Triangle hospitals go Epic with multimillion-dollar software

jmurawski@newsobserver.comJuly 5, 2014 

  • Carrots and sticks

    Hospitals can qualify for federal sweeteners for adopting electronic medical records, but starting in 2015 they will also be penalized for not meeting the federal government’s standard for using electronic medical records with Medicare and Medicaid patients.

    So far, Triangle hospital systems have qualified for nearly $30 million in combined federal incentives. Here’s how Triangle hospitals and hospital systems have fared:

    Medicare incentives
    HospitalIncentivesYear
    N.C. Specialty Hospital $800,0002013
    UNC Hospitals $2 million2012
    WakeMed Cary $2.1 million2013
    Johnston Memorial Hospital Authority $2.2 million2013
    Duke University Health System $2.6 million2013
    WakeMed Raleigh $3.1 million2013
    Rex Hospital $5 million2012-2013

    Medicaid incentives
    Hospital IncentivesYear
    WakeMed Cary $300,0002013
    Johnston Memorial Hospital $1.4 million2012-2013
    WakeMed Raleigh $1.7 million2013
    Duke University Health System $1.8 million2013
    UNC Hospitals $4.5 million2012-2013

    Source: N.C. Department of Health and Human Services

  • What is Epic?

    The Wisconsin software company selected by the Triangle’s hospital networks is private, employee-owned and does not file financial data with federal regulators.

    Epic Systems, founded in 1979, doesn’t advertise and rarely grants interviews with its executives. Its founder and CEO, Judy Faulkner, was recently ranked 84th among the Forbes list of the world’s 100 most powerful women. Forbes lists her net worth at $3 billion.

    Despite its aversion to publicity, Epic has become a market leader in designing and selling electronic medical records software to medical practices, hospital systems and academic teaching centers.

    Epic software is regarded as the most expensive on the market, in part because the company caters to elite, multiple-hospital institutions.

    “Epic is pretty selective as to who they sell to – they won’t sell to you if you don’t meet their criteria,” said IT consultant Jeffery Daigrepont of Atlanta. “I’ve actually had clients that have asked me on their behalf to personally call Judy and beg her to consider them, and she’s turned them down.”

    Epic’s motto – “Do good, have fun, and make money” – evokes the sunny optimism of a booming technology sector shaped by Apple and others. Epic’s nearly 7,000 employees work, play and relax on a utopian campus outside Madison, Wis., a corporate playground that features organic produce, solar panels and geothermal energy systems.

— Rex Hospital switched last month to new electronic medical records software, a technology shift so complex it will take about a month to complete and is being scripted like a full-scale emergency: 1,000 technical specialists, two round-the-clock command centers, daily strategy sessions and a vacation blackout for most employees.

Durham-based Duke University Health System has already made a similar switch, and WakeMed Health & Hospitals plans to introduce the same software at its main campus in February. An integrated IT system coordinates all hospital departments, imaging labs and doctors offices on a single network for patient records and for generating bills.

All told, the Triangle’s major hospital systems could spend more than $700 million on new IT systems and related training, staffing and implementation. The switch is not without financial risk, as North Carolina’s hospital executives know all too well.

At Cone Health System in Greensboro and at Wake Forest Baptist Medical Center in Winston-Salem, error-prone introductions of the same software system in the past two years resulted in millions of dollars in unbilled services and triggered hundreds of layoffs.

Duke University Health System was the first in the Triangle to make the change, starting with staff training in 2011 and completing the rollout this year. It plans to invest $349 million in the new system, but also expects to save about $70 million by unplugging more than 100 software systems and mainframes that will no longer be needed.

“This is a big, massive change,” said Jeffrey Ferranti, Duke’s chief information officer. “We had 16,000 people go live. It really needs to be all hands on deck.”

The move to a single integrated electronic medical record is driven by federal requirements that will bring financial penalties next year for failure to use such records for Medicare and Medicaid patients. The shift augurs a new health care environment where hospital systems will become massive data storage networks, increasingly rewarded for preventing unnecessary drugs, tests and hospitalizations.

All three Triangle hospital networks have selected the same software vendor: Epic Systems, widely considered the industry leader in hospital IT. According to the privately held Wisconsin company, it has 315 customers – hospitals, hospital systems and physician networks – and generated nearly $1.7 billion in revenue last year. It has declined to name its North Carolina customers and doesn’t disclose market share.

Epic’s forté is replacing more than a hundred IT systems across hospital departments that are either cobbled together or not connected. Its “Care Everywhere” portal allows hospital systems and doctors’ offices across the country to share medical information about a patient who receives care out of state.

Hospital officials rhapsodize over Epic’s improvements to patient care: a comprehensive medical history accessible to doctors, nurses, lab techs, pharmacists and to patients via smartphone or home computer. Patients will eventually be able to request prescription refills, schedule appointments, review lab test results, and receive updates and reminders from their doctors.

Culture shock

Three days into its rollout last month at Rex, crews of technicians and “super users” buzzed about the hospital floors in color-coded vests, resolving hundreds of minor technical glitches. A steering committee of about 50 hospital leaders met twice a day to review usage updates, monitor the culture shock of change, and greet positive reports with cheers and applause.

“We are knocking all the targets out of the water,” Tracy Parham, UNC Health Care’s chief information officer, reported at a morning session on June 23.

The transition can be stressful, especially for doctors flummoxed by digital medical records. Robert Wehbie, 56, an oncologist at the Rex Cancer Center of Wakefield, said he was initially pessimistic but is gradually coming around.

“I can see the light at the end of the tunnel where I will not need a trainer beside me showing me things,” Wehbie said. “I think I’ll eventually get there with a lot of heartburn and angst.”

The full software adoption for Rex and its parent, UNC Health Care, could take five years. Rex and UNC are spending $125 million on the gargantuan project, but that’s a partial cost that doesn’t include five hospitals recently acquired or affiliated with UNC.

The Rex rollout began June 20, but the vacation blackout was lifted Tuesday, and the staffing at the 24/7 command centers is being scaled back. The most urgent glitches at Rex have involved printers that didn’t print medical labels and system access problems for some employees, officials there said.

Capturing more revenue

Those who are familiar with Epic say it excels in an area that’s not widely publicized. A big part of Epic’s appeal lies in its laser-like precision for billing health insurers.

“That’s part of the goal,” said Eric Ford, a professor of health care management at Johns Hopkins University in Baltimore. “Much more complete documentation means that Epic can pull out the parts that optimize the billing.”

“You maximize in terms of dollars billed, and optimize in terms of compliance, or making sure you’re not doing things that are illegal,” said Ford, a former medical professor at UNC Greensboro and an adviser to the Cone Health system during the Greensboro hospital chain’s ill-fated 2012 rollout of Epic.

WakeMed Health & Hospitals in Raleigh uses 11 separate billing systems that will be replaced by Epic. WakeMed rolled out the integrated system at three clinics in May, and at its WakeMed Physician Practices network of 1,000 doctors and employees in June.

The main hospital on New Bern Avenue is set to switch to Epic in February at a systemwide implementation cost of $120 million.

WakeMed officials discovered that after the doctors switched to Epic, their clean bill rate jumped from 80 percent on the old billing systems to 96 percent, said John Piatkowski, WakeMed’s senior vice president for physician practices and medical affairs.

A clean bill is one that can be automatically submitted to an insurer for payment, whereas bills that aren’t clean are delayed to input manual fixes before they can be filed, Piatkowski said.

Billing delays are troublesome for hospital systems because under insurance contracts, late bills can become invalid after 90 days or some predetermined period, he said.

“If you don’t have the system set right, the right charge doesn’t get attached to the service provided or doesn’t flow through,” said Benjamin Alexander, WakeMed’s chief medical information officer.

Problems in Triad

When not properly integrated, the complex billing function can misfire.

At Cone Health in Greensboro, problems arose when some bills were delayed and some unpaid, Ford said. The totality of Cone’s loss is not clear, but the system ended up laying off 150 employees in 2013 after it spent $130 million on Epic software and related costs.

Cone Health spokesman Douglas Allred said Epic was one of several factors that contributed to the layoffs. Allred cited reduced insurance reimbursements, lower patient volumes and the federal budget sequestration, which cost the hospital $4.5 million.

Wake Forest Baptist Medical Center suffered a lowered credit rating from Standard & Poor’s and Moody’s Investors Service after a muddled Epic rollout in 2012. And last year, Baptist rescinded 1.5 percent merit raises for employees in the wake of an Epic-related financial setback, including $36.9 million in lost margin and $16.8 million in Epic-related expenses, according to the Winston-Salem Journal.

Cone and Baptist have since resolved their problems with Epic. And hospital officials in the Triangle report no major incidents.

At a WakeMed ear, nose and throat practice and at Rex Hospital, doctors and nurses raved about Epic during a site visit hosted by hospital officials.

Loretta Phillips, a nurse practitioner at Rex, said she read all the training manuals, practiced at home in Epic’s “playground environment,” and spent 15 hours in training.

“We don’t like paper anymore,” Phillips said.

Esa Bloedon, a WakeMed ear, nose and throat doctor, said Epic is a major advance in medical technology.

“Before, I would have four different programs open, and I’d bounce back and forth,” he said while navigating an Epic screen. “This does more than I need. There’s an endless array of features.”

But Wehbie, the Rex oncologist, described Epic as an efficiency evolution in health care that may end up costing back-office jobs. Wehbie reflected on his early experience with Epic in a phone interview.

“This is largely built as a billing platform to reduce the revenue cycle and to capture charges,” Wehbie said. “It’s a small step for patient care and a giant leap for how hospitals negotiate the financial environment.”

Murawski: 919-829-8932

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