WA Provider Files Complaint Against Cerner in Bankruptcy Court

Washington-based Astria Health recently filed a complaint in bankruptcy court against Cerner, blaming the EHR and revenue cycle management vendor for the health system’s financial demise and the closure of its medical center last year.

Astria Health contended in the complaint filed Monday that Cerner and its subsidiary, Cerner RevWorks LLC, made “intentional misrepresentations” to the health system before it implemented the vendor’s EHR and billing services, local news source Yakima Herald reports.

The health system is now seeking damages and has asked the court to triple the amount since it claims Cerner violated the Washington State Consumer Protection Act. It also wants the court to void any claims Cerner has filed during the system’s bankruptcy process, the report states.

Astria Health filed for Chapter 11 bankruptcy in May 2019, shortly after purchasing two hospitals in eastern Washington. At that time, the health system explained that it converted to a new EHR system following the purchase of the hospitals and, at the same time, it contracted with an unnamed company to manage its revenue cycle, including business office billing, claims processing, and collecting.

The company—now named as being Cerner—had allegedly promised accounts receivables would return to pre-transition levels shortly after implementation with “minimal negative cashflow impact” throughout the transition.

However, Astria Health claims that the performance guarantees for accounts receivable were never met, leaving a “large amount of unprocessed accounts receivable (AR) value trapped in the contracted business office operation.”

As a result, the health system experienced a significant cashflow shortfall, which prompted it to file for bankruptcy less than a year after Cerner took over revenue cycle management.

In addition to naming the vendor as Cerner, the complaint now also reveals that the health system feels misled by Cerner, which allegedly claimed that its EHR and billing systems would integrate seamlessly.

Astria Health also unveiled that its collections fell from 97 percent of net revenue prior to using the billing system in the summer of 2018 to 54 percent of net revenue after implementation. The health system also pointed out that claims to government payers were frequently rejected following implementation of the billing system.

Reduced collections meant that the health system could not purchase supplies and was forced to reduce services, according to the report. Throughout the complaint, Astria Health also directly blamed Cerner’s billing system for its financial issues that ultimately led to the closure of Astria Regional Medical Center, the system’s third hospital during that period.

“Cerner’s systems caused Astria hundreds of millions of dollars in damage and harm,” Astria Health wrote in its complaint, according to the report. “Ultimately, the cash collection issues were so severe that Astria Regional Medical Center, a hospital that had existed for 128 years, was forced to close.”

In a statement to the RevCycleIntelligence, a Cerner spokesperson disputed the allegations. 

“We categorically deny the allegations made in the lawsuit, we disagree on the merits, and we will vigorously defend the company,” the statement said. 

Cerner has also filed a “cure” claim against Astria Health asking for $9.5 million and another $1.2 million for the system’s use of the billing system between May 2019 and October 2019.

Cerner has since sold RevWorks in a deal announced in June 2020. Revenue cycle management company R1 RCM completed the acquisition of the service in August.

“We’re thrilled to be working with R1 on this transaction as we’ve had a great partnership for some time,” Brenna Quinn, senior vice president of revenue cycle management at Cerner, said at the time. “We are committed to growth and transformation that drives simplicity, scale and more cost-effective solutions for global health care. We’re confident that clients, and the industry, will certainly benefit from this expanded R1 offering.”