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University Hospitals spent $6 million to abandon software system

By Diane Heldt, The Gazette, Cedar Rapids, Iowa

Sept. 20–The University of Iowa spent $6 milllion in fiscal year 2011 to abandon a failed laboratory computer software system, hospital officials told the state Board of Regents today.

During implementation of the software system last spring, hospitals officials concluded the vendor could not meet expectations, and the hospital served notice it was terminating the contract. What was paid to that point and what was incurred in operating expense internally was about $6 million, Ken Fisher, the hospital’s chief financial officer, said, calling it a “painful decision.”

A root cause analysis of the decision showed hospital officials things they can improve on, such as coordinating site visits with big purchases, Chief Executive Officer Ken Kates said.

“We are also exploring all our options in terms of the dollars that have been spent,” he said.

Despite that unplanned $6 million cost, fiscal 2011 was a very good year financially for the hospital, officials said. Records were set in many areas, including emergency visits.

The operating margin for the fiscal year that ended June 30, 2011 sits at about 5.9 percent, or a little more than $60 million. Once the yearly audit is finished, officials expected the operating margin will be closer to 5.7 percent.

“Fiscal ’11 was an outstanding year in virtually every area,” Fisher said.

One concern, hospital officials said, is that they are beginning to reach capacity in the emergency room, which was expanded three years ago. They are looking at ways to offload lower-need patients from the Emergency Treatment Center to UI Quick Care centers.
“It’s already reaching capacity for something that was designed to last much longer,” Fisher said.

(c)2011 The Gazette (Cedar Rapids, Iowa)|

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