HITlaw 7/6/12

Practice Fracture and EMR Rights

Physician groups are signing up for EMR technology in a rush in order to meet eligibility deadlines for reimbursement under the HITECH Act. Unfortunately one of the key considerations in the process, the license agreement, is too often seen as a “last step” on the checklist. As I have urged in previous papers and postings, this should not be the case, as many items are overlooked in the push to acquire an EMR, implement, go live, and finally attest to Meaningful Use.

One important issue that is left unaddressed in the supermajority of licenses is transfer rights in the event of a practice split.

By split I do not mean the situation where a physician leaves a practice and the practice remains intact, because in those cases the license stays with the practice. No issue there. The departing doc takes nothing away in terms of license rights.

But when a practice splits and dissolves, what happens with the EMR license? How is data divided and protected? Who is responsible to the vendor for the security and confidentiality of the EMR system?

When licensing EMR technology (or any other type), the practice should negotiate terms for the perhaps unlikely but still possible situation of the practice breakup. The first request to the vendor should be an accommodation permitting the transfer of the license to multiple successor entities in the event of a breakup. Note that this will rarely, if ever, be without additional cost to the subsets of physicians, and many vendors have minimum provider thresholds, all of which is fair. If a vendor does not market customarily below a certain provider level, there is a reason, which is in most cases ongoing cost. They have determined the minimum sustainable level at which a product can be licensed, enhanced, and supported.

That said, the key issue here is the right to split the license should the need arise. No vendor wants to lose a client, and if the vendor can accommodate a license split, they actually increase their client base and revenue stream.

Next on the priority list would be some recognition by the vendor that in the event of a non-subscription-based license split, some accommodation will be made in terms of original license fee investment. (Quick sidebar – I exclude subscription-based systems because there is no upfront, perpetual license fee – it is simply pay as you go.)

With regard to non-subscription license fees, providers should not expect a known, predetermined allowance, as there are too many factors involved. For example, a five-provider license could be split into subsets of providers in 120 different ways, if my math skills are still up to par (5 factorial, or 5 x 4 x 3 x 2 x 1). Now do the math for a 10-provider license and you will be amazed at the number of combinations. Further, if the license is more than five or seven years old, the practice has in all likelihood taken a full depreciation on the initial investment and should keep this in mind.

I suggest that the most you could reasonably request is a statement that the vendor will make an accommodation of some type with regard to license fees, perhaps on a prorated basis allowing for depreciation and subject to the vendor’s minimum provider level. Prior implementation costs and support fees are clearly not eligible, as those services were provided and paid for. However, there may be a savings to be realized if minimal implementation and training are required by the new practices due to the familiarity with the incumbent vendor’s system. There is real incentive to the vendor to move from a single customer to multiple customers, with no sales effort, minimal implementation effort, and increased revenues, both one-time and recurring. The flip side is the customer should not expect to split a single license into multiple licenses and systems with no corresponding increase in fees, especially support fees.

Although not a pleasant topic, the practice breakup is a possibility, and having a pathway for continued use of the subject technology is important. If done up front, it means one less (or smaller) headache should the breakup occur.

Another very important issue is the data in the EMR. If a practice breaks up, what happens with the data? The first issue here is to determine what happens between the physicians with regard to their respective patients’ data. Consider record retention periods and ongoing access to records by patients or former patients. These are not issues for the vendor, and the best time for the practice to address these issues is when the EMR (or other) technology is acquired.

The associated request to the vendor should be a “transition services” accommodation. This should include the willingness to export or convert data to another vendor’s system should the practice at some point move to a different technology, obviously at a cost. Next you should discuss and investigate (before signing), the ramifications of splitting data into subsets, even if to populate new systems from the same incumbent vendor, and address those as well. Find out before implementation if there are any issues to consider regarding how the EMR or associated database should be structured.

Finally, when the practice breakup occurs, what happens with the original EMR system? The customer practice has obligations to the vendor. These must be carefully considered and fully performed. From the vendor’s point of view, it does not really matter which entity (original or successor) is responsible, but that there is an accountable entity involved. This may not be necessary if the original system is split and licensed anew to subsets of the practice, with the eventual result that there is no “old system.” However, too many times I have assisted vendor clients in situations where the provider customer expects new systems to be created with credit(s) or allowance(s) given for the original system, but then also expects to keep the original system alive and well and running in order to access historical data.

It doesn’t work that way, especially if the original practice is dissolved. The vendor needs protection. Providers should recognize that if you “want it both ways” you should expect to pay full price for the new systems, which is entirely fair. I have used the example many times that you cannot purchase a new car at a price based on trading in your old car, and then decide to keep the old car with no corresponding increase in price for the new car. Note there is also the reasonable middle ground where the old system may be accessed and “wound down,” with corresponding support fees, for a limited period of time after which the system goes away and the customer certifies this to the vendor.

When practices do not work out details ahead of time as to license and data ownership rights, the vendor gets drawn into the fray. As far as the vendor is concerned, the original licensee — the practice itself — is the holder of the license and the owner (as between vendor and customer that is) of the associated data. If you find yourself in this situation as a provider customer, develop a few options that might work between practice members and then approach the vendor.

Just keep in mind that no vendor wants to be asked to decide issues that are properly between practice members. If your EMR license agreement does not contain language permitting a partial license transfer for the benefit of practice members in the event of a practice split, you can imagine what might result. Some members might want to continue using the system and consider the license “theirs”. Others might seek to block that effort. Both might go to the vendor and ask for a ruling. For the benefit of all, I will repeat once again, address these issues up front at acquisition time.

In summary, practice groups should plan ahead when signing for new technology. Negotiate license transfer rights. Expect to pay something, but know you have established a transfer pathway. Determine between practice members what happens with the practice data if the practice breaks up. Discuss this with the vendor, address conversion of data in the license, and investigate database configuration options for implementation time. Do all this at the time the technology is acquired.

Time spent addressing important license issues at the acquisition stage helps avoid future problems, whether between practice members or the practice and the vendor.

William O’Toole is the founder of O’Toole Law Group of Duxbury, MA. You may contact him at wfo@otoolelawgroup.com and follow him on Twitter @OTooleLawHIT.