An increasingly common event these days is that hospitals, usually smaller ones, are filing for bankruptcy. It's a consequence of poor management, the high cost of EHRs, hospital competition, and decreased reimbursement. Here's an article from 2013 listing ten hospitals that filed for bankruptcy during that year (see: 10 Hospitals That Filed for Bankruptcy in 2013). Although most of the ten cited were relatively small, some were in the 200-300 bed range. Due to their financial stress, some of the bigger ones were in the process of being acquired by larger regional hospitals. The debt of one of the ten, Saint Francis Hospital in Westchester, N.Y., had "ballooned ...due in part to health IT costs and uncollectable bills" (see: Bankruptcy Court Approves Sale of Saint Francis Hospital to Westchester).
It was recently reported that Lifespan, the leading provider in Rhode Island and a major affiliate of Brown Alpert Medical School, has had it's bond rating downgraded by Moody's (see: Moody's downgrades Lifespan Rhode Island Obligated Group (RI) to Baa2; outlook negative). Here's an excerpt from the report:
The downgrade to Baa2 is based on Lifespan's multi-year trend of declining operating performance and the material loss in fiscal year (FY) 2013, which was well below the Baa1 median levels and failed to meet budgeted expectations. The negative rating outlook reflects the anticipation that the operating cash flow margin in fiscal years 2014 and 2015 will remain thin as it is expected to remain below 3%....Lifespan continues to benefit from its position as a large multi-hospital academic medical center, providing a comprehensive array of high-end acute and non-acute services as the largest provider in Rhode Island and a low debt position....The system is budgeting a 2.8% operating cash flow margin for FY 2014 and expects further decline in performance in FY 2015 as it rolls out its new IT system, which is expected to result in greater efficiencies and some cost savings (see: Lifespan Takes Major Step to Transform Health Care Delivery)....Lifespan operates in a challenged Rhode Island economy with an unemployment rate just below 9% in 2014, remaining well above unemployment in the country and surrounding states. The sustained unemployment contributes to growth in the combined charity care and bad debt for Lifespan equating to a 55% increase since FY 2009. Furthermore, Rhode Island does not have a public hospital system and as the largest provider in the state, Lifespan bears a disproportionate load of serving the poor and indigent population as evidenced by a high 15.3% Medicaid and 7.1% self-pay in FY 2013.
I suspect that the cost of upgrading its EHR has contributed to its worsening financial picture of Lifespan. A similar EHR scenario has occurred with other hospitals (see: The Cost of Deploying an Epic EMR and the "Oreo Cookie" Analogy; EHR part of MaineHealth's financial woes). Should the situation with Lifespan worsen, I suspect that it would be an example of a health system that was too big to fail. Somehow, if necessary, the state of Rhode Island and the federal government would cobble together some sort of rescue package to assist the organization.
A worsening financial picture for hospitals in the process of deploying a new EHR is not totally related to the cost of the new system as I pointed out in my note about MaineHealth (see: Some of the Details Behind the Maine Medical Center/Epic EHR Meltdown). Here are two bulleted points from it:
- All executive officers need to keep...[charge capture and revenue cycle management] firmly in mind when deploying...[a new] EHR...All hospitals with legacy billing systems in place (which is to say most hospitals) have myriad instances of installed customized programs. Neither personnel in the hospital central IT group, nor the CFO, nor the CIO may have a complete understanding of these programs, which are often poorly documented. Many months may be required to iron the kinks out of a new billing system and payers may not accept late [payments].
- In addition to problems with charge capture after an Epic go-live, hospitals will also take a huge nurse and physician productivity hit because they are not familiar with the screens and the user-interface may be poorly designed. The result is the double whammy after an Epic go-live of a 15-20% diminution in revenue plus the additional burden of the cost of paying for the EHR license, installation, and continuing vendor support.
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