Iowa hospital blames EHR install for bankruptcy

Mercy Iowa City (Iowa) cited a difficult EHR implementation as one of the primary reasons for having to file for bankruptcy in August, according to The Gazette.

The hospital contracted with Altera Digital Health for its EHR platform in 2021, but Mark Toney, Mercy's chief restructuring officer, said in his court declaration that the system caused "significant operational problems" such as coding and patient collection issues. He also mentioned the EHR made it challenging to submit regulatory reports on deadline and "misconfigured workflows," according to the report.

The hospital lost revenue last year and earlier this year due to delayed patient submissions and the subsequent accounts receivable backlog, which jumped 40% while net patient revenues dropped.

"Put simply, the failed EMR implementation was a significant contributing factor to (Mercy's) financial difficulties in 2022 and 2023, that ultimately necessitated the filing of these Chapter 11 (bankruptcy) cases," said Dan Simon in a letter to Altera dated Dec. 8. "Now, on the cusp of closing a value-maximizing sale to the University of Iowa approved by the bankruptcy court, your client's attempt to leverage a release for potentially valuable cases of action is not well received."

The University of Iowa is in the process of acquiring Mercy, and the hospital will transition to a new EHR when the sale is complete. However, Altera has asked a bankruptcy judge to force the hospital to either decide to terminate the existing contract, which lasts through March 2031, or hand it over to the University of Iowa.

Mercy wants to keep Altera on through the transition for patient record continuity, but then join the new system.

The two sides have not agreed on the "cure amount" either. Mercy calculates the cure amount is $8 million plus another $1.5 million to Altera's successor, Allscripts Health Care, but Altera maintains it should receive $12 million, noting the hospital has added $4 million since the bankruptcy was filed.

In court documents, Altera said it has been paid less than half of the amount agreed upon by the contract. "By using the software and evading assumption or rejection of the agreement, (Mercy) is unfairly forcing Altera to continue performing under the agreement without giving Altera any of the benefits and protections of the bankruptcy code," according to documents quoted by The Gazette.

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