EHR rollouts taking a financial toll on hospitals

UMass Memorial Health Care is going live with a new electronic health record system later this year. While the expectation is that there will be longterm efficiency gains, the rollout has already had a significant effect on its bottom line.

The four-hospital academic medical center saw EHR expenses mount to $26.1 million in fiscal 2016, eroding operating income to $40.7 million for the year with more being spent for the launch.

UMass has company. Hospitals installing new EHR systems should expect a sizable cash drain as the process disrupts business and adds technology and training expenses, ac- cording to a new report from Moody’s Investors Service.

During the first year of EHR installations, the median decline in operating cash flow for hospital systems is 10% with a 6% falloff in days cash on hand, Moody’s said after examining system installations over the past several years. EHR installs can cost anywhere from several million dollars for a small, stand-alone hospital to a half-billion dollars for larger systems.

Moody’s looked at 39 recent launches and found that installs can disrupt billing and patient throughput. The damage to operating performance usually dissipates after the first year as staff and clinicians become proficient in the technology.

Hospitals are trying to manage the risk by establishing lines of credit to ensure cash availability as well as getting the board of directors involved to handle project management.

Moody’s cited Wake Forest Baptist Medical Center in Winston-Salem, N.C., and Presence Health in Chicago as examples of systems whose clunky EHR conversions contributed to margin deterioration and credit downgrades.

Both have recovered. Moody’s upgraded Wake Forest Baptist’s debt to positive from stable last October. And Presence Health completed a $1 billion bond offering a year ago to restructure its balance sheet.