- Health systems draw mainstream attention when they make the decision to implement a new EHR technology across their entire network, both inpatient and ambulatory.
Several large-scale health system EHR implementation are currently underway — Partners HealthCare and Mayo Clinic Epic EHR implementations and the Department of Defense implementation of a Cerner EHR solution.
Recently, a Boston Globe report shone negative light on the financial implications Partners is facing in part because of its Epic EHR selection.
The health system reported a $60-million drop in operating income between 2014 and 2015. Investment losses accounted for $37.5 million. The total cost of ownership for going with Epic Systems is reported to approach $200 million over three years — software, hardware, training, etc.
All the “losses” aside, Partners still netted $3 billion in revenue, a 6-percent improvement over the quarter.
The same report references the Brigham and Women’s Hospital Epic EHR implementation and the financial losses resulting from a loss in productivity and a reduced number patient visits.
Health system EHR implementations are costly endeavors, but there’s more to these implementations than large capital outlays. Industry leaders do not choose health IT infrastructure by chance. The decision-making process is deliberate and future-looking.
According to Definitive Healthcare, the Boston-based Partners recently generated $5.6 billion in net patient revenue ($17.27 billion in total patient revenue). Additionally, the health system maintains a high level of integration, an integrated delivery network that has received top honors for performance and quality in nationwide surveys.
Partners comprises 50 clinical facilities — notably hospitals Brigham and Women’s Hospital, Massachusetts General Hospital and Children’s Hospital. All told, data show the health system to be highly optimized across the care continuum and dominant in both inpatient and outpatient markets.
On the technology side, more than half of the health system’s hospitals (8/15) have successful attested for meaningful use. On the innovation side, Partners hospitals are active participants in accountable care. DefinitiveHC data includes details about the capital reserved for Information technology investments, which approach close to $92 million. The estimated IT operating budget tops $165 million.
The Partners Epic EHR implementation launched last June after three years of development. Considering the timing of the rollout, a dip in financial performance is to be expected. What's more, the Boston-based health system has maintained an AA financial rating for the past five years.
Expectations for Mayo
The segues nicely to Mayo Clinic and its recent decision to implement a system-wide Epic EHR platform. The health system headquartered in Rochester, Minn., unveiled its decision for a health system EHR replacement last January, agreeing to move from a Cerner to an Epic EHR platform. Mayo leadership tied the decision to clinical and financial motivations.
“We’re confident in choosing Epic as our strategic partner as we continue to enhance Mayo Clinic’s excellence in health care and medical innovation,” Mayo Clinic president and CEO John Noseworthy, MD, said of the decision.
At the time of the announcement, officials from Mayo Clinic projected two years of work for completing the Cerner-to-Epic EHR transition, a process that also included bidding farewell to health IT from GE. A mixture of Mayo and Epic staff along with external consultants were slated to comprise the EHR implementation team.
Mayo's Epic EHR selection was seen as a major coup for one industry analyst who told the Wisconsin State Journal that the Minnesotan health system was "one of the crown jewels in the market."
More recently, details about the Epic EHR implementation emerged as part of a deal between Mayo Clinic and Epic Systems over the former's 62,000-square-foot data center. In a deal worth $46 million, the health system agreed to sell its data center to the EHR vendor and sign on as a lessee.
"Epic systems needed a high quality disaster recovery data center that was some distance away from its production data center yet still close enough to get to easily," an Epic spokesperson told EHRIntelligence.com last month. "Mayo had a high quality data center in an excellent location that was too large for their needs. The terms for the purchase and the terms for Mayo’s portion that they will lease from Epic systems are at industry standard prices."
Based on DefinitiveHC data, Partners and Mayo share many similarities financially. The latter recently generated $5.46 billion in net patient revenue ($10.7 billion in total patient revenue), albeit across two times the number of sites (120).
However, whereas Partners saw a dip in net patient revenue growth over the year, Mayo experienced a 23.8-percent growth as well as a positive net operating margin of 9.5 percent. The last figure is in question in light of financial announcements from November 2015 that stated the health system's operating fell to 4.8 percent as a result of increased expenses for facilities.
On the technology side, Mayo is a different animal from Partners. On the one hand, the Minnesota health system maintains an estimated IT capital budget of $56.6 million and an estimated operating budget of close to twice that figure — $102 million. Almost all of its 25 hospitals have successfully demonstrated meaningful use. As for network strength, Mayo is on par with Partners. The highly integrated delivery network is moderately optimized and dominant in both the inpatient and outpatient markets.
Considering that the Mayo Epic EHR implementation will touch the lives of an estimated 59,500 members of staff and 1.3 million patients, the project should pose some challenges to system-wide operations and productivity, but Mayo is likely best positioned as a health system to manage such an undertaking.
EHR modernization at DoD
The military health system is the definition of sprawling. All told it was responsible for more than one million inpatient and 946,000 outpatient admissions during fiscal year 2015 at 55 military hospitals and 372 military medical clinics.
When the Department of Defense made the decision to select a commercial EHR technology for its health system, numerous suitors lined up for the project. Ultimately, a bid spearheaded by Leidos and including Cerner Corporation won the $9-billion contract — the Defense Healthcare Management System Modernization (DHMSM).
"About 18 months ago we made a determination that we were going to invest in an implementation team and some of the things that we would be necessary requirements from a solution perspective," Cerner President Zane Burke related to EHRIntelligence.com in October.
More than a week ago, Cerner made news as the winner of $50.7-milllion award to for EHR data hosting with the purpose of ensuring that the DHMSM EHR system reaches its full level of performance. Cerner shops such as Intermountain Healthcare have also taken advantage of the EHR vendor's cloud-hosting data centers to free itself of the operating and maintenance costs associated with supporting a large and complex health IT infrastructure.
Like Epic Systems, Cerner Corporation has experience working with large integrated delivery networks. One such example is Tenet Healthcare. The health system headquarters in Dallas consists of 191 ambulatory surgery centers, 101 hospitals, 56 physician groups, and 14 skilled nursing facilities. In terms of financial strength, the health system generates more than $14.6 billion in net patient revenue (99th percentile). Total patient revenue exceeds $82.4 billion according to DefinitiveHC.
On the technology side, 77 of those 101 hospitals have successfully demonstrated meaningful use. Much of that success is likely tied to the $147 million in estimated IT capital and $292 million in operating budgets. Though strongly optimized, the health system has room for improvement in inpatient and outpatient markets.
The EHR modernization contract presents a similar challenge for Cerner, but the odds are in the EHR company's favor. Leidos developed the DoD's existing EHR platform, AHLTA.
"That's where our partner Leidos is incredibly useful and successful," Burke said. "They are the legacy provider today of ALHTA. That's why the marriage is quite good. It's one of the reasons we selected to go with Leidos as part of the move forward."
The Leidos-Cerner collaboration should serve as the foundation to linking the old and new EHR system and ensuring the longitudinal nature of patient records, which remains the crux of the DoD-VA interoperability conundrum as well as advancing interoperability nationwide.