Every year I have thousands of conversations with folks who are trying to understand what healthcare policy management software costs. These conversations happen at every conference I attend (and I attend a lot of them) and during more policy committee meetings than I can count. It’s not easy to determine your organization’s total out-of-pocket cost and each hospital has different needs, but I’m going to break down what you need to consider when buying policy management software. Once you have considered all of these options, you will be able to make a decision for yourself about whether policy management software is the right fit for you.
There are two categories of pricing that you need to consider when buying policy management software:
- Annual Subscription Fees
- Secondary Variable Factors that cause pricing to vary significantly, such as:
- Implementation Fees
- Training Fees
- Interface Costs
- Specialty Professional Services
Annual Subscription Fees
First let’s discuss the various models you might encounter and what the typical annual subscription fees would be for policy management software. For consistency we will use an example of a 3000 person healthcare organization. You can modify the pricing proportionately based on the size of your healthcare organization.
Pricing Based on Concurrent User Licenses
Concurrent user licenses is one model that exists to make it easy to understand the cost. Basically, a hospital will tell the vendor how many people will be using the software at the same time. The cost of each license is multiplied by the number of people and the result is your cost. In our example, 150 people out of 3000 hospital employees will use the software at the same time. The cost of the concurrent user license is usually much higher than other pricing models. If the cost of the concurrent user license is $235 USD per person, then the annual subscription fee is $35,250 USD per year.
150 concurrent users X $235 per concurrent user = $35,250 USD
Of course if your organization has more or less concurrent users that would affect the various prices and incentives a vendor would offer. This model could work well for industries where access to policies and procedures is not mission critical. This is not the case in healthcare where patient safety, accreditation, regulatory compliance, and overall legislative governance makes policies and procedures the nucleus of a hospital’s GRC (governance, risk and compliance) efforts.
Healthcare unfortunately is one of those industries where access to policies and procedures and by default your electronic policy management system is mission critical. This is an important point when evaluating suppliers that offer a concurrent user license model as there could and probably will be “lockouts”.
A “lockout” is when an employee within your hospital tries to log into the policy management system and cannot gain access because you are already at your concurrent user login limit for that given point in time.
For instance in the example given above if a nurse on the floor tried to log into your hospital’s policy management software when 150 other employees are already logged in they will not be able to gain access.
During the evaluation process you may think that this may be an unlikely occurrence, however your policy team should think through all the scenarios where this could have an adverse impact on the organization as a whole. An example of this would be an unannounced accreditation visit (i.e. – The Joint Commission, DNV, State, CMMS etc.) Not being able to pull up the right policy at a time like this would not be ideal, but not being able to access policies and procedures at all could lead to a significant citation.
Pricing Based on Full-Time Equivalents
Another pricing model is based on number of full-time equivalents (FTE). FTE is calculated by adding up all of the hours your employees work and dividing them by the 40-hour work week. So if you have an employee that works 40 hours a week, that’s 1 FTE. If another employee works 10 hours a week and the third employee works 30 hours a week, that is also equivalent to 1 FTE. Put them all together and you get 3 people who work the same amount as 2 full-time workers. Do this for all of your employees and you will have your FTE number.
Like the concurrent user model, a chart is used to calculate which pricing tier a healthcare organization will land in. In the example above an organization with 3000 full-time equivalents will probably pay $8.30 per FTE per year. This will give a total annual fee for your policy software of approximately $24,900 USD.
3000 full-time equivalents * $8.30 per full-time equivalents = $24,900 USD
The FTE pricing model usually includes training, implementation and other costs. This is a great option if your set-up is straight forward, you have internal personnel to devote to helping with the rollout, and a basic suite of features and benefits is required. With this model there is usually no fear of users being locked out. This all-inclusive pricing model allows vendors to compete on price rather than product or service. If you are concerned primarily with price, this is probably your best price fit.
Pricing Based on Total Full-Time Employees
The final model is based on the hospital’s total number of full-time employees – the actual human beings or “warm bodies” that come to work for what your hospital deems a full-time work week (not to be confused with full-time equivalents.) Your human resources department usually has this number readily available.
Like the previous models, a pricing chart is used to calculate the annual subscription fee based on the number of full-time employees. This model does not typically lock anyone out regardless of the number of users or the location of users.
In comparison to the other two models, the full-time employee pricing model usually lands somewhere between the total number of concurrent users and the total number of full-time equivalents. In our example of a 3000 person hospital, this would typically yield about 1800 full-time employees. Therefore the price for this model is about $12.50 per full-time employee.
1800 full-time employees * $12.50 per full-time employee = $22,500
Vendors that offer this type of pricing do so because they understand what it takes to provide service and support to organizations of varying sizes. Be careful because initial service, implementation, and other fees are typically not included in this model.
Contract Terms for Policy Management Software
Typical contract terms range between annual terms to a five-year term. There is usually a provision that the price can increase annually based on the consumer price index (usually about 3-5% annually.) Payment terms range from an annual payment to monthly payments. Invoice payment terms range from net 10 to net 60 depending on the vendor. Keep in mind that all of these points are negotiable with almost all vendors.
Secondary Pricing Variables
There are other variables to consider when evaluating the total cost of ownership for policy management software. Be sure you consider each of the following factors before making your final decision.
Implementation Fees for Healthcare Policy Management Software
There is always a cost to setup your policy management system. The technical part of it can be viewed as technically provisioning or activating the software. This is a high margin area for most policy and procedure management vendors as most prospective hospitals still believe that software activation takes as long as it did back in the 90’s to early 2000’s. What used to take days or weeks now takes hours. Some vendors charge no direct costs for implementation but build it into their annual fee. This no-cost charge is dangerous as the built-in cost ends up being more costly over a 3-5 year period. Larger multi-location organizations should be wary of vendors with a no-cost implementation model because many times they will not have sufficient personnel and resources to pull off a timely implementation. Other implementation fees range from $500 to $2500 USD and should be a one-time, up-front cost and is not recurring.
Training Your Employees on Policy Management
Your employees will need to be trained on how to use the software. The train-the-trainer approach does not work well and is not needed for policy management software. Training is typically targeted at three types of users within your hospital.
- A handful of employees will become resident experts of the policy management software application
- Your management and executive level employees
- Your front line staff
For the front line staff, online or pre-recorded short video sessions are sufficient. This is the most cost effective for this type of employee. For the other two types of employee groups mentioned above, a mix of webinar and face-to-face onsite sessions are offered by most policy management software vendors. Webinar sessions are usually purchased in a block of hours. Typical blocks range from 8 hours for a small hospital to 24 hours for larger healthcare systems. You can expect to be charged $300 a day by most policy management vendors for webinar training, which is better for smaller healthcare organizations. For a large health system, webinars are used to lay the foundation and do some initial education prior to the onsite sessions. For medium to large scale chains of hospitals that have multiple locations, onsite training is a must and typically takes the form of a road show from one location to another. The rate per day for onsite training among policy management vendors ranges between $1000 and $3500 per day for a team of one or two trainers. Using our earlier example, a 3000 person healthcare organization you would need the following mix of training:
16 Hours of webinar training + 4 days of onsite training
$600 + $8000 = $8600
Don’t forget you may also have some travel costs if your vendor is not local to your area. Training is a pay as you consume cost.
Policy Management Software Interface Costs
An interface is a handshake between the policy management system and any existing software you may have that you would like to talk to your policy management system. Policy management software is frequently stand-alone software and rarely interfaces with any patient health information, so major interfaces are few and far between.
However, a common interface is Active Directory/LDAP integration that allows your employees to use the same username and password to login to both their computers and their policy management system. This negates the need to create, manage and have employees remember yet another username and password. For policy management vendors that only deploy their policy management system on your internal servers, Active Directory/LDAP integration should be done complimentary as its simple and easy to do. For those that are deploying their policy management application via a SAAS (software as a service) model or over the cloud (i.e. – via a service like Amazon Web Services) this type of integration is a bit more tedious. You will need your IT department’s network database analysts, a software developer at the policy software vendor and perhaps a third party network/cloud engineer from the policy management vendor’s data center or cloud provider. It requires less than 1 day of time to setup a secure connection between the hosting facility and your location and typically will cost you $2500 USD annually. This will be a recurring cost as it requires ongoing maintenance and monitoring, regardless of the size of your organization.
Specialty Professional Services for Policy Management
Some vendors specialize in policy management for the hospital and healthcare space. If this is the case be sure to ask for their fees related to:
- Policy writing and updating
- Policy auditing, inventory and GAP analysis
- Cross walking to accreditation standards
- Overall policy management best practices
While these professional services may not be what you were originally looking for, there is a tremendous amount of value and savings to be gained from vendors that can provide these services. Professional services are billed on an hourly basis ($150-$400 per hour) or on a monthly retainer fee (approximately $5000 per month).
Choosing the Right Policy Software Vendor for You
We understand that every hospital has different policy management software needs. I hope you will find this information useful as you evaluate which vendors are a good fit for your healthcare organization. At Policy Medical, we strive to provide the best policy and procedure management software possible, but realize we cannot meet the needs of every organization. That being said, if you would like to find out if PolicyManager has the features you need at the right price point, please schedule a product demonstration with our team. I know they will be happy to answer any questions you might have about the product or the cost of implementing policy management software at your healthcare organization.