NY Hospital Settles with Cerner Over $38M Medical Billing Problem

EDITOR'S NOTE: This article has been updated with a statement from Cerner.

Cerner recently reached a settlement with a New York hospital after an audit revealed the EHR system’s medical billing component resulted in $38 million in financial losses in 2017, a local news source reports.

Dianne Shugrue, President and CEO of Glens Falls Hospital announced the settlement with Cerner in a full-page ad in The Post-Star. Shugrue stated in the ad that the billing problem lasted for two years, causing the hospital “financial hardship.”

The hospital reduced operating costs and laid off employees during the two-year period to keep the hospital afloat after sustaining the financial loss.

But the medical billing problem will not have a long-term impact on the hospital’s bottom line, Shugrue reassured patients in the ad.

“Glens Falls Hospital is not closing, and we are not going out of business,” she wrote. “Our cash flow and balance sheet are strong, our debt is manageable, our expenses well controlled.”

The issues with the medical billing system have been “comprehensively addressed and resolved,” she added.

Although, the hospital is now focusing on fixing different billing issues. “I’m not entirely satisfied with our performance yet, but our team is making good progress,” she wrote.

Shugrue did not name Cerner as the owner of the medical billing system that malfunctioned. However, The Post-Star obtained Glens Falls Hospital’s audited financial statements from 2012 and 2017 and IRS filings from 2014 to 2017, which revealed the hospital’s new billing system was responsible for the losses.

Glens Falls Hospital implemented the Cerner EHR system in November 2016, according to the local news source. The single EHR system replaced multiple health IT systems, including the hospital’s legacy patient registration and billing tool.

Shugrue intended for the Cerner EHR implementation to help the hospital digitize healthcare and streamline processes.

But shortly after implementation, the hospital allegedly failed to collect $12.6 million in bills, representing a 31 percent increase compared to 2015.

Shugrue stated that a “one-time system conversion” cause the hospital to lose millions of dollars. She did not elaborate on the details, but The Post-Star reported that the financial audits make it clear that Cerner’s medical billing system was the biggest contributor.

The billing system failed to send out about $38 million worth of bills in a timely manner or at all in 2017, the financial audit uncovered.

Patients have recently told The Post-Star that they either never received a bill from the hospital or they were billed for the same procedure. Some patients also reported that the hospital sent their bills to a collection agency after their insurance companies denied the hospital’s claims because the bills were sent too late.

Cerner is reportedly working with Glens Falls Hospital to resolve the issue. The terms of the settlement are currently confidential, but Shugrue indicated in the ad that both parties are satisfied with the deal and the hospital will continue to use the medical billing system.

“These technology advancements will undoubtedly be a long-term benefit to all patients and the community by improving the safety, quality and value of healthcare,” she wrote.

The situation in New York calls to light several other incidences where an EHR system conversion or implementation resulted in significant, short-term financial losses, the local news source reported.

Agnesian Healthcare in Wisconsin sued Cerner in 2017 over $16 million in losses after implementing the company’s billing system. The health system claimed Cerner’s revenue cycle management software was error-prone and caused employees to use manual work-arounds to create bills.

Vanderbilt University Medical Center also suffered financial losses in 2017 following an Epic EHR implementation. The Tennessee-based center reported lower operating incomes following the implementation.

Providers desire the integration of clinical and financial systems, especially as the industry transitions to value over volume. Providers increasingly need to understand not only patient outcomes and health, but also cost of care to succeed in more complex payment models.

Now that nearly all hospitals have an EHR system, providers are looking to implement or upgrade revenue cycle management technology to gain a better understanding of their clinical and financial standings.

Many providers are turning to their EHR vendors to help implement revenue cycle management technology. In fact, a 2016 KLAS survey found that 59 percent of provider organizations considering a revenue cycle management system replacement said they made that decision because they wanted more EHR and revenue cycle management integration.

However, large EHR vendors are still struggling to optimize their financial systems as evident by recent lawsuits and settlements. The companies may have as many usability and efficiency challenges as their small, more specialized competitors.

Updated 3/20: In response to the news of the settlement, Cerner spokesperson Anamarie Rebori Simmons stated in an email, “The hospital remains a valued partner. The matter was previously resolved. We continue to work together to provide care to the community.”