Hospital Computer Billing System ‘in Danger of Collapse’ : Funding: L.A. County had expected $2 million in savings with the revamped setup. Instead, delays and problems may cost taxpayers more than $16 million.

A $64.7-million computer system touted three years ago as the answer to Los Angeles County’s outdated hospital billing procedures is now in such serious trouble that it is “in danger of collapse,” according to the county’s health department director.

The county not only has failed to realize $2 million this year in projected savings from the computer system, but delays and problems at High Desert Medical Center in Lancaster and Rancho Los Amigos in Downey could end up costing taxpayers more than $16 million--and that is if the glitches can be fixed.

“The subject project is in serious trouble and, I believe, in danger of collapse,” said Robert C. Gates, director of the Department of Health Services, in a Sept. 30 letter on file with the Board of Supervisors. “Unless substantial progress is made by January, 1994, I will need to seriously consider abandonment of the effort.”

Among other problems, Gates blames the computer system for the county’s failure to bill the state for up to $10 million in Medi-Cal claims that have gone unpaid because of missed deadlines, according to documents filed with the board. The county is hoping to persuade the state to reimburse the claims anyway, but has not received any indication of the state’s position.

The financial losses come at a time when the county is projecting a budget deficit of more than $1 billion next year.

“It’s a fiasco,” said Kathryn Barger, Supervisor Mike Antonovich’s health deputy.

A similar computerized billing system was declared a failure this summer by health officials in Maricopa County, Ariz., which lost $11 million on its project. Officials there said they would have had to spend about $40 million more than projected to get the system up and running.

Officials from IBM Corp. and Baxter Healthcare Corp., which jointly developed the IBAX computer system for Maricopa and Los Angeles counties, could not be reached for comment Friday.

A June 29 report prepared by IBM Corp. acknowledges that some IBAX employees were poorly trained, but lays equal blame on Los Angeles County for the system’s problems. Until recently, the health department had nine IBAX committees that wasted time in long, ineffective meetings without reaching decisions, the report says.

Health department officials could not be reached for comment Friday, an official county holiday. But Gates informed the Board of Supervisors last month that he had taken steps to improve IBAX’s performance, including appointing a new, in-house manager for the system and having the auditor analyze the system’s shortcomings, particularly the Medi-Cal losses.

However, problems with IBAX’s software are still so severe that the county will delay full implementation of the system at its four other hospitals for at least nine months. The delays will cost at least $3.7 million because the county will have to pay an outside contractor to continue operating the hospitals’ billing systems in the meantime, Gates said in an Oct. 18 memo.

The county may also have to spend another $2 million in additional program costs and miscellaneous expenses, health officials have said.

Other documents indicate that the county participated in a publicly offered, tax-exempt bond issue to raise money for the project, which could make it difficult for it to back out of the deal without incurring a significant loss.

When the Board of Supervisors approved the 90-month IBAX contract in late 1990, IBAX was touted as a proven, state-of-the-art system designed to replace a hodgepodge of contractors and in-house methods that were failing to promptly bill patients, insurance companies and other providers for hospital health care costs.

One of four bidders, IBAX was chosen by a panel of county employees and others who evaluated system references from hospitals in Ohio and Florida, where similar IBAX systems were in place, according to documents on file with the Board of Supervisors.

The county was projected to realize more than $10 million in savings by the time the contract expired in 1998, largely in Medi-Cal claims that would otherwise go unpaid because of missing documents and in extra interest earned because of the improved cash flow, according to a cost-benefit analysis of the system.

But Gates reported to the board recently that Rancho Los Amigos is 36% more days behind in accounts receivable than when IBAX was installed last year, and the High Desert hospital is about 21% more behind than it was. Employees at both facilities blame IBAX officials for being unresponsive to complaints about the system, according to a Sept. 9 county auditor’s report.