August 8, 2017

Most hospitals take a financial hit when they implement EHRs. Here's how you can do better.

Daily Briefing

    Read Advisory Board's take on this story.

    Implementing a new EHR system puts hospitals at financial risk, but many hospitals return to pre-implementation levels of financial stability within a year, according to a new report from credit rating firm Moody's.

    Report highlights potential EHR implementation risks

    In the report, Moody's highlighted several potential risks that come along with an EHR installation, saying, "Hospitals run the risk of incurring operating losses, lower patient volumes, and receivables write-offs if there are problems with adoption of a new EHR system." Hospitals are also endangered financially by the common operational and financial disruptions that accompany any complicated IT project, the firm said. 

    Based on sample of hospitals with large recent investments in EHR and revenue cycle system conversions, Moody's estimated  "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."

    Most hospitals recover, stand to benefit from EHR implementation, report finds

    However, despite initial risk, Moody's said many hospitals return to their pre-installation financial levels, largely because of strong risk management. Moody's also pointed out that while launching a complex IT project involves many risks, cyberattacks pose an even greater threat.

    Why the EHR life cycle is just like raising a child

    Ultimately, Moody's expects cybersecurity to become an increasingly important area of focus for hospitals and health systems. "As IT investments represent a growing portion of hospital budgets, an increasing amount will be allotted to guarding confidential patient data, which make hospitals a prime target for cyberattacks and ransomware events," Moody's said. "We expect cybersecurity to be a primary focus of hospital management teams and their boards, with annual capital and operating budgets allotting appropriate levels of expenditures to protect patient data and testing vulnerabilities" (Monegain, Healthcare IT News, 7/25).

    Advisory Board's take

    Preston Raulerson, SVP, Clinovations

    The Moody's report highlights some key underlying factors for enterprise EHR implementations: Initial implementation costs are quite high; revenue takes a notable hit during the first year; and the long-term outlook for organizations with advanced EHRs is quite good compared with their peers.

    Despite the incredible complexity, cost, and impact to throughput that is part of any large-scale health IT transition, there are ways health systems can minimize costs and offset them with new benefits.

    Think long-term: Focus on optimization. While the first year is important to both cost and revenue, it is almost always the most inefficient period throughout the EHR timeline. Reducing impact at go-live is important, but it is only a start—ensuring value beyond an initial go-live should be the long-term focus.

    One post-launch best practice is for health systems to pivot the same workgroups and decision makers who worked on go-live stabilization to focus on high-impact EHR optimization. Building linkages between ROI and optimization goals (along with operational and clinical metrics) tends to be a major culture change for the average health system, but the importance of that change will always exceed the pain.

    Prioritize vision and leadership over an abundance of EHR options. No matter the brand of EHR, there isn't a magic implementation bullet that solves for value without hard internal decisions that are both clearly communicated and embraced by operational leaders. Our EHR consulting team is often brought in to support a health system's implementation when the organization has an abundance of possible directions for its EHR that are nearly impossible to generate value from without defined goals or a well-articulated vision.

    A strong vision and aligned leadership support are foundational to devising an appropriately lean implementation, an IT roadmap that drives toward standardization, and an integrated and collaborative optimization structure—three crucial processes that drive ROI.

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    What you can do right now if you are getting ready for an EHR go-live: Create a smooth go-live experience for your physicians by staffing your go-live with clinician resources.

    Download our Clinical Go-Live Support Planning Tool, which helps identify the right clinician-to-clinician ratio to support your EHR go-live and calculates the clinical support that you'll need for every practice during each wave of your go-live.

    Download the Tool

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