Hospitals face budget woes with switch to electronic records
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Pulse of Longwood takes you inside one of the nation’s largest hubs of hospitals and biomedical research.

Brigham and Women’s Hospital has posted its first budget shortfall in over 15 years, hospital president Dr. Betsy Nabel announced at a recent town hall-style meeting. To blame, in part, was the expense of switching to new electronic health records, a cost that has led to overruns at a number of hospitals in recent years.

The hospital fell $53 million short of its budget in the fiscal year that ended Sept. 30, in large part due to unexpected costs associated with switching to electronic health records in June, according to hospital spokeswoman Erin McDonough.

Wisconsin-based Epic is the dominant provider of electronic health records in the country, and its products are also among the priciest. In addition to the Brigham, two other Massachusetts health systems and one in the UK reported financial losses after making the switch to Epic.

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The budget overruns and complications are a setback for executives at the Brigham and other hospitals who have argued that implementing new software systems will help contain costs and improve medical care.

Nabel said the Epic-related losses were temporary, and expecting the Brigham to meet its budget every year “is sort of like you expect the Patriots always to win.”

The Brigham, a 793-bed hospital in Boston that ranks among the top 10 in the nation, brought in $3.3 billion in revenue in FY2015, according to McDonough. It had expected a $121 million surplus, which would be reinvested into capital projects and other costs such as pay increases. But it came up $53 million shy of that number, she said.

Nabel cited three factors: The hospital lost patient volume in February when Boston got slammed by snow; it paid more than expected into its employee pension fund; and it lost money transitioning to Epic.

The transition was part of a broader, $1.2 billion Epic implementation across the 10 hospitals in the Partners HealthCare system, which is still ongoing.

The Brigham and nearby Dana-Farber Cancer Institute hired 1,500 extra staff to help with the massive Epic go-live in June. The Brigham knew it would cost a lot, and budgeted $47 million for the transition last fiscal year, according to McDonough.

But the switch ended up costing $27 million more, she said. Half of that came from a purposefully reduced patient volume in the summer, when the hospital opted to move slowly to avoid medical errors due to miscoding.

The other $13.5 million came from a different problem: With the new health records, patient visits were not properly coded to reflect the complexity of each patient’s case, which resulted in lower reimbursement from insurance companies, Nabel said.

The president of Epic flew in from Wisconsin recently to visit the Brigham and offer guidance. Nabel said the coding problem is temporary, and the transition to Epic has succeeded in one important way: It has not led to an increase in medical errors.

“We will work through this,” Nabel told her employees of the budget woes.

Financial troubles prompted the Brigham to lay off 20 workers and eliminate 80 vacant job positions this year, McDonough said. She said no more job cuts are planned.

Lahey Health, a hospital network based in Burlington, Mass., also cited the cost of switching to Epic as one factor that caused it to lose $21 million and lay off 130 people earlier this year. The extra Epic costs stemmed from training, support, and a purposeful reduction of patient load — not from coding glitches — said Lahey spokesman Andrew Mastrangelo. Boston’s disastrous winter was a major factor, too, he said.

Southcoast Health of New Bedford, Mass., which runs four community hospitals, also struggled with the expense of launching Epic. The cost of the new technology system, $100 million, was among the factors that caused a $30 million operating loss in 2014, a spokesperson said. The setback was temporary: Southcoast saw a $5 million operating surplus the following year.

Epic spokeswoman Erika Koch acknowledged there are “up-front investments” to launching the company’s software system.

But “what we typically see when a health system transitions to Epic is permanent, long-term improvement in financial health and increased bond ratings,” she said. All of the “five hospitals with strong finances” cited by Becker’s Hospital Review are Epic customers, she noted.

Back at the Brigham, Nabel announced that due to lean financial times, all non-unionized staff in good standing will get an average 2 percent raise this fiscal year.

“We would like to get back up to 4 to 5 percent,” she told the audience in a hospital auditorium.

“So would I!” called out an employee from the crowd.  

The Brigham is 90 percent finished with a $1 billion fundraising campaign, which includes soliciting donations from patients via email.

To help cut costs, Nabel unveiled a program called Bold Ideas, Big Savings, which offers workers cash prizes for coming up with ways to save the hospital money.

The only workers not eligible for the budget-cutting bonuses are the hospital’s 3,200 nurses. That’s because their union, the Massachusetts Nurses Association, opted not to participate.

The hospital is embroiled in tense negotiations with the union, which is seeking 9 percent raises.

“We opted out because we think it’s just a gimmick,” said union spokesman David Schildmeier. “This is a hospital that makes multi-millions in profits every year.”

“They want us to put suggestions in a box to make more money,” he said, but nurses are not being listened to on issues like worker safety — a key issue the union is pushing at the bargaining table.

The first winners of the Bold Ideas program are the six members of the hospital’s audio-visual team.

Peter Linck, who manages the team, said he noticed something while his crew was setting up sound systems and webcasts for events: The hospital was paying outside contractors as much as $288 per hour to move furniture. He suggested his team could do the same work for much cheaper, and sometimes earn overtime pay in the process.

The men got trained in how to lift and shlep without breaking their backs. Since September, they have been moving furniture a few times a week, saving the hospital an estimated $10,000. In reward for their budget-cutting proposal, they will share a $2,000 check.

On a recent weekday, the team, dressed in button-down shirts and ties, hauled hospital furniture back into place after a flu clinic.

Audio-visual worker John Bourque said he didn’t mind the manual labor. Compared to his weekend job moving fridges at Home Depot, he said, “this is a piece of cake.”

Boston Globe staff writer Priyanka Dayal McCluskey contributed reporting.

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