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Interoperability Becoming Important To Consumers

Posted on June 26, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

The other day, I was talking with my mother about her recent primary care visit — and she was pretty po’d. “I can’t understand why my cardiologist didn’t just send the information to my family doctor,” she said. “Can’t they do that online these days? Why isn’t my doctor part of it?”

Now, to understand why this matters you need to know that my mother, who’s extremely bright, is nonetheless such a technophobe that she literally won’t touch my father’s desktop PC. She’s never opened a brower and has sent perhaps two or three e-mails in her life. She doesn’t even know how to use the text function on her basic “dumb” phone.

But she understands what interoperability is — even if the term would be foreign — and has little patience for care providers that don’t have it in place.

If this was just about my 74-year-old mom, who’s never really cared for technology generally, it would just be a blip. But research suggests that she’s far from alone.

In fact, a study recently released by the Society for Participatory Medicine and conducted by ORC International suggests that most U.S. residents are in my mother’s camp. Nearly 75% of Americans surveyed by SPM said that it was very important that critical health information be shared between hospitals, doctors and other providers.

What’s more, respondents expect these transfers to be free. Eighty seven percent were dead-set against any fees being charged to either providers or patients for health data transfers. That flies in the face of current business practices, in which doctors may pay between $5,000 to $50,000 to connect with laboratories, HIEs or government, sometimes also paying fees each time they send or receive data.

There’s many things to think about here, but a couple stand out in my mind.

For one thing, providers should definitely be on notice that consumers have lost patience with cumbersome paper record transfers in the digital era. If my mom is demanding frictionless data sharing, then I can only imagine what Millenials are thinking. Doctors and hospitals may actually gain a marketing advantage by advertising how connected they are!

One other important issue to consider is that interoperability, arguably a fevered dream for many providers today, may eventually become the standard of care. You don’t want to be the hospital that stands out as having set patients adrift without adequate data sharing, and I’d argue that the day is coming sooner rather than later when that will mean electronic data sharing.

Admittedly, some consumers may remain exercised only as long as health data sharing is discussed on Good Morning America. But others have got it in their head that they deserve to have their doctors on the same page, with no hassles, and I can’t say the blame them. As we all know, it’s about time.

Lessons To Consider When Weathering M&A Transitions

Posted on June 24, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

These days, the need for sophisticated IT infrastructure and the shift to risk-bearing insurance contracts are increasingly favoring large, muscular players. Not surprisingly, healthcare industry M&A is reaching a new peak.  Just about any substantial healthcare organization is facing the question of whether to acquire outside players and bulk up, merge with a bigger healthcare player or risk going it alone.

Particularly if you’re doing the acquiring, however, achieving critical mass is just the first in a long, difficult series of steps necessary to success. Health systems, in particular, face difficult management challenges when they try to integrate all of the moving parts necessary to survive as a next-gen organization.

A new study commissioned by West Monroe Partners, however, may shed some light on how to think about M&A integration issues. The study, which focuses on mid-market deals (between $300M and $2B) looks at post-merger integration across several industries, but I’d argue that its lessons still make sense for hospitals. Their tips for managing post-merger transitions include the following:

  • Start planning early:  West Monroe researchers found that companies which considered integration strategies as they began targeting and negotiating with merger partners were more successful in integration. Specifically, these companies were able to integrate more deeply than firms that didn’t began planning till pre-merger preparations were already under way.
  • Pay close attention to cultures: Here’s an eye-opening stat: more than half of companies surveyed by researchers said that merger value was lost due to lack of attention to differences in corporate cultures. Clearly, giving lip service to this issue but failing to address it intelligently can be costly.
  • Poor change management impacts future dealmaking:  In a clear case of “sadder but wiser,” a whopping 94% of survey respondents said that they would place more emphasis on change management next time they managed post-merger integration efforts. The study doesn’t spell out why but it seems likely that their past efforts blew up on them. Given that many health systems won’t stop at one deal in this climate, this is an important point.
  • Communicating change well is essential: About three-quarters of mid-market execs said that communicating change to their staff was one of the hardest parts of integration, and 62% said that communicating to outsiders was a major challenge. Many seem unhappy with the results of the past efforts, as 57% said this was a key area for improvement.

Some of these suggestions may be discouraging for hospital leaders. After all, required and important changes like the ICD-10 transition and ongoing EMR changes may already have staffers near burnout, and they may react badly to coping with added cultural changes.

That being said, the survey results also suggest that many of the integration challenges healthcare organizations face can be headed off somewhat by smart planning.  At least there’s something execs can do to cushion the blow.

Even Without Meaningful Use Dollars, EMRs Still Selling

Posted on June 10, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

I don’t know about you, readers, but I found the following data to be rather surprising. According to a couple of new market research reports summarized by Healthcare IT News, U.S. providers continue to be eager EMR buyers, despite the decreasing flow of Meaningful Use incentive dollars.

On the surface, it looks like the U.S. EMR market is pretty saturated. In fact, a recent CMS survey found that more than 80% of U.S. doctors have used EMRs, spurred almost entirely by the carrot of incentive payments and coming penalties. CMS had made $30 billion in MU incentive payments as of March 2015. (Whether they truly got what they paid for is another story.)

But according to Kalorama Information, there’s still enough business to support more than 400 vendors. Though the research house expects to see vendor M&A shrink the list, analysts contend that there’s still room for new entrants in the EMR space. (Though they rightfully note that smaller vendors may not have the capital to clear the hurdles to certification, which could be a growth-killer.)

Kalorama found that EMR sales grew 10% between 2012 and 2014, driven by medical groups doing system upgrades and hospitals and physician groups buying new systems, and predicts that the U.S. EMR market will climb to $35.2 billion by 2019. Hospital EMR upgrades should move more quickly than physician practice EMR upgrades, Kalorama suggests.

Another research report suggests that the reason providers are still buying EMRs may be a preference for a different technical model. Eighty-three percent of 5,700 small and solo-practitioner medical practices reported that they are fond of cloud-based EMRs, according to Black Book Rankings.

In fact, practices seem to have fallen in love with Web-based EMRs, with 81% of practices telling Black Book that they were happy with implementation, updates, usability and ability to customize their system, according to the Q2 2015 survey. Only 13% of doctor felt their EMRs met or exceeded expectations in 2012, when cloud-based EMRs were less common.

Now, neither research firm seems to have spelled out how practices and hospitals are going to pay for all of this next-generation EMR hotness, so we might look back at the current wave of investment as the time providers got in over their head again. Even a well-capitalized, profitable health system can be brought to its knees by the cost of a major EMR upgrade, after all.

But particularly if you’re a hospital EMR vendor, it looks like news from the demand front is better than you might have expected.

FDA-Approved Digital Health Should Save $100B+ Over Next Four Years

Posted on June 8, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Here’s some research which suggests that a lack of “medical grade” digital health tools is perhaps the final obstacle holding healthcare back adopting them full scale — and reaping the benefits.

Accenture released a study last week concluding that FDA-regulated digital health solutions should save the U.S. healthcare system more than $100 billion between now and the next four years.

The scant number of digital health solutions the FDA has already approved has already had a meaningful impact, generating $6 billion in cost savings last year courtesy of improved med adherence, fewer ED visits and digitally-supported behavior changes, Accenture reports.

But that’s just a drop in the bucket, if Accenture is right. The consulting firm expects our health system to save $10 billion this year thanks to use of such devices. And then, as the FDA approves more digital health technology, the savings figure should make dramatic jumps over the next few years, hitting $18 billion in ’16, $30 billion in ’17 and $50 billion in ’18.

What’s intriguing about these numbers is that they assume each FDA approval will seemingly generate not only more savings, but also a cumulative “whole is greater than the sum of its parts” effect.

After all, in raw numbers, the number of devices Accenture is relying on to achieve this effect is small, from 33 approved last year to 100 by the end of 2018. In other words, 67 devices will help to generate an additional $44 billion in savings.

That being said, what makes Accenture so sure that the ever-so-slow FDA will approve even 70-odd devices over the next few years?

* Provider demand:  At present, about one-quarter of U.S. doctors “routinely” use tele-monitoring devices for chronic disease management, researchers found. As hospitals and medical practices look to integrate such solutions with their core EMR infrastructure, they’ll look to please providers who want digital health tech they can trust.

Reimbursement shifts:  Accenture argues that as value-based reimbursement becomes more the norm, health leaders will increasingly see digital health solutions as a means of meeting their goals. And medical device providers will be only to happy to provide them.

Regulatory conditions: With FDA guidelines in place specifying when wellness tools like heart rate monitors become health devices, it will be easier for the FDA to speed up the process of digital health technologies, Accenture predicts. This should support 30% annual growth of such solutions through 2018, the study found.

Consumer health tracking:  Consumer demand for health tracking devices, especially wearables, should continue its rapid expansion, with the number of consumers owning a wearable fitness device to double from 22% this year to 43% by 2020, according to the consulting firm.

While Accenture doesn’t address the impact of digital health tech that doesn’t get FDA approval, there’s little doubt that it too will have a significant impact on both health outcomes and cost savings. Ultimately, though, it could be that it will take an FDA seal of approval to get widespread adoption of such technologies.

Hospitals Favor IT Investments Over Cash on Hand

Posted on June 5, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Today I was reading a piece in Healthcare Finance News concluding that now more than ever, hospitals are being judged by financial analysts by the number of days’ cash they had on hand. At the same time, the story noted that hospitals are facing some of the biggest financial stresses they’ve faced in decades, with high patient deductibles and copays leading to drops in collections, switches to risk-based compensation cutting margins and the ever-present need for EMR and other IT investment looming.

When you boil all of this down to the essentials, you’ve got a pitched battle going between the need for current liquidity and the need for future liquidity. While having cash on hand shored up for a rainy day makes analysts like Moody’s happy, failing to spend on the right IT infrastructure undercuts the chances of making it work a few years in the future.

After all, if you don’t have a current revenue cycle management system in place, payments can slip through your hands that could have been collected.  Without spending the right amount in (on the right product, at least) on tools that help manage risk-based contracts, health systems and ACOs can end up losing big money on these contracts.

And even hospitals that aren’t in robust shape are betting their financial future on big EMR investments because they clearly consider it necessary to do so. For example, as I noted in a post earlier this year, Chattanooga, TN-based Erlanger Health System just committed to a 10-year, $100 million deal to put Epic in place despite its only recently having recovered from serious financial challenges.

So the question becomes whether hospitals can risk being cash-poor for now — at least by one measure — in an effort to keep the IT tools they need at hand. Obviously, there’s no one-size-fits-all answer, but industry strategies seem to offer a hint.

The reality seems to be that many health systems and hospitals feel they need to invest in IT upgrades and new technologies whether the traditional metrics fall into line or not. As scary as the regulatory issues (such as the ICD-10 upgrade) and changes in compensation are, health organizations like Erlanger are making the bet that even if it makes them uncomfortable now, having the right IT in place is a must-do.

While I’m no financial genius, my guess is that this means hospitals are going to voluntarily let key metrics like DCOH slip in favor of building for a solid future. I suppose we’ll know in five years or so whether taking such a risk pushed a bunch of hospitals over the cliff.

Hospitals Test New Early-Warning Systems

Posted on June 3, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

The following story offers some tidbits on how new technologies, some EMR-based and some offering independent forms of patient monitoring, are popping up in hospitals.  I found the technologies profiled to be quite interesting and I think you will too.

According to a new piece in The Wall Street Journal, U.S. hospitals have begun to test wireless monitoring systems to track the condition of potentially unstable patients, such post-surgical patients or those on narcotic meds that can suppress breathing. The new technology is most popular on med/surg units where patients aren’t generally monitored 24/7 for changes that can prove fatal.

One approach hospitals are adapting is a wireless monitor which is placed under a mattress and tracks patients’ breathing and heart rate. The monitors, which were developed by an Israeli firm called EarlySense, also lets nurses know when patients get out of bed and when to turn them to avoid bed sores. According to the WSJ, EarlySense costs between $80,000 to $200,000 for a 30-bed unit; prices vary depending on how big the hospital is and how many features the product includes.

Academic research is already suggesting that such monitors can make a significant impact on patient care in hospitals. One study appearing in the American Journal of Medicine last year found that use of the wireless monitors was correlated with both shorter stays and a lower rate of code blue events as compared to units that didn’t use the monitors.

Another technology, software known as the Rothman Index, cross-references 26 variables in medical records and uses them to score a patient on a scale from 1 to 100, with lower scores suggesting that the patient needs to be watched more closely or receive immediate help. The software, which costs roughly $150,000 for a 300-bed hospital, places updated scores regularly on a graph. Some 70 hospitals already have the software in use.

The University of Pittsburgh Medical Center children’s hospital will soon join that number, rolling out a pediatric version of the Rothman Index software in June. UPMC, which has always invested heavily and inventively in new HIT approaches, chose to implement the new software after a research study appearing in Pediatric Critical Care Medicine found that it could effectively supplement staffs’ effort to track kids.

Yet another technology, used at Brigham and Women’s Hospital in Boston, rates patients’ risk of developing serious problems in real time, by analyzing patterns found in lab results, vital signs and nurses’ assessments gathered from EMRs.

Regardless of how you slice it, it’s clear that hospitals are poised to make big leaps in how they monitor patients on the verge of destabilization. This looks like a very promising set of approaches.

Is Epic Too Big To Fail?

Posted on May 27, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

While there’s a chance an Epic purchase can endanger a hospital’s financial health, I’ve never heard a whisper of gossip suggesting that Epic is in financial trouble.

In fact, it appears virtually unstoppable. Though Epic is a private company, and doesn’t disclose its financial information, its 2014 revenue was estimated at $1.75 billion, up from $1.19 billion in 2011. And despite the fact that the hospital EMR market is getting saturated, the giant EMR vendor is doing quite nicely with the estimated 15% to 20% of the market it is reported to hold.

Still, what would happen if Epic took a body blow of some kind and stopped being able to support the implementation and operation of its products?  After all, buying an EMR isn’t like picking up, say, a fleet of trucks that the hospital services and maintains. For years — sometimes a decade — after a hospital goes with Epic, that hospital is typically reliant on Epic to help keep the EMR lights on.

Which brings me to my core question: Is Epic too big to fail? Would it create such a disaster in the healthcare market that the U.S. government should step in if Epic ever had a massive problem meeting its commitments?

As little as I like saying so, there’s a strong argument to be made that Epic simply can’t be allowed to stumble, much less crumble.

As of April 2014, Epic reportedly had 297 customers, a number which has undoubtedly grown over the past year. What’s more, 70% of HIMSS Analytics Stage 7 hospitals, i.e. hospitals for which their EMR is absolutely mission critical, use the EpicCare inpatient EMR.

If Epic were to face some financial or operational disaster that prevented it from supporting its hospitals customers, those hospitals would be very compromised. Epic’s customers simply couldn’t leap abruptly to, say, a competing Cerner system, as the transition could take several years.

Depending how far along in their Epic install and launch they were, hospitals might try to limp along with the technology they had in place, switch temporarily to paper records or try to keep their progress going with whatever Epic consultants they could find.

In an effort to recover from the loss of Epic support, hospitals would be forced to bid high for the services of those consultants. Hospitals could have their IT budgets decimated, their credit harmed or even be driven out of business.

In the crazy shuffle that would follow, there’s little doubt that many medical errors would occur, some serious and some fatal. It’s impossible to predict how many errors would arise, of course, but I think it’s easy to argue that the number would be non-trivial.

Given all this, the feds might actually be forced to step in and clean up Epic’s mess if it made one. Mind you, I’m not saying that, say, HHS has such a plan in place, but perhaps it should.

Ultimately, I think the healthcare industry ought to do some self-policing and find some ways to reduce its reliance on a single, frighteningly-powerful vendor. Over time, I believe that will involve gradually shifting away from reliance on existing EMRs to next-gen EMRs built to support value-driven payment and population health analysis. In the mean time, we’d better hope nobody drops a giant rock on Epic’s executive headquarters.

Study: Scribes Have Positive Financial Impact

Posted on May 22, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

Many hospitals, and some larger medical practices, have been using scribes to capture medical documentation within EMRs — leaving the provider free to make old-fashioned eye contact with patients.

Using the scribe might sound like a crude workaround to techies, but it’s been a hit with emergency department doctors, who prefer to focus on their brief, critical encounters with patients rather than the hospital’s expensive toy.

While it was clear from the outset that doctors loved having a scribe to support them, there’s been scant evidence that the scribe was anything other than an added cost.

A recent study, however, has concluded that at least from a Case Mix Index standpoint, scribes can have a meaningful impact on a hospital’s revenue.  The study, which evaluated the use of scribes between 2012 and 2014 across a group of hospitals, concluded that the scribes save money and boost patient-doctor communication.

The study, which was designed to capture the impact of medical scribes on a hospital’s CMI, linked Best Practices Inpatient Care Ltd. with Advocate Good Shepherd Hospital, Advocate Condell Medical Center and hospitalist-specific medical scribes from ScribeAmerica LLC.

Kicking things off to a good start, ScribeAmerica and Best Practices put scribes through a jointly-developed course that emphasized workflow, productivity and accurate inpatient documentation. The researchers then tallied the results of using trained scribes over a two-year period in the two hospitals.

From 2012 to 2014, researchers found that for both Advocate Condell Medical Center and Advocate Good Shepherd Hospital, CMI values climbed after medical scribes came on board.  Advocate Good Shepherd’s CMI grew by .26 and Condell Medical’s CMI rose .28. These are pretty significant numbers given that a CMI growth of 0.1% typically translates to a gain of about $4,500 per patient. In this case, the hospitals gained roughly $12,000 per patient.

These findings make sense when you consider that using scribes seems to have served its purpose, which is to be extenders for providers who’d otherwise be hunched over an EMR screen.

Researchers found that inpatient physicians at the two hospitals studied were able to cut time spent on chart updates by about 10 minutes per patient on average. This profit-building effect is enhanced by the fact that scribes often get discharge summaries prepared immediately, rather than within 72 hours as is often the case in other hospitals.

That being said, it should be noted that the study we’ve summarized here was co-written by the CEO of Best Practices, which clearly invested a lot of time and effort training the scribes for the specific tasks important to the study.

Still, the study does suggest, at minimum, that scribes need not necessarily be written off as an expense, given their capacity for freeing providers for billable clinical activity. Ideally, IT vendors will develop an EMR that doctors actually want to use and don’t need an intermediary to work with effectively.  But until that happy day arrives, scribes seem like they can make a difference.

What If Doctors Owned Part of Hospital EMRs?

Posted on May 19, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

After this many years of widespread use, you’d think that physicians would have accepted that EMRs are an inevitable part of practicing medicine — and at least sometimes, a useful tool that helps doctors manage their panel of patients more effectively.  But it seems some hospital administrators have concluded that a significant percentage of doctors loathe EMRs.

I draw this conclusion not from casual conversation with physicians, but from a hospital recruiting advertisement quoted in The New York Times.  The advertisement, which was attempting to attract doctors to a facility in Phoenix, closed its glowing description of state-of-the-art equipment and an attractive location with a single provocative line, all in bold: “No E.M.R.s.”

While EMRs are getting long in the tooth these days, they haven’t won over many doctors. As physician Robert Wachter notes in his NYT piece on the subject, a 2013 RAND survey found physicians most unhappy with EMRs, citing “poor usability, time-consuming data entry, needless alerts and poor work flows.”

I think it’s pretty obvious why EMRs continue to stay user-hostile. While doctors are the end users of  EMRs, hospital IT leaders and other CXOs make the final buying decisions. And he (or she) who writes the check makes the rules.

In theory, it’s strongly in hospital management’s interests to force EMR vendors to clean up their usability act.  After all, not only do hospital leaders want their EMRs used effectively, they want the data to be robust enough to be usable for value-based care delivery. But the truth is that hospital leaders are nowhere near demanding enough of EMR vendors. And because they’re the ones writing the checks, doctors get stuck with the ugly results.

But what if there was a way to involve both doctors and hospitals financially, as partners, in buying EMRs?  Not being the world’s greatest finance wizard, I don’t know how a hospital and a group of physicians could structure a deal that would allow them to jointly own the hospital’s EMR system. And I’m aware, though I don’t know how they would be addressed, that there could be significant legal issues to be resolved if the hospital was a not-for-profit entity.

But at least in theory, if doctors were paying for a percentage of the EMR, they’d have a lot more say as to what level of usability they’d demand, what features were most important to them, and what price they’d be willing to pay for the system. In other words, if doctors had skin in the game, it would put a great deal of pressure on vendors to make EMRs doctors actually liked.

Now, I realize that doctors might have no interest in buying into a technology which has let them down again and again. But there’s a chance that more visionary and tech-friendly physicians might grab the chance to have a substantial say in the EMR-buying process. The idea is worth a look.

Erlanger Health System Takes A Chance On $100M Epic Plunge

Posted on May 11, 2015 I Written By

Anne Zieger is veteran healthcare editor and analyst with 25 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. She can be reached at @ziegerhealth or www.ziegerhealthcare.com.

The seemingly eternal struggle between EMR giants Cerner and Epic Systems has ended in another win for Epic, which was the final choice of Chattanooga, TN-based Erlanger Health System. The health system’s CEO, Kevin Spiegel, who said that Cerner had been its other finalist, announced last week that Erlanger would spend about $100 million over 10 years for the Epic installation.

Erlanger, a four-facility public hospital system with about 800 total beds, is an academic medical system and serves as a campus of the University of Tennessee College of Medicine. The system also partners with UT to operate the UT Erlanger Physicians Group, a 170-member multispecialty practice.

The health system, which fell in financial trouble in 2012, only recently saved itself and positioned itself for the massive Epic investment. It closed out FY 2014 with $618M in total operating revenue and $18M in operating income.

Erlanger’s turnaround is all well and good. But that being said, these numbers suggest that Erlanger is making something of a gamble by agreeing to an approximately $10M a year health IT investment. After all, the health system itself concedes that its return to financial health came in large part due to $20 million in new Medicare and Medicaid funding from CMS, along with new funding from the state’s Public Hospital Supplemental Payment Pool. And politically-obtained funds can disappear with the stroke of a pen.

The risky nature of Erlanger’s investment seems even more apparent when you consider that the system has an aggressive building plan in place, including a new orthopedic center, a $68M expansion of one of its hospitals, a 100,00 square foot children’s & women’s ambulatory center and a new health sciences center. Particularly given that Erlanger just completed its turnaround last year, does it make sense to squeeze in Epic payments alongside of such a large capital investment in infrastructure?

What’s more, the health system has a bond rating to rehabilitate. Faced with financial hardships in 2013, its bond rating was downgraded by Moody’s to a Baa2 and the system’s outlook was rated “negative.” By 2014, Erlanger’s had managed to boost the Moody’s outlook to “stable,” in part due to the influx of state and federal funds obtained by Erlanger execs, but the Baa2 rating on its $148.4 million in bond debt stayed in place.

While I imagine the hospital will realize a return on its Epic spending at some point, it’s hard to see it happening quickly.  In fact, I’d guess that it’ll be years before Erlanger’s Epic install will be mature enough to be evaluated for ROI, given the level of effort it takes to build a mature install.

In the meantime, Erlanger leaders may be left wondering, from time to time at least, whether they really can afford their expensive new EMR.