EMR Investment Can Mangle Hospital Credit Rating

As we all know, EMRs are huge investment for hospitals, albeit a necessary one by most standards.  The thing is, can they afford their EMR?  At least in the following case, the answer seems to have been with a resounding “no.”

As we reported earlier, Winston-Salem, N.C.-based Wake Forest Baptist Medical Center went through terrible troubles with both implementation and collections when it installed an Epic EMR system.

In the wake of the fiasco, during which the hospital reported a loss of $56.6 million in operation costs for fiscal 2013, the facility and was slapped with a downgraded credit rating From Standard & Poor’s Ratings Services (from “AA-” to “A+”).  Wake Forest leaders attributed the loss largely to the cost of the EMR installation.

It’s little wonder Wake Forest struggled, and moreover, somewhat surprising that more hospitals aren’t seeing major financial troubles in the wake of their EMR rollout.  After all, as S&P’s Kevin Holloran points out, healthcare IT expenses now account for 25 percent 35 percent of the hospital capital project budget, and Meaningful Use requirements a major contributor to this.

Now, it is worth noting that Wake Forest’s financial troubles came in part due to billing concerns that were only part of the overall implementation picture.  Hospitals that manage to go out their EMR without directly harming cash flow should do far less damage than Wake Forest’s implementation.

But the bottom line is this: when Meaningful Use incentive payments are no longer there to cushion the blow, will hospitals really be able to afford their extremely pricey EMRs?  Will they be able to afford to support them, in a market where health IT recruitment is excruciatingly tough?  And given that EMRs are inevitably married to billing, will Accounts Receivable problems pop up later in the game and endanger hospitals’ credit rating?  My guess is that 2014 will see more hospital performance belly flops courtesy of their EMR.