- Officials at a Texas health system are partially blaming a troublesome Cerner EHR implementation for continued financial losses and a bond downgrade.
Odessa American reported Ector County Hospital District (ECHD) recently had its bonds downgraded by Fitch Ratings and received an Issuer Default Rating. This bond downgrade signals declining financial stability.
ECHD currently has about $44.65 million in hospital revenue to refund bonds from a 2010 bond series that funded its Medical Center Health System (MCHS) Center for Women and Infants, as well as its Center for Health and Wellness.
Medical Center Health System (MCHS) CFO Robert Abernethy told Odessa American the downgrade is indicative of the hospital’s earnings over the last two years. A fiscal year (FY) 2017 audit released by assurance and audit firm BKD earlier this month showed the hospital district reported operating losses of about $77 million in 2017 and $59 million in 2016.
Abernethy said the downgrade “was not that unexpected.”
Despite its bond rating, Abernethy said ECHD is not in technical default and will be able to service its debt.
“I think it reflects not only do we have a lot of room for improvement, but it also reflects the optimism that we’re going in the right direction,” he continued.
Abernethy attributed the downgrades over the past two years to a decline in the local economy, as well as the health system’s Cerner EHR implementation.
“The issues we’ve had with the Cerner conversion — that has really hurt us from an Accounts Receivable standpoint,” he said.
The Cerner EHR implementation contributed to persistent billing problems and rising tensions between MCHS management and hospital staff.
Former MCHS CFO John Riggs similarly pointed to the $55 million Cerner EHR implementation as causing the health system’s downgrade in 2017. Last year, the ECHD Board approved a request to hire Dixon Hughes Goodman (DHG) to create a revenue cycle process improvement agreement to help the hospital resolve a reduction in its “discharged, not final billed” (DNFB) balance.
The agreement also provided oversight of the billing resolution accounts currently in DNFB status. According to a Financial Resource Group (FRG) report, the Cerner system may have inflated DNFB numbers. One manager noted a day’s reporting from the Cerner system showed $14 million in DNFB, while a report from an nThrive billing system showed only $6.7 million in DNFB.
In addition to incorrect charges and billing errors, MCHS also experienced delays in issuing bills to patients that required manual EHR workarounds by staff members. These workarounds negatively impacted staff productivity and cash flow.
These problems with billing — as well as the high cost of the Cerner system itself — may have contributed to the health system’s bond downgrade. According to Abernethy, the health system now has about $8.8 million in bank notes dedicated to the Cerner system.
Despite past problems, Fitch Ratings stated they expect the hospital district to improve its profitability and operating margins under Abernethy’s leadership. ECHD’s hospital outlook rating was recently changed from negative to stable in 2018.
Abernethy emphasized that the improved rating outlook is due to the strengthening economy in Ector County. Currently, ECHD is working to address their Accounts Receivable backlog.
“We’re heading in the right direction,” said Abernethy.
While the Cerner implementation has caused some problems for the health system, MCHS President and CEO Rick Napper said during an ECHD Board of Directors meeting in February that MCHS is ahead of national benchmarks for EHR clinical documentation. Furthermore, the health system has managed to keep spending related to the Cerner system below the approved $55 million budget.