Vanderbilt's EHR install will test financial mettle

Despite a strong financial profile, Vanderbilt University Medical Center's $214 million rollout of a new electronic health record system is so big that Moody's Investors Service is a little uneasy about it.

The three-hospital system in Nashville, which also operates more than 120 clinics across Tennessee and southern Kentucky, plans to go live on the new Epic EHR system in November, according to a Moody's report released Tuesday.

Moody's pegged the cost of the installation at $214 million. While affirming a strong A3 rating on $926 million of public debt, Moody's said the cost of the installation will be a slight drain on cash.

The report estimates that Vanderbilt's operating cash flow margin will dip to 6.1% in fiscal 2018 from the 7.7% it has been running throughout the system's 2017 fiscal year that ends June 30.

"The stable outlook reflects expectations that financial performance will continue at its modest levels for the foreseeable future, with an anticipated margin decline in FY 2018 due to the upcoming IT installation," Moody's said.

The medical center said it is committed to ensuring a smooth installation of the EHR system.

New EHR implementation is a massive undertaking fraught with risks. Last year, MD Anderson Cancer Center in Houston said its Epic implementation sparked a revenue decline and a $405 million, or 77%, drop in adjusted income in the 10 months that ended June 30.

MD Anderson President Ronald DePinho resigned his post this March under a financial cloud, saying he could have done a better job administratively and communicating with staff.

An EHR is the electronic nervous system of a hospital, allowing staff to onboard patients, track care, view clinical workflow and bill for services.

Vanderbilt announced that it was moving to Epic's full suite of administrative and clinical software way back in December, 2015, and has routinely kept staff updated on the system's progress.

The conversion has one advantage. Vanderbilt's homegrown EHR that the system has used for years is being integrated into the new Epic system.

Vanderbilt recently encouraged employees to familiarize themselves with the new system at interactive events called "space stations," according to medical center spokesman John Howser. Formal employee training on the system begins August 21 for most users with "super users" starting training two weeks earlier.

The medical center was spun out of Vanderbilt University in May, 2016, creating a separate legal entity that sold debt to pay the university for its buildings and operations.