Erlanger earnings take a hit from new medical record system

Erlanger Medical Center is located on Third Street near the intersection with Central Avenue.
Erlanger Medical Center is located on Third Street near the intersection with Central Avenue.

Erlanger Health System's earnings took a hit after implementing its new electronic medical record system, a software called Epic - a fitting name given the undertaking.

During a Monday meeting, Henry Hoss, chairman of the Erlanger board's budget and finance committee, said Epic's effect on the third-quarter financial report was "very obvious." But hospital leaders assured the committee the numbers were part of the plan.

"The Epic implementation was a huge impact, and that was not unexpected," Erlanger CFO Britt Tabor said.

Consolidating the hospital's antiquated medical records under one system was one of the most difficult and expensive projects in Erlanger's history, requiring about 100 new employees and $100 million over 10 years.

After more than two years of preparation, the hospital launched Epic for inpatient services in October, but opted to hold off on billing throughout November to work out the kinks.

"Every insurance company has a different way they want to receive their bill, and so you have to build all those edits in Epic," Tabor said, citing an example of when patients are charged for a drug but not charged for the injection.

"Epic flags that bill, because you can't have a drug charge without an injection charge," Tabor said. "Then we have to go back into the build of the system and find out how that happened."

As payments to the health system stalled, the net days in accounts receivable - how many days pass from when a bill leaves until payment arrives - jumped from 63 in September to 71 in March. Meanwhile, the days cash on hand fell from 68 to 55, according to the quarterly report.

"We had to make sure that all of the bills were at least correct," Tabor said, adding that incorrect bills could anger patients and further slow payments.

The decision not to bill was made based off the software company's recommendations and lessons learned from other health systems, officials said.

Many hospitals across the country, some of which have lost millions changing to electronic health records, are undergoing similar challenges.

Parkridge Medical Center underwent its own conversion several years ago to a system called Meditech, and CHI Memorial plans to go live with Epic in April 2019, officials from each hospital said.

It took Erlanger writing more than 30 million lines of code and correcting nearly 15,000 work issues to weather the estimated six- to nine-month "stabilization" phase.

Although Tabor said he's pleased with the outcome, it means the third quarter net income from operations was approximately $4.05 million compared to budgeted income of about $8.27 million. He expects to make up the losses during the fourth quarter and still meet the yearly budget.

"We're right at the cusp of that sixth month," he said. "The [accounts receivable] keeps building, but that doesn't mean that we're not going to collect it ... once it gets billed, the cash will come in."

Erlanger COO Rob Brooks said "there's a lot of getting used to" with the new system, which likely contributed to an increased length of stay, but he hopes Epic will help clinicians move patients through the system quicker, saving costs to apply to the new budget in July.

"That's really important so that we can prepare in the next few years," he said. "We're really looking to balance both our balance sheet and our cash on hand."

During Thursday's board meeting, Dr. Bruce Shack, dean of the University of Tennessee College of Medicine Chattanooga, reported progress in both new hires and resolving ongoing conflicts between the university and the hospital.

Leadership from both sides will meet this morning with the consulting firm that was retained to review issues that surfaced during a November board meeting.

Contact staff writer Elizabeth Fite at or 423- 757-6673.

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