“The ratings change was largely due to the one-time implementation costs and temporary business disruption associated with the installation of a new medical records system at the medical center in the fall of 2012," former Wake Forest Baptist Chief Financial Officer Edward Chadwick said at the time, noting that the EHR's costly impact was “greater than anticipated.” C. Michael Rutherford replaced Chadwick as CFO this past March.
The situation got worse for Wake Forest Baptist in fiscal 2014, which ended June 30, when it tallied more than $78.4 million in operational losses, according to unaudited figures (PDF) released late last week. Moody's Investors Service also downgraded the system's bond rating in July.
Technology troubles lessened last year, officials noted, and more patient accounts have been collected as the EHR and revenue software systems have fit more smoothly into the day-to-day workflow.
Perhaps more troubling was the 2.8% decline in net patient service revenue, totaling $1.54 billion in the year ended June 30. Inpatient admissions dropped 6.3% year-over-year, while outpatient volumes soared 11.3%. Executives said more services are being shifted to outpatient settings, and the CMS' two-midnight rule also led clinicians to shift more volumes to observation, or outpatient, status.
Overall, Wake Forest Baptist's expense growth (10.4%) outpaced revenue growth (8.9%), which partially prompted the system to lay off 350 employees in May. “Management believes that future operating performance must be improved from current levels, and continues to aggressively pursue both short- and long-term strategies to drive growth, reduce cost and leverage our technology investments,” executives said in the disclosure.
The healthy total revenue growth mostly came from a settlement involving a wound treatment device. This past June, Kinetic Concepts and Wake Forest Baptist agreed to a deal in which Kinetic will pay the medical center $280 million over the next three years in patent royalties related to a negative pressure wound therapy system.
Wake Forest Baptist's total operating revenue in 2014 reached $2.06 billion. Including investment gains, Wake Forest Baptist's total deficit in fiscal 2014 was $28.9 million, compared with a $4.5 million net loss in fiscal 2013. Both years seem far removed from 2012, when Wake Forest Baptist had a total surplus of $88.7 million and an operating surplus of $45.8 million.
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