Failed Computer System Costing County Millions

As it struggles with an enormous deficit, Los Angeles County is spending millions of dollars a year on an ill-fated hospital computer system that has never really worked--and that county officials were warned would be a costly failure even before they bought it almost five years ago.

By some estimates, the cost of the failed system has soared past $74 million, although county officials concede that they have yet to determine the total cost of buying, dismantling and replacing it.

These costs include $22 million, approved in March, for one of several replacement computer systems and an additional $300,000 a month to keep the current system running. Many who use the system, known as IBAX, say that it often spits out gibberish and crashes frequently, and that it could take years to solve the problems.

County health officials enthusiastically hailed IBAX as a panacea when they bought it in 1990 to modernize the vast county hospital network’s accounting and operations systems. IBAX had been touted as state-of-the-art when it was created by IBM and Baxter Healthcare Corp.

Department of Health Services Director Robert Gates said IBAX was selected after the most exhaustive, consensus-based review in the department’s history. But, he concedes now, “had we to do it all over again, in 20/20 hindsight we would have done something different.”

However, a Times investigation shows that even if Gates and his staff did not have hindsight, they did have warnings. Red flags were raised repeatedly, some long before the county was financially locked into the project, others during the four trouble-plagued years before they terminated the IBAX contract.

Although disgusted county officials cut their ties with IBAX last June--Supervisor Gloria Molina called it a disaster of “catastrophic proportions”--the extent of the project’s failures and costs has been carefully guarded by the county.

Interviews and a review of thousands of pages of documents obtained under the California Public Records Act show that the county’s relationship with IBAX was marked by a litany of failed hopes, personality clashes, million-dollar missteps, confusion and delays that allowed problems to spin out of control while costs escalated and health services faltered.

The IBAX system, which went on-line in 1992 at two of the county’s hospitals, was initially expected to save $10 million over several years by efficiently billing patients, insurance companies and the state for medical care. It was later expanded to handle patients’ records and track everything from appointments and medical histories to lab tests and pharmacy records.

Instead, High Desert Hospital in Lancaster and Rancho Los Amigos Medical Center in Downey have at times been nearly crippled by computer failures and shortcomings. The system proved so unreliable, documents show, that the hospitals could sometimes not balance their books or track their patients.

The system performed so poorly that it was never installed at County-USC Medical Center or three other county hospitals as planned, records show.

The cost of replacing IBAX, which comes as the Health Services Department ponders a $650-million deficit, is one reason supervisors have openly criticized Gates, who abruptly announced his resignation last month, effective Nov. 1. Gates has defended his handling of IBAX, saying his department was sold a false bill of goods by IBAX Healthcare Systems.

Whoever is to blame, county employees using IBAX say it still is not providing anything close to what was promised. Last year, Gates described IBAX as being plagued by “mediocrity . . . staffing shortages and turnover, contract disputes, implementation delays and unresolved systems problems.”

County officials say they cannot attribute any specific medical problems to IBAX’s performance. But they concede that medical care has suffered, delays have been rampant and some aspects of hospital administration are worse now than before IBAX was launched.

“The real cost is in the service that has not been provided,” said Dr. Jonathan B. Weisbuch, now director of medical planning and education. “We are still in a situation where people come in and we don’t know who they are. We don’t know what medication they need or cannot have. . . . It is just not good medical care.

“Many of us have been saying from the very beginning that this system would never work,” said Weisbuch, who contends that he was demoted from a top administrative position for complaining about IBAX and other department controversies. “The question is why the hell did we buy the IBAX system when so many people argued it wouldn’t cut the mustard?”

IBAX executives declined to comment to The Times. In county documents, however, they accepted some blame. They also asserted that indecisiveness and poor leadership by county officials created many problems--a contention partly supported by county auditors who would report, as the project began to unravel in 1993, that it had suffered from “the blind leading the blind.”

In the end, IBAX and the county quietly settled out of court and pledged not to assign blame for the losses.

Records obtained by The Times make it clear that county officials grew worried about IBAX long before the Board of Supervisors approved the first contract. Even as the system nearly collapsed about them, county officials quietly kept hoping things would get better.

Instead, they only got worse. And more expensive.

Costs seemed to rise almost from the day health services chief Gates told the supervisors in April, 1989, that the department had chosen IBAX over three competitors. The final agreement still needed to be negotiated, but Gates said it would be drafted in nine months. The entire system could be on-line in all six county hospitals by June, 1991, Gates told the supervisors.

But throughout late 1989 and 1990--still before the contract was approved--the county was continually sending memos to IBAX complaining that its concerns were going unheeded. Among them: that the system would need too much customizing and that the company was not pledging enough training and technical support.

The county, already nervous about IBAX, even asked losing bidders to come back with new proposals. As contract negotiations with IBAX bogged down in 1989, county officials began receiving discouraging reviews of the company’s first year of operations at more than 150 hospitals around the country.

Critical articles in trade publications about IBAX “concern us in the choice of [IBAX] for a long-range relationship,” said a county assistant health services director, Carl Williams, in an October, 1990, memo that he sent to all county hospital administrators.

By the time Gates’ original deadline for approving the contract arrived--January, 1990--negotiations remained stalled. By then IBAX’s initial bid of $23.5 million had also ballooned past $33 million in projected costs.

As they look back now, some critics say the county was unwilling to pull away from IBAX even as hints of trouble mounted. As far back as 1985, Gates had promised the supervisors that he would soon replace outmoded hospital computers. So by the time his department settled on IBAX, critics now contend, the county was in too much of a hurry to turn back.

“They were in an advocacy mode when they should have been in an analytical mode,” said Dr. Thomas Lincoln, a county computer specialist. Critics, he said, “were ignored.”

The mounting criticism of IBAX reached the county supervisors, whose top aides expressed concerns to health officials. “All along, we were asking them why there were so many problems [with] IBAX . . . in other municipalities,” said Kathryn Barger, health deputy to Supervisor Mike Antonovich.

Health officials, she said, promised “our system would be so much different, and that IBAX had learned from their mistakes.”

By then, negotiations between the county and IBAX proceeded despite continuing tensions. In October, 1990, the project’s estimated cost was $56 million--more than double the initial bid.

But two months later, on Dec. 18, the supervisors approved their first contract with IBAX for $49 million, with the intention of expanding it. Four months later, the county approved paying $2.4 million more. That same week, the Health Services Department celebrated with a reception at Descanso Gardens in La Canada Flintridge, heralding the county’s partnership with IBAX as a “showcase for the future.”

But another 13 trouble-filled months would pass before the system would officially go on-line.

There were so many serious problems when IBAX was being tested at Rancho Los Amigos and later at High Desert Hospital that county officials officially rejected the system as being inadequate, meaning they would not pay for it unless it was fixed. Eventually, county officials decided that the system performed as promised and agreed to pay.

Later, a consultant hired by the county to help wean it off the IBAX system would conclude that county officials had failed to ensure that the problems were really corrected before they accepted IBAX, costing taxpayers unnecessary money. According to a 1994 confidential report done for the county by the Seattle-based Coplan & Co. consulting firm, the “contract included contingency funds to address unforeseen problems, but the Board of Supervisors removed the contingency.”

Although The Times obtained parts of the report, county lawyers have repeatedly refused to release it.

By January, 1992, the county committed an additional $13.2 million for IBAX, for a total of $64.7 million--nearly three times the initial bid. But even after the final contract was approved, the system was still in trouble, and still not on-line.

When it finally went on-line four months later, the glitches started immediately.

Among them: prolonged crashes, delays, employees who were unable to use the unwieldy system and inaccurate and blank reports.

Some were the result of flaws detected two years earlier that had not been corrected, documents show. Perhaps of greatest concern, one county memo says, were bugs in the system for billing the state for indigent patients through the Medi-Cal and Medicare programs--failures that later cost the county at least $17 million in late billings that the state refused to reimburse.

County officials grew increasingly concerned about what they said were systemic problems, such as poorly trained support staff, hard-to-use software and poor communication. They alleged that IBAX responded lackadaisically to emergencies.

A county health services employee, in a confidential and unsigned memo to the Board of Supervisors in September, 1993, warned:

“Before this fiasco is completed it will cost the county of Los Angeles more than $100 million above what the prior costs were to perform the same work. The hard truth is that prior to IBAX . . . better work was being done for about one-fifth of the cost, with fewer staff and with much better results.”

An internal health department memo concluded that “one does not know what to expect from the system at any given time.”

IBAX in turn blamed county officials, saying they dragged their feet on important decisions and failed to provide enough employees to run the system. The county also failed to provide clear lines of leadership, creating eight separate committees in charge of various aspects of IBAX, company officials said at the time.

IBAX also contended on numerous occasions that the county’s contract made the county responsible for much of the cost of fixing the system--a stipulation that a county consultant had warned years earlier could cost taxpayers a substantial sum.

At High Desert, employees found their workload had tripled because of grappling with IBAX, documents show.

“We had to manually figure out where patients were, and how many,” said hospital chief financial officer Richard Britz.

By March, 1993, county officials had learned of two separate surveys of hospitals and health care managers, published in trade publications, which rated IBAX near the bottom in terms of performance.

Hostility was now open, and letters between county officials and IBAX flew. IBAX President Jeffrey Goodman complained of endless rounds of “executive finger-pointing.” IBAX told its staff not to respond to their pagers in some emergencies, documents and interviews show.

“It became a standoff,” Britz said. “They were not cooperative.”

In late 1993, still trying to make IBAX work, county officials heard about a nearly identical fiasco in Phoenix. Maricopa County supervisors had scuttled their IBAX project after spending $11 million, confronted by the fact that it would take an extra $50 million to make IBAX work.

In January, 1994, health service chief Gates weighed in, angrily writing to IBAX Project Manager Susan A. Boyer: “I fully expect you to honor the commitment made to the county to provide whatever resources are necessary” to fix the problems.

Finally, by last spring, county officials learned--after the fact, they say--that IBAX had sold all of its hospital contracts except theirs to another health care company. Fearing they now owned a system that would no longer have technical support, county health officials met to discuss official “disengagement.”

After several closed-door sessions, the supervisors unanimously voted to terminate the IBAX contract last June.

Amid talk of lawsuits on both sides, IBAX and the county settled out of court last November, with the county getting $8.5 million in cash and equipment.

Just how much IBAX will cost the county may never be known.

In 1993, county auditors called for a full review of IBAX--including its selection and financing, and why two of the contracts were not competitively bid. That audit was never conducted.

Larry Gatton, a health services official in charge of the county’s “IBAX recovery” effort, insists IBAX has cost the county less than $30 million. Last June, however, county lawyers estimated losses of $58.7 million. Gatton said several million of those losses never materialized, although he said final figures are not available.

But county documents indicate these expenses: $12 million to keep IBAX running while the county weans itself off the system, $22 million for one of several replacement computer systems and $23 million to pay off bonds issued to launch IBAX. And that doesn’t include the $17 million in lost Medi-Cal reimbursements, money the county is petitioning the state to recover.

Gates, in an interview before announcing his resignation, was asked to assess the total cost of IBAX, including lost money and staff time.

“I don’t have an answer for that,” he said.