UA Health Network in the Red by $28.5M ; Electronic Medical Records System Cost $32M More Than Budgeted

By Emily Bregel; Stephanie Innes | AZ Daily Star, June 1, 2014 | Go to article overview

UA Health Network in the Red by $28.5M ; Electronic Medical Records System Cost $32M More Than Budgeted


Emily Bregel; Stephanie Innes, AZ Daily Star


Southern Arizona's largest health network is $28.5 million in the red so far this fiscal year, and officials say a costly electronic medical records system is largely to blame.

The operating loss is unprecedented for the four-year-old University of Arizona Health Network, which includes two local hospitals.

The electronic records system, from Wisconsin-based Epic Systems, has cost an estimated $115 million, including $32 million in unbudgeted costs for the first eight months of the fiscal year, which ends June 30, financial documents show. The extra costs are due primarily to a delay in getting the system live and funding additional training and support, officials said. It was supposed to be up and running by Sept. 1, but wasn't operational until Nov. 1.

"This is the biggest operational change this organization has ever undertaken," said Dan Critchley, who started working with the UA Health Network as a consultant last July and has been chief information officer since Feb. 1.

"We're in what we call support mode now," Critchley said. "We're fully done with our install."

There are other reasons for the network's weak finances. UA Health Network officials say uninsured patients aren't getting health insurance coverage through the federal Affordable Care Act as quickly as they'd anticipated, resulting in $11 million less than expected in patient revenue through February.

The network also lost federal dollars from a program that helped bridge the funding gap created by Medicaid rate cuts and a rise in uninsured patients. The Safety Net Care Pool, which also included Maricopa Integrated Health System and Phoenix Children's, pumped $33 million into the UA hospitals for the first six months of the fiscal year. But that infusion ended Dec. 31 to coincide with greater health insurance availability through the Affordable Care Act.

Theoretically, the UA Medical Center hospitals should have seen a big enough decline in uninsured patients to make up for the money that stopped coming from the Safety Net Care Pool.

Network board chairman Steve Lynn said the network's finances are a concern, but he's optimistic.

"The issue is more about where we are going and what things are in place to change the trajectory," Lynn said. "It was an especially difficult time financially because of Epic, there was no choice in the matter. That period of time has fortunately passed and now we can do much better."

6,300 employees

The University of Arizona Health Network is a $1.2 billion nonprofit organization that includes about 6,300 employees and two hospitals -- the UA Medical Center's university and south campuses. It also includes a physician practice plan, clinics and health plans. The organization -- the seventh-largest employer in Southern Arizona, according to the 2013 Star 200 -- was created in 2010 through a merger between University Medical Center Corp. and University Physicians Healthcare. Its beginning was marked by turbulence and chaos: In its first four years, the network has had four chief executive officers. The fourth and current CEO is Dr. Michael Waldrum, who has been with the network since January 2013.

The new electronic records system brings uniformity to the UA Health Network, which had various entities -- south campus, university campus and outpatient clinics -- working in separate silos of computer record-keeping.

A financial report presented to the network's board of directors on April 24 says the Epic system's higher-than-expected expenses this fiscal year were due to "implementation delays, additional training support and planned schedule reductions." Some of the expenses were originally supposed to be in the prior fiscal year.

The report attributes $6.8 million of the current year's losses to physicians spending enough time training to use the new system that they couldn't see as many patients between November and January. Schedules were back to normal as of February. …

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