of MEDITECH Expanse was 60% less over a ten year period than Epic. This translates into helping maintain your hospital’s independence and more direct care givers.
Always welcome your feedback and glad to provide additional information on this topic.