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Electronic health record license agreements

By Daniel F. Shay, Esq..

Electronic Health Records (EHRs) have existed since the early 1990s, but are part of one of the hottest trends in health care today. With increased governmental interest and the proliferation of computer and broadband technology, EHRs are increasingly popular. EHRs offer the possibility of increased efficiency within the office, the ability to rapidly communicate physician orders outside the office, and the chance for increased profits.

EHRs are also expensive to purchase, costing tens of thousands of dollars for the software alone. Implementing an EHR may also impede productivity during installation, both in terms of technical hurdles and the time needed to train practice personnel in the effective use of the software. In addition, there may be costs for improving the practice’s existence computer infrastructure. Despite serious implementation barriers, EHRs may be inevitable. You can buy now or buy later, but eventually every practice will likely have one.

To buy an EHR, you will have to sign a license agreement. The license agreement is the backbone of the relationship between the practice and the vendor. As with any other contract, some terms will be negotiable and some terms are non-negotiable. It is therefore essential to understand the impact of the license’s language on this relationship.

When analyzing a license agreement, consider three crucial questions: (1) What am I buying? (2) What are the vendor’s and my duties? and (3) How do I get out of the contract? While answers to these questions may appear throughout the document, four common clauses can help to answer these questions: scope of the license, support duties, warranty & liability disclaimers, and termination.


The scope of the license controls what, specifically, you are buying. It determines how many machines you can install the software on, how many people may use the software, and/or in how many physical locations you may install the software. The scope of the license is also one of two clauses directly connected to the license price. In reviewing the scope of the license, ask yourself several questions relating your practice’s infrastructure. First, how many computers (including the one at home) do you, or will you have, on which you will install the EHR? Second, how many people in your practice will use the EHR? Third, in what type of facility will the EHR be used? Each of these can be a basis for the cost of your license.

Licenses may be priced on a per-computer or per-user basis, or may be site licensed for a specific facility, building or office suite. A per-computer license will be more economical for a practice with relatively few computers but a larger number of users. By contrast, a per-user license will benefit a practice with only a few users but a larger number of computers. Finally, a site license will benefit practices which have a much larger infrastructure and a large number of users, since the site license will cover the entire building (or office location) rather than focus on how many computers or users the software will be installed to, although it may be more expensive than other license types. A site license may also not be as economical for a multi-location group practice. Licenses may address the issue of scope differently. If you are looking at a license that approaches scope in a way that does not match your practice’s needs, remember that there may be other options available. Remember, it costs nothing to ask questions and it almost always helps to talk to more than one vendor.


The support clause is one of the most important sections relating to duties in the license. While practice and vendor duties may vary from license to license, ideally every license should address support. Support may take the form of training for practice personnel, telephone and/or in-person technical support, and patches and/or updates to the software. Support services may require payment of monthly fees, or may be included in the initial cost of the license. The license may place additional requirements on you to receive ongoing support from the vendor. For example, your practice may have to designate a specific contact person to act as a liaison with the vendor for support issues. There are both pros and cons to such an arrangement. While the contact person in your office may be more familiar with the software than other personnel, and communication with the vendor may be more efficient, if the contact person leaves, is out sick, or on vacation you will need to have someone else fill their shoes.

Licenses may also place operational and maintenance requirements on you. For example, the license may require that the software be installed on a computer housed in a room that remains within a certain temperature. The software may have to be installed on a machine that has only an operating system and no other software installed, or you may be required to install all updates and/or patches that the vendor provides. While these requirements may not seem burdensome on their face, they may: (i) include practical costs such as investing in additional hardware to meet environmental requirements; (ii) deny you the ability to install additional software such as billing software; or, (iii) require you to install updates which change the software’s functionality in a way that is inefficient for your practice’s specific needs.

Warranty & Liability Disclaimers

The disclaimers of warranties and liabilities relate to contract duties, in that they limit recovery or damages when the vendor otherwise fails to fulfill contract requirements or the software fails to meet certain expectations. Disclaimers exist exclusively to protect the vendor, and appear in all EHR licenses. If the EHR does not function properly or otherwise breaches what the warranty covers, you will not be able to recover damages beyond the cost of the software itself for whatever the disclaimer covers. Thus, if the software malfunctions and harms a patient, you will be unable to obtain punitive damages or other specific damages from the vendor. If the software fails to meet your practice’s specific needs, you cannot sue for breach of the warranty of fitness for a particular purpose. Disclaimers typically appear in all capital letters or boldface, as required by law. Disclaimers are usually non-negotiable. However, it is still important to understand their significance even if the practice will be unable to convince the vendor to change the contract language.


How you get out of the relationship with the vendor is just as important as how you get into it and what is expected of both parties during the relationship. So the termination clause is of critical importance when analyzing an EHR license. A termination clause may permit either or both parties to terminate for any reason on written notice, may only allow for termination of breach (with or without a cure period), or may intersperse grounds for termination with the clauses relating to duties of the parties (ie: “Failure to meet these obligations shall be grounds for termination.”). You should always be able to terminate for more than simply a breach, however. If you are dissatisfied with the service you receive, but not to the point where it would breach the license terms, you should still be able to terminate. If for some reason the license does not include any means by which you can terminate, ask to have the license changed to allow you to terminate both for breach and for no reason at all, also called a without cause termination clause.

As a separate issue, pay close attention to what happens to your practice’s data upon termination. Some EHR licenses may require that you return the software. If your data is stored off-site or is stored on-site but in a format readable only by your specific EHR, make sure the vendor will return your data. You should also determine if the vendor will convert your data to non-proprietary format upon termination. Additionally, make certain that the contract specifies that your practice exclusively owns any and all data created through your use of the EHR. Remember, when reading the termination clause, you are planning ahead for the worst, even if you currently assume the best.

When analyzing your EHR license, it is important to understand the purpose and significance of the document’s language. Remember to try to negotiate for the most favorable terms you can. The license is not written in stone. However, even if the terms are non-negotiable, you can know ahead of time what you are getting into, and plan accordingly.

Daniel F. Shay, Esq., is an associate at the firm of Alices G. Gosfield & Associates, P.C. in Philadelphia, Pa.

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