Erlanger Health System Takes A Chance On $100M Epic Plunge

Erlanger Health System was in financial trouble as recently as 24 months ago. Yet, despite this Erlanger has shifted it's budgetary priority to implementing a digital health system from Epic.  Their other consideration was Cerner's EHR.

The Erlanger Health System include several other facilities in the community:

 

Erlanger, a four-facility public hospital system with about 800 total beds, is an academic medical system and serves as a campus of the University of Tennessee College of Medicine. The system also partners with UT to operate the UT Erlanger Physicians Group, a 170-member multispecialty practice

.The health system, which fell in financial trouble in 2012, only recently saved itself and positioned itself for the massive Epic investment. It closed out FY 2014 with $618M in total operating revenue and $18M in operating income.

Another Health System’s Finances Weighed Down By Epic Investment

While Memphis-based Baptist Memorial Health Care Corp. may intend to be “the high-quality and low-cost provider” in its region, spending $200 million on an EMR purchase has got to make that a bit more, shall we say, challenging.

While health systems nationwide are struggling with issues not of their own making, such as some states’ decision not to expand Medicaid, it appears that Baptist Memorial’s financial troubles have at least some relationship to the size of its 2012 investment in an Epic EMR platform.

But the health system’s financial health has deteriorated significantly over the past few years. After all, back in 2009,S&P gave Baptist Memorial a long-term ‘AA’ rating, based on its strong liquidity and low debt levels; history of positive excess income and good cash flow; and solid and stable market share in his total surface area, with favorable growth in metropolitan Memphis.

However, at this point Baptist is clearly struggling, so much so that is taking the extraordinary step of cutting the salaries of top executives in the system by 22% to 23%. That includes cutting the salary of health system CEO Jason Little. But this is clearly a symbolic gesture, as executive pay cuts can’t dent multimillion dollar operating revenue shortfalls.

So what will help Baptist improve its financial health?

Baptist is also going to have to live with its IT spending decisions, and it seems obvious that they’ve had long-term repercussions. I don’t think any outsider can say whether Baptist should have bought the Epic system, or how much it should have spent, but the investment has clearly been a strain.

It seems apparent that these expenditures are based upon the fear of being left out of the tremendous forces of change fueled by Congress's desire to reform American Health Care Financing and increasing the accessibility to it by previously uninsured patients.

There appears to have been several mortivations for HIT and EHR.

Providers see (saw) it as a means of improving legibility, decreasing errors, and a more efficient means of accessing medical histories as well as reducing repetitive testing.

CMS and HHS saw it as a chance to extract health data for purposes of improving outcomes, as well as warehousing enormous amounts of big data.

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