Kaiser Foundation Health Plan and Kaiser Foundation Hospitals, the HMO and integrated delivery network of the Kaiser Permanente organization, is taking a $442 million write-down to scrap its homegrown electronic medical records system and switch to a commercial product.
The charge, recorded during the 2002 fourth quarter, pulled down Kaiser's full-year net income to $70 million--nearly 90% below 2001 earnings of $681 million, the not-for-profit Oakland, Calif.-based healthcare system says. Year-over-year revenues increased by 14%, however, to $22.5 billion from $19.7 billion.
Kaiser also says its net worth declined by $470 million last year as a result of increased funding requirements and poor market performance of its employee pension program.
Additionally, Kaiser says it added 115,000 patients last year, putting its total enrollment at 8.4 million across seven regions of the country.
In the fourth quarter, Kaiser recorded a net loss of $525 million, down from a $187 million surplus during the final three months of 2001.
Still, Kaiser management remains firmly committed to its decision to abandon its decade-long effort to develop its own EMR in favor of a "more advanced and cost-effective vendor system," according to a statement.
"This is the right time to be investing in a major care system re-engineering project," Kaiser Permanente Chairman and CEO George Halvorson says.
Kaiser last month said it was turning to Epic Systems Corp., Madison, Wis., to lead a $1.8 billion project to automate and standardize clinical record-keeping nationwide.
Kaiser Permanente hopes to have the system deployed to all of its nearly 11,400 physicians within three years. Patients also will be able to access their personal medical records via a secure Internet connection, officials say.
According to Andrew Wiesenthal, M.D., associate executive director of the Permanente Federation, Kaiser's medical group division, senior executives concluded that they could get the same functionality for the same amount of money in about half the time by turning to the commercial market (Modern Physician, February 2003).