Monday, May 2, 2011

Why Should Your EHR Be “In Service” by December 31, 2011?

As we move further along on 2011, you should seriously consider your plans for the year and the most advantageous (and soon to be extinct) tax benefits of an EHR investment in 2011 or 2012.

Until December 31, 2011, EHR investments are eligible for 100% Bonus depreciation.  100 % Bonus Depreciation allows a practice to completely write off their hardware and software EHR expense without limit in 2011.  (Bonus Depreciation drops to 50% in 2012 and reverts to regular depreciation in 2013.)  Another interesting aspect to Bonus Depreciation is that Bonus Depreciation is not limited to an offsetting profit.  Without getting into too much number crunching, that means that you may be able to generate positive cash flow depending on financing etc.

To take advantage of Bonus Depreciation, you need to have the EHR in service and you only have 8 months to do it.  If you plan to take advantage of this one-time tax benefit, your still need to allow for enough time to select the right product and correctly put the product “In Service” subject to your tax advisor.

Anyone wanting to qualify for 100% Bonus Depreciation needs to act now since you are facing a limited timeline to put the EHR in service:

Selection – Practices can select an EHR within two to three months.  This includes analyzing options, reviewing products and performing due diligence before making a final decision.  However, many practices take more time to arrive at a final selection.

Contract Negotiation – EHR contracts have a number of issues and details that deserve careful consideration and design.  Typically, a contract can be completed in two to four weeks.  However, you may need additional time to firm up your hardware and/or communication strategy.

Establishing Technology Infrastructure – Before many implementation activities can occur, you need to order, and install hardware as well as provision communication upgrades.  For an EHR, installation of the technology base can take anywhere from thirty to ninety days.

“In Service” –The specifics of putting the EHR in service should be coordinated with your tax advisor.  However, regardless of the In Service process, the EHR In Service effort requires the same level of due diligence and care that is needed to support any EHR transition.

As you can see, time is not on your side if you want to place the EHR in service in 2011.

Placing an EHR in service does not require attaining Meaningful Use and qualifying for the Stimulus Incentives.   Nonetheless, the 100% Bonus Depreciation for 2011 or 50% Bonus Depreciation for 2012.  Bonus Depreciation may offer a significant advantage for your practice and your owners.

For more information on the specific tax issues, Mark Estroff of Gates Moore in Atlanta has written an excellent article on the subject.

© Sterling Solutions, 2011

1 comment:

  1. Ron, so many practices today are implementing EHR in the hopes of attaining meaningful use for 2011 with payouts in Feb, 2012. This need has created a whole new world of opportunity for those of us who are assisting these practices to implement all the changes. Until they can actually absorb what they need to do and then begin implementing, it is a daunting task for practice managers to handle on their own. Much Success to you....