When hospitals first started first started adopting EMRs en masse, they spent enormous amounts of money on their systems. So much money, in fact, that it’s hard to believe that these early adopters weren’t driven into disaster by their spending.
That’s especially true for health systems that went with Epic Systems technology. For example, Kaiser Permanente allegedly spent a staggering $3 billion on installing its Epic Systems EMR and set aside $1 billion for 10 years of maintenance, while Duke University reportedly paid $700 million for its Epic installation. But regardless of the vendor, hospital EMR rollouts require huge investments; studies peg the cost of buying and installing an EMR at anywhere from $15,000 to $70,000 per provider.
In the past, it’s helped that hospitals became eligible for meaningful use incentive payments starting in 2009, giving them something to shoot for other than date operational and clinical benefits. Whether or not you’re a fan of the meaningful use program, it’s hard to argue that it helped discipline hospitals’ early EMR spending by requiring they buy certified systems and focus on very specific goals.
But the bottom line seems to be that either the early adopters could afford a massive investment, or found ways to make it pay very quickly. Meaningful use incentives helped those hospitals along, but the hospitals had to take up the slack on their own.
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Lately, though, more and more hospitals have begun to struggle with the financial consequences of buying a high-class EMR, with some sliding into financial disaster when their EMR investment turned out to be a poor fit, too expensive to operate, difficult to integrate with their billing systems and more. In fact, a full 40% of 590 hospitals surveyed by healthcare research firm Black Book said they were struggling due to “misjudged” EMR, HIE and patient portal expenses.
Hospitals face new realities
These days, hospitals that spend untold millions of dollars on bringing a new EMR onboard are far more likely to suffer for it financially. Take Winston-Salem-based Wake Forest Baptist Medical Center, which in 2012 reportedly spent $13.1 million on an Epic system, followed by another $8 million for implementation of the system. By summer of 2013, Wake Forest was showing a $56.6 million drop in operational revenue for the fiscal year ending June 30. The CFO attributed much of the losses to the implementation of the Epic EMR.
Another victim of EMR spending is Greensboro, NC-based Moses Cone Memorial Hospital. The facility had to eliminate 300 jobs and was hit with a “negative” credit rating from Standard & Poors, due in part to the $130 million spent purchasing, implementing and maintaining its new Epic infrastructure. Last year, Moses Cone saw a $17.9 million operating loss through its third-quarter of its financial year, as well as an 18.9% drop in net patient revenue. While the losses were due in part to declining Medicare and Medicaid reimbursement, the Epic implementation was a big hit.
While the reasons for this tide of EMR-related financial troubles are complex, one key factor seems to be that the healthcare industry now faces a world of financial stresses it didn’t several years ago when early adopters like Kaiser jumped in. In particular, one major factor squeezing hospitals financially is the rapid growth in the number of high deductible health plans, which often leave hospitals with unpaid bills they never faced before.
I’m not suggesting that hospitals trying to get EMRs today are doomed to financial collapse. But unless they find a way to collect on some of these massive unpaid debts, they might not be able to afford one.
Date: November 12, 2014