Hospital declares bankruptcy after improper accounting software implementation

Dec 18, 2013 | Health Insurance Billing

Once Saint Francis Hospital in Poughkeepsie, New York, implemented a new software billing program, there were problems from the start. However, no one could have anticipated the problems becoming so big that they would lead to the hospital filing for bankruptcy protection. 

The trouble began back in September 2012, when the hospital switched all of its systems to Meditech, a Massachusetts-based medical software company that provides support to both clinical and administrative applications. While the clinical side of the organization had very few issues, the administrative side, particularly the financials, were problematic right away. 

Because users were unable to properly monitor and manage customer accounts, several bills went unaccounted for. This led to a severe drop in revenue for the hospital. Bills weren't being tracked so the hospital wasn't being paid. 

Art Nizza, the chief executive officer at the hospital, explained to the Poughkeepsie Journal that when bills go uncollected for a specific period of time, they typically are never paid. 

"In healthcare billing," Nizza said, "there are periods and timeframes in which you can bill and then in which the bill becomes uncollectible."

The most unfortunate aspect of this story is that users of the system did recognize it, but considered it a "blip" in accounts. No one envisioned it would materialize into a debt of $50 million, which ultimately led to the hospital filing for Chapter 11 bankruptcy earlier this week.  

Nizza became Saint Francis Hospital's CEO last August, and while he knew there were billing problems when he took over, he was unaware of the magnitude of the situation. 

"Frankly, until a couple of months ago, [it was an issue the hospital] didn't realize it could not recover from," he told the news source.

The massive debt was the result of the hospital's inability to pay its bills because it couldn't collect appropriate revenue from its patients and insurance companies. While this was the worst of the organization's problems, there were several issues that stemmed from a lack of organization, including improper billing. So, not only were many bills going unpaid, those that were often were undercharged. 

According to the Journal, when Saint Francis Hospital emerges from bankruptcy protection it will likely be bought by LaGrange-based Health Quest, so the hospital might be able make it out of its situation in the long run, but no organization should find itself in this predicament. This particular event showcases that simply implementing a new software system to manage finances does not guarantee more effective operations. In fact, as was the case with Saint Francis, improper use of the software can lead to far greater problems.

The best way to manage finances and improve accounting efficiency is by partnering with a third party provider that can handle all low-balance accounts, allowing the finance departments to concentrate on high priority accounts. Sure, implementing a new software system might seem like it will offer the advantages your organization needs, but often times simply changing software systems won't fix all internal problems in the department. If you outsource to a provider with knowledge of medical financial systems that uses state-of-the-art software solutions, you can rest assured you will not run into the issues that befell Saint Francis.