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Financing high-tech: You can afford it after all

You probably don't have a lot of cash to pay for the latest in billing and clinical systems. There are ways to absorb the upfront bite.

By Tyler Chin, amednews staff. March 8, 2004.

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Chandrasekhar Varma, MD, an Escondido, Calif., endocrinologist, last year figured it was time to replace his billing system and install electronic medical records software. One problem: the price tag for the necessary software and hardware ran $60,000. "I didn't have $60,000 lying around," he said.

Rather than cancel his plans, Dr. Varma did what many physicians do when they buy technology: He sought financing.

Generally, physicians can seek a lease-to-own arrangement or a straight loan from a lease company or a bank, or go with a subscription pricing model arrangement through the technology vendor.

Under the terms of a lease-to-own or bank-financing arrangement, the lender forks over the full purchase price to the seller. A doctor then must make monthly payments to the lender over an agreed-upon period, which typically ranges from three to five years. The lender owns the goods until the physician pays off the loan plus a dollar buyout payment, at which time the physician owns the goods.

"It's like buying a car. When you buy a car you can pay cash or have a lease company [or bank] finance it for you," said Frank Rhie, MD, founder and chief medical officer of Alteer Corp., a Irvine, Calif.-based company that sells financial and clinical software to physicians. Although in many ways, it's more like owning a condominium. Whether or not your loan is paid off, you still have to pay a monthly maintenance fee to cover technical support and software updates.

With subscription pricing or pay-to-use, also known as an application service provider model, the physician never owns the software and data are stored outside his or her office. The advantages of subscription pricing are that users don't incur large costs upfront, don't obligate themselves to pay off a large debt, don't have to worry about technology support and automatically have access to the latest software version because the system is housed and maintained offsite by the vendor.