Moody's analyzes financial risks of EMR implementation: 6 findings

EMRs are essential components to delivering quality patient care and accurate billing statements. However, problems with new system installation can cause significant operating losses, lower patient volumes and receivables write-offs, negatively impacting the hospital's operating margin and credit quality, according to a new analysis conducted by Moody's Investors Service.

Here are six findings from the Moody's report:

1. Adoption of a new EMR system significantly decreases cash flow and liquidity; however, this is usually limited to one year.

2. Hospitals that recently changed EMR systems saw an average 10.1 percent decrease in absolute operating cash flow, but saw improved results in patient revenue and bad debt the following year.

3. Installation costs contribute to condensed revenue and rising expenses, causing a strain on operating margins. The time immediately prior to and after the implementation date pressures the margin the most.

4. In the first year of installation, days in accounts receivable increased a median of 11.8 percent because hospitals saw a slowdown in payment collections during the transition. However, median days in accounts receivable decreased by 8.2 percent after the first year. 

5. During the first installation year, days cash on hand dipped an average of 6.1 percent and unrestricted cash and investments decreased by 1.1 percent, on average.

6. Proper risk management such as establishing lines of credit, creating committees to oversee project governance and committing to a multi-staged rollout helps limit the size of financial disruption and risk.

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