EHR installations carry ‘significant financial risk’ for hospitals

Implementing a new electronic health record (EHR) system will thin a hospital’s financial margins in the first year, according to a report released by credit rating agency Moody's Investors Service, but they usually return to normal afterward.

The report examined 39 hospitals that had recently installed new EHRs. Moody’s said other hospitals run the risk of operating losses, decreasing patient volumes and receivables write-offs “if there are problems with adoption” of the new system.

“In a sample of hospitals that have recently invested in major EMR and revenue cycle system conversions, increased expenses and slower patient volumes contributed to a median 10.1 percent decline in absolute operating cash flow and 6.1 percent reduction in days of cash on hand in the install year,” Moody's found.

Rolling out a new EHR can be a massive undertaking with a huge price tag, like Mayo Clinic’s ongoing $1 billion implementation of a new Epic system. The more complex the project, the greater the disruption to clinicians (though not patients) and a hospital’s financials. Problems with EHR rollouts have been blamed for large financial losses and, in some cases, changes in leadership, as was the case with MD Anderson Cancer Center at the University of Texas.

The Moody’s report mentioned UMass Memorial Health Care as one example of an EHR rollout affecting its financials. The four-hospital system saw operating income shrink to $40.7 million as EHR costs jumped to $26.1 million in 2016.

"If combined with unanticipated liquidity or operating pressures, the disruptions can lead to both short-term and prolonged margin contraction and negatively affect credit quality," the report said.

On the bright side, these disruptions are usually temporary, according to Moody’s. The report said most hospitals saw their operating cash flow and cash on hand return to pre-installation levels within a year.