5 findings about how EHR implementations affect hospital finances
An electronic health record (EHR) system is a big investment for any hospital or health system, and it can affect operating margins and credit quality. We’ve all heard horror stories about how implementations gone wrong can lead to serious financial trouble. But the right system can improve a healthcare organization’s bottom line.
How do EHR implementations affect hospital finances? We’ve compiled a list of tips from recent research to give “just the facts” for more informed decision-making:
1. Implementing a new EHR does not affect bond ratings. Published in JAMIA in February 2018, one study analyzed the impact of EHR implementation on bond ratings and net income from service to patients (NISP) at 32 hospitals and a set of controls. There was no difference in the likelihood of changes to bond rating or NISP following a go-live when compared with the control group.
2. The first year is the toughest. A 2017 analysis by Moody’s Investors Service found that the first year of installation decreases cash flow and liquidity, strains operating margins and slows down payment collections – but only during the first year. The following year usually brings improved results in patient revenue, bad debt and accounts receivable.
3. Risk management minimizes disruption. The Moody’s report also found that having good governance in place – such as establishing lines of credit, having project committees and rolling out the EHR in stages – helped limit financial risk and disruption.
4. Health IT investments positively affect financial performance. A comprehensive review of pooled hospital data shows a direct and positive association between health IT expense with hospital Return on Assets (ROA)* and productivity. Results indicate health IT capital and operating expenses will ultimately generate positive financial performance for the organization.
5. Preoccupation with cost continues. A JMIR study finds that financial considerations remain top of mind, and is the most frequently listed barrier. But interviewee perception plays a role on whether cost is given as a barrier to or a facilitator of EHR adoption. Perhaps having a solid understanding of total cost of ownership before launching an EHR implementation could help shape a more realistic perception of cost.
To learn more about ways hospitals can lower the cost of care, visit our resource page.
*Return on Assets (ROA) is a financial ratio that shows the percentage of profit an organization earns in relation to its overall resources, or net income divided by total assets.