Covenant Health in Massachusetts experienced significant operating losses in 2018, largely due to a multi-million Epic EHR implementation.
Massachusetts-based Covenant Health experienced $60.9 million in operating losses in 2018, largely due to expenses associated with its $83 million Epic EHR implementation.
The health system suffered operating losses for the fifth year in a row. Covenant Health includes three hospitals in New Hampshire and Maine, as well as seven nursing homes in Massachusetts.
This string of operating losses led to a reduction to Covenant Health’s bond rating.
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Financial services company Standard & Poor’s (S&P) referenced Covenant Health’s operating losses as part of a June decision to downgrade the health system’s bond rating from BBB to BBB- with a negative outlook, according to Boston Business Journal.
Covenant Health leadership intends to reduce its losses and boost revenue in the coming years through a two-year plan. A new team of managers has taken the helm at Covenant to guide the organization toward its financial goals.
“We came out of 2018 and early in 2019 we’re showing strong signs of being back on track,” said Covenant Health President and CEO Stephen Grubbs.
Grubbs told Boston Business Journal the losses Covenant Health experienced were mostly due to a slow $83 million Epic EHR implementation project. The EHR implementation reduced clinical productivity at Covenant Health hospitals and provider practices by 30 percent as clinicians spent time acclimating to the new system. Physician turnover also exacerbated losses in clinical efficiency.
The $60.9 million in operating losses Covenant Health saw in 2018 compounded $4.2 million in operating losses the year prior and $5 million in operating losses in 2016.
Grubbs said he anticipates the health system will achieve greater profits in 2019. Now that the Epic EHR system has been in place for several months, Grubbs said the hospital is seeing a boost in clinical efficiency and productivity.
Covenant Health is also working to keep expenses down by reducing its staff by 27 full-time employees over the last few months.
“We’re evaluating positions that were posted to make sure we truly needed them and responding better to volume fluctuations, so were able to defer that many FTEs that were budgeted,” Grubbs said.
The health system has also engaged with a consultant in compliance with bond agreements to recover from its financial losses. Covenant Health’s consultant recommended the health system reduce expenses related to administrative corporate costs.
Covenant is required to follow through on these recommendations to avoid defaulting on its bond.
The health system expects to close 2019 with $23 million in operating losses, according to financial analysts. However, S&P noted it will be difficult for Covenant to realize this outcome.
“We want to cut (last year’s) loss in half,” Grubbs said. “We budgeted for a 60 percent improvement … and we’re on track to exceed that.”
“There’s a need for Catholic health care in New England,” Grubbs said. “There’s a lot of health care options, a lot of good health care options in New England, but there is a role and a place for Catholic health care. That’s where I think we’re beginning to thrive and continue to grow our presence.”
Hospitals and health systems frequently see operating losses in the months after launching an EHR implementation process.
In February 2019, Ohio-based Fairfield Medical Center experienced $22.6 million in operating losses due to the expenses associated with a Cerner EHR implementation.
Moody’s Investors Service lowered the rating on Fairfield Medical Center’s bonds in the fourth quarter of 2018 based on operating losses observed throughout the year. The bond credit rating company stated an increase in financial pressure from the cost of implementing the new Cerner EHR system contributed to the ratings hit.
Date: July 17, 2019
Source: EHRIntelligence