Report: Health Care Institutions Take Financial Hit From EHR Implementations

Most regret the decision to change systems, survey finds

The implementation of electronic health record (EHR) systems has put a dent in the bottom line of several major health care organizations, according to a report in Becker’s Hospital Review. The organizations include the University of Texas MD Anderson Cancer Center and Partners HealthCare, the predominant provider network in Massachusetts.

In addition to software licensing fees, the costs of EHR implementation projects include training, purchasing additional hardware, consulting fees, and other operational costs, Becker’s says. Two major health systems reported that their EHR implementation projects were projected to cost more than $1 billion.

In Texas, the MD Anderson Cancer Center reported a 57% drop in adjusted income in the seven-month period ended March 31, 2016—a $160.5 million decrease that the health system attributes to its Epic EHR implementation project. Similarly, in Massachusetts, Boston-based Partners HealthCare reported an operating income of $12.8 million for the quarter that ended December 31, 2015—down from $74.1 million for that quarter the previous year, partially due to its Epic implementation.

Also in Massachusetts, Brigham and Women’s Hospital reported its first budget shortfall in more than 15 years in the fiscal year that ended September 30, 2015, partly due to unexpected costs associated with its EHR transition. The hospital’s implementation of the Epic EHR cost the hospital $27 million more than its $47 million estimation, according to the Becker’s report.

Other hospitals and health systems whose EHR implementations negatively affected their finances included the following:

  • California-based Sutter Health said one-time EHR implementation costs contributed to the health system’s 32% drop in operating income, along with salary and benefit increases.
  • In Pittsburgh, Pennsylvania, Allegheny Health Network reported an operating loss of $17.8 million compared with a $9.7 million loss during the same period in the previous year. In addition to decreasing patient volumes, a health system spokesperson said much of the decrease could be attributed to one-time costs associated with launching an EHR at Allegheny General Hospital.
  • Increased operating expenses due to implementing Epic’s EHR contributed to an operating loss of $5.6 million in the first quarter of fiscal year 2016 for Lahey Hospital and Medical Center in Burlington, Massachusetts. The hospital indicated that Epic-related training costs increased overhead costs by 29%, totaling $36.8 million, but it expected those expenses to decline as training wound down.
  • Southcoast Health, based in New Bedford, Massachusetts, launched the Epic EHR system at three hospitals, two urgent care centers, and more than 400 physician offices in 2015. Southcoast reported a $9.9 million operating loss in the first quarter of fiscal year 2016, largely a result of the system's $100 million Epic implementation.
  • WakeMed Health & Hospitals, headquartered in Raleigh, North Carolina, reported a $49.9 million operating loss for fiscal year 2015, largely resulting from an investment of approximately $100 million in the Epic EHR platform. The health care system, however, was expected to return to profitability in 2016.

In a survey conducted in April 2016, 1,204 hospital executives and 2,133 user-level IT staff were asked whether they were satisfied with their EHR systems. The survey found that the high total cost of ownership of EHR replacements was not a barrier for some struggling hospitals to buying a new system. However, 84% of financially threatened hospitals regretted the executive decision to change systems. Moreover, 14% of all hospitals that replaced their original EHRs since 2011 were losing inpatient revenue at a pace that wouldn’t support the total cost of their replacement EHR, the survey found.

In addition, 90% of surveyed nurses said that EHR process changes reduced their ability to deliver hands-on care at the same effectiveness. Similarly, 62% of IT non-managerial staff claimed that the EHR replacement initiative had a significantly negative impact on health care delivery.

Sources: FierceHealthFinance; May 26, 2016; Becker’s Hospital Review; May 23, 2016; and Black Book Market Research; April 29, 2016.