Calculating the useful life of your EHR - is it possible?

An EHR’s useful life is an important consideration when calculating long-term ROI and contemplating the time frame in which an EHR should be replaced.  However, useful life can be a difficult concept to grasp and calculate as it isn't as easily measured as the depreciation of tangible medical equipment. In healthcare, useful life is traditionally applied to physical assets like medical devices, but for EHRs, the concept is more abstract and multi-dimensional.

Before discussing the useful life of an EHR, it is important to understand that the considerations used to arrive at a calculation differ, and when not applied properly can result in inaccurate outcomes, therefore it is important to ask the right questions concerning useful life.  Calculating an EHR's useful life isn't impossible, but its accuracy depends on factors that can be hard to quantify and vary by context.

Understanding useful life in the context of EHRs

What is EHR Useful Life?

An EHR’s useful life refers to the period during which the system delivers value to its user. More specifically, it can either:

1. Refer to the length of time the EHR will be serviceable and supported by the vendor.
2. Define how long the system can effectively meet the healthcare provider's operational needs before requiring repair, upgrade, or replacement.

Unlike medical devices that show signs of physical wear and tear, EHR systems don’t degrade physically. Instead, their decline stems from software obsolescence, changing practice needs, or regulatory shifts that make the system less functional or compliant over time.

Calculating EHR Useful Life

Both accepted accounting practices and Federal guidelines provide a framework for calculating the useful life of healthcare-related assets, including EHRs. When calculating the useful life of an EHR, key factors include:

• Wear and tear (though more applicable to hardware).
• Obsolescence due to technological advancements or regulatory changes.
• The healthcare provider’s repair and replacement policies.

While factors like wear and tear apply primarily to medical hardware, the two most significant influences on EHR useful life are:

1. Obsolescence due to economic and technological changes.
2. The provider's policies for repairs and replacements.

Use this EHR pricing guide to start building a budget and calculating potential ROI for new software

Regulatory compliance and Meaningful Use

A significant factor influencing EHR obsolescence is regulatory changes. For instance, when new Meaningful Use or interoperability requirements emerge, EHR systems must comply or become irrelevant. The useful life of an EHR should align with any future regulatory deadlines.

Other factors that affect the Useful Life of an EHR

Cost of Operation vs. Value

One way to measure the end of an EHR’s useful life is when the cost of maintaining the software exceeds the value it provides. For instance:

• Rising maintenance costs that are no longer sustainable for the practice.
• Productivity losses due to poor EHR performance or usability issues.

When the system's cost to the practice becomes unjustifiable, it’s time to consider a replacement.

Vendor replacement cycles

An EHR's useful life can often be assessed by the vendor’s replacement schedule. Many software providers have set timelines for releasing new versions or phasing out older systems. When your EHR provider announces an end-of-support date, the system's useful life is effectively determined.

In the absence of such information from the vendor, your practice will need to evaluate the system's lifespan based solely on obsolescence and performance factors.

The benefits of calculating EHR Useful Life

By accurately calculating the useful life of an EHR, healthcare organizations can improve their long-term budgeting and operational planning. It provides a more precise timeline for:

• Financial forecasting.
• Scheduling upgrades or replacements.
• Maximizing the system's ROI before its replacement becomes necessary.

Having an estimated useful life for the system allows the organization to align technology investments with clinical and operational goals, ultimately ensuring better care outcomes and financial health.

Conclusion

While calculating the useful life of an EHR may seem challenging due to the intangible nature of software obsolescence, it is by no means impossible. By evaluating regulatory changes, practice needs, and cost-effectiveness, healthcare providers can establish a timeline for when their EHR will need replacement. Doing so allows for better financial planning and ensures that the system continues to meet the evolving demands of modern healthcare.