A complex industry demands complex technology investment

Fueled by legislative and regulatory changes, hospital IT budgets – and specifically EHR investments – spiked over the last decade, outpacing overall healthcare expenditure growth.    As health systems enter the post-EHR era, leadership must weigh market forces with the following options:

• Cut IT spending
• Continue to invest in new IT solutions
• Address accumulated technology debt from other neglected systems

The five driving forces outlined below highlight several growing needs for health systems. These key forces indicate that relief from hospital technology spend is not in sight and, in fact, strongly suggest a second wave of IT investments is imminent.

1. Reimbursement Pressures

As reimbursement rates are increasingly tied to health outcomes and not services provided, technology investments will be a crucial step in transitioning away from the fee-for-service model. Hospitals are facing increased pressure to comply with quality and safety standards and at the same time improve patient care, satisfaction, and experience to meet requirements for higher reimbursement rates. While the industry is shifting, albeit slowly, hospitals are beginning to experiment with value-based care delivery models including bundled payments and shared savings – both of which require new capabilities anchored by technology.

2. Consumerism

Healthcare is a unique industry, where the consumer has historically had little to no involvement in payment for services. With primary purchasers of healthcare services being third-party payers, the consumer is often left out of buying decisions and given little to no incentive (or knowledge) to question the cost or quality of care they receive. Yet, this relationship between healthcare buyers and consumers is being rapidly dismantled. Demands for greater transparency around the cost and quality of care have led to consumer-driven health plan design with greater shares of cost falling to consumers themselves.

Digital health has also ushered in the opportunity to give consumers more control in managing their personal health. 3 With expanded choice, patients are beginning to shop around not only for health plans, but also providers, including standalone clinics and telemedicine. Consumers appear to be loyal to their doctors, but not their health system, placing higher value on convenience and overall experience than brand loyalty. In fact, the Centers for Medicare and Medicaid (CMS) has tied 30% of withheld reimbursement to patient experience. As consumers expect greater convenience, they demand greater automation and ease in handling logistics via technology.

3. Regulatory Changes

An increased number of regulations are having a direct impact on health systems and patient care, such as the Affordable Care Act (ACA), Health Information Exchanges (HIE), and Meaningful Use. While the benefit or harm of any of these regulations are debatable, what is clear is that health systems have more rules to follow, and technology is often a part of keeping up with these rules.

4. Population Shift

The population is aging: By 2050, those 65 or older will represent 20.2% of the U.S. population, compared to 8.1% in 1950. 4 And the degree of cultural and linguistic diversity is increasing rapidly. A more diverse patient population means increasing complexities in managing patient care that extend beyond a clinic and include explanation of health benefits, patient advocacy, multilingual resources, home-based care, and even transporting patients to and from clinical sites. With a more complex and diverse patient pool, technology can be leveraged to accomplish more with fewer providers.

5. Security

With increased technology adoption, hospitals face increased threats in cybersecurity. The Federal Bureau of Investigation had warned the healthcare industry to prepare for cyber threats. According to the Ponomon 2016 Cost of Data Breach Report, done in conjunction with IBM Security, the average cost per stolen record was $355.5 Healthcare is a high-risk industry when it comes to the cost of stolen records since the information contained is more valuable to the hackers for identity theft.

With no monumental legislation or regulations to further direct IT spend, as ARRA and Meaningful Use did over the last decade, technology strategy is now at the complete discretion of each health system. Executives now must decide where – and how much – to invest moving forward. Learn the five investment profiles we’ve developed for hospitals of the future.