Editorial: Porter Hospital’s miscalculations

In doing the right thing, Porter got slapped around by the state regulatory agency for miscalculating how much a new, electronic medical records system would cost. The Middlebury hospital took on the challenge of converting to a digital (versus paper) based filing system of patient’s records because it believed it would provide better patient care in the long-term at less cost.
Porter’s mistake was in estimating the cost of the IT ststem far too low, partially because it assumed it could handle some of the transition on its own. Turns out the software company’s description of its product might have been overly rosy; Porter was forced to make more customized changes to fit its processes than expected; and the time it took to get those customized changes made and its staff on board took far longer than anyone expected.
The result is that an IT project that was supposed to cost $4.7 million is running 63 percent overbudget. To remedy those cost overruns, the state’s regulatory body, the Vermont Department of Financial Regulation (DFR), had to play tough with Porter’s management and board oversight (see story Page 1A), but just last week approved a $7.1 million total expenditure for the project — allowing Porter to get on with its business of creating a better health care facility.
Here’s what’s good about that process. Through the state’s DFR, the public has a state agency that is overseeing hospital budgets close enough to spot waste, cost-overruns, potential mismanagement and unnecessary overlaps in service. With the cost of health care booming, that oversight helps protect consumers from even higher costs.
But here’s what’s silly: Porter’s error was not because of gross mismanagement of the system, but in under-estimating how much the system would cost. Back in 2010, if Porter had projected the cost of the improved system would be $7.1 million and justified that, it is likely that regulatory system would have approved that expense and Porter would have come close to its budget. No problem. But because officials at Porter assumed things would go smoothly, the system would be implemented as advertised and they wanted to budget as close to actual expenses as possible (without inflating its budget for such contingencies), they got hammered when things did not go well.
The upshot of this whole episode is that the state is allowing Porter to absorb the cost overruns in its prior and current budgets and therefore continue to implement the system. (What other realistic outcome could there be?) Porter bears the full cost of the project, as it always would have. No one benefitted from the cost over-run; no one at Porter wanted to see it take longer, and no one was grossly mismanaging their duties. Indeed, cost overruns happen all the time with complex IT installations simply because there are many unknowns when installing the system.
Why the charades? Because that is also part of the process.
Angelo S. Lynn

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