Health System Sues Cerner Over Billing-Related Losses

Posted on October 5, 2017 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of FierceHealthcare.com and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

If I asked you what issues cause the biggest conflicts between EMR vendors and their clients, you might guess that clinical data management disputes or customer service issues topped the list. But actually, in my experience the most common problems health systems encounter in their EMR rollouts are billing-related.

For example, Dana-Farber Cancer Institute just announced a $44.2 million operating loss for the third quarter of fiscal 2017. The Boston-based hospital attributes at least part of its losses to billing issues associated with its Epic system. Leaders at Dana-Farber said that these billing issues had cost the hospital roughly $25 million since it rolled out Epic in May 2015, according to Becker’s Hospital CFO Report.

Another instance comes from Healthcare IT News, which reports that Cerner is being sued by a health system accusing the vendor of selling it faulty billing software.

The suit, by Wisconsin-based Agnesian Healthcare, accuses Cerner of fraud and breach of warranty, and asserts that issues with Cerner’s revenue cycle software led to losses of more than $16 million. The hospital system contends that these problems have damaged its reputation and generated $200,000 a month in damages. (Cerner disputes these allegations, of course.)

According to HIN, the hospital system went live with Cerner’s RCM software in 2015, for which it paid $300,000. Agnesian’s suit says that problems with the Cerner package began shortly after rollout, generating widespread errors in its patient billing statements.

According to the health system, its billing process was so compromised that it had to send out statements by hand. (Yes, I can feel you cringing from here.) Given the delays inherent in relying on manual processes, Agnesian ended up with a huge backlog of unprocessed statements, some of which it deemed uncollectible and wrote off.

When the health system alerted Cerner about its concerns, the vendor got involved, and in 2016 it told Agnesian that problems have been addressed.  Nonetheless, this year the health system found “major additional coding errors” which led to another round of lost revenue, Agnesian says.

And brace yourself for more cringing: according to the suit, the Cerner RCM software had been writing off reimbursable charges without informing the health system. If you’re an RCM leader or CFO, this is the stuff of nightmares.

Ultimately, Cerner agreed that the RCM solution needed to be rebuilt given the depth of the coding errors found in the software, but that didn’t happen, the suit says. In a final indignity, the personnel tasked with rebuilding the RCM solution left Cerner before completing the rebuild.

Given all the aforementioned mishegas, it will be many a month before billing processes normalize even if Cerner fixes its RCM software, the health system says. And of course, it’s likely to end up writing off more bills under the circumstances, which has got to be very painful by this point.

Agnesian’s suit asks the court to cancel the Cerner contract and award it direct, indirect and punitive damages. Cerner, meanwhile, seems to want to go into arbitration. We’ll see which side blinks first.