Cloud EHR vs on-premise EHR: an objective comparison

major incidents can take an average of 17 days to fully resolveThe cloud-based versus on-premises EHR debate has persisted for more than a decade, but the context has evolved from whether cloud systems are viable to where they make sense and where they don’t.

Organizations now evaluate EHRs based on interoperability, long-term cost predictability, cybersecurity posture, and operational resilience. not just a hosting model.

While cloud adoption has accelerated, on-premise EHRs persist in environments where latency control, data residency, or internal governance outweigh scalability advantages.

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2026 cloud EHR adoption trends

According to recent findings, Black Book Research indicates a change in how healthcare leaders view cloud security and the obstacles small practices face in adopting cloud platforms.

• As of August 2025, ~78% of U.S. hospitals, health systems, and physician groups have approved significant cloud investments scheduled for completion by mid-2026.
• For 2026, 80% of security leaders (CISOs) rank third-party cloud and EHR vendors as their greatest emerging cyber risk, a sharp departure from earlier views of these platforms as inherently more secure.
• In 2024–2025 reports, 91% of small medical practices criticized complex hospital-integrated EHR systems, citing high implementation costs and a lack of internal expertise as major barriers.
• The leading reasons for cloud migration are now reducing IT maintenance costs (78%), improving disaster recovery (71%), and accelerating AI adoption (63%).
• 81% of executives now rank interoperability as the top selection criterion for new cloud platforms, ahead of traditional vendor-managed security.

Adoption is no longer universal or uncritical. Larger provider organizations and specialty groups increasingly take a hybrid approach combining hosted EHRs with locally managed data layers or analytics platforms.

The question is no longer “cloud or on-premise?” but “which workloads belong where?”

Cost

One of the main value propositions of cloud EHR systems in the market has been their lower upfront cost. Cloud platforms eliminate the need for on-site servers, storage infrastructure, and much of the internal IT overhead associated with patching, backups, and redundancy.

The advantage still holds, but the cost gap has narrowed.

Government data taken from selected practices in Michigan report that the five-year TCO for office-based and cloud-based systems show that the cloud-based option cost $58,000 while the office-based option cost practices $48,000.

Upfront costs for the cloud-based system were less at $26,000, while the office-based system showed upfront costs of $33,000. From these data, it’s clear that cloud-based systems aren’t always cheaper. 

Peer-reviewed research specifically from the University of Michigan School of Dentistry shows the cloud-based EHR had significantly lower overall cost over two years compared to upgrading/maintaining an on-premise system for that specific academic clinic: the cloud deployment had lower one-time and ongoing costs and no hidden infrastructure costs.

"The overall cost of an on-premise solution over a two-year period was approximately $2,000,000 higher than a cloud-based solution… Across the two-year period, both one-time and ongoing costs were higher for the on-premise solution… Cloud solutions did not carry any hidden costs."

While the above studies are older (and the latter is specialty-specific),  this is just a snapshot of costs, and given the number of cloud-based products on the market, one could expect to see more competitive pricing.

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Reliability

Reliability was once the primary objection to cloud EHRs. That concern has narrowed, though it has not disappeared.

Cloud vendors now advertise uptime guarantees between 99.9% and 99.99%, equating to 52 minutes to 8.7 hours of annual downtime.

For on-premise EHRs, the question of average downtime becomes a bit murky due to variation in hardware, redundancy, and IT staffing.

Recovery times vary significantly based on organizational readiness. In 2024, it was reported that major incidents can take an average of 17 days to fully resolve, with U.S. healthcare organizations losing $1.9 million per day to downtime from ransomware attacks.

Organizations with mature disaster recovery plans often set Recovery Time Objectives (RTO) of four hours for critical systems.

Security

As you can imagine, security has become the most misunderstood part of the cloud EHR discussion.

Earlier assumptions framed cloud systems as inherently riskier due to data exposure. Current evidence does not support that conclusion.

• Most healthcare data breaches originate from phishing, credential theft, or misconfigured access, not the hosting model
• Cloud-hosted systems show no higher breach rate than on-premise systems
• Organizations with dedicated security teams and automated patching performed better regardless of deployment type

What we can conclude

The cloud versus on-premise debate no longer has a universal answer, and that is the most important update since this article was first published.

However, cloud EHRs now dominate new deployments, particularly among:

• Small and mid-sized practices
• Multi-location outpatient groups
• Organizations prioritizing interoperability and rapid deployment

On-premise systems are still viable where:

• Internal IT teams are strong
• Data residency requirements are strict
• Custom integrations outweigh scalability needs
• Long-term cost control is prioritized over flexibility

As such, the choice between cloud and on-premises remains dependent on the circumstances of each practice.