Success of Nation's Hospitals Hinges on Technology Investment

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October 3, 2007

Higher-rated hospitals with more resources dedicated to quality-focused initiatives may achieve growth in volumes and market share, improved payer arrangements, and cost reductions, according to a new report by the Healthcare Financial Management Association (HFMA) and GE Healthcare Financial Services. Hospitals that cannot differentiate themselves in fragmented markets may fall further behind. Therefore, with the high cost of IT and its notorious high rate of failure, nowhere is a healthcare executive's abilities tested more than planning a capital expenditure that involves technology.

Today's Technology Spending Trends: Strategies for the Healthcare Executive indicates that strategic investments in technologies such as electronic prescribing tools and computerized provider order entry systems will likely influence a hospital's long-term competitive position. The report, the second installment of the Financing the Future III series, focuses on the state of healthcare technology spending today, near and long-term trends, barriers to IT adoption, and expert views regarding funding for IT initiatives.

"Today's healthcare executive cannot wait for policy changes, significant infusion of government funds, or other external sources of support to pursue investments like electronic health records," said Richard L. Clarke, DHA, FHFMA, president and CEO, HFMA. "If they hesitate, they may be putting themselves at financial risk."

With little expectation that government or private payers will be providing the needed financial assistance for acquiring and supporting these technologies in the near term, hospitals are finding they will have to generate revenues by leveraging resources on hand to improve clinical and business processes.

"While the healthcare industry is embracing the concept of better health care through technology, widespread implementation of these initiatives remains slow," said Jeffrey A. Malehorn, president and CEO of GE Healthcare Financial Services. "Providers, payers, government, and employers must come together to realign incentives that support technology investment."

Key points emerging from the report include:

Studies indicate many facilities allocate as much as 20 percent to 30 percent of total capital spending on healthcare IT. Yet many of the financial benefits of hospital IT—decreased need for repeat tests, lower readmission rates, and shortened length of stay—are realized by healthcare purchasers such as Medicare/Medicaid, insurers, and consumers --not hospitals.
IT investments and upgrades are widely seen as essential to efficiencies and quality of care—enhancing patient safety, decreasing medical errors, and reducing the cost of health care overall.
Lack of hospital spending on IT is largely attributed to relatively little federal financial support and a payment system that does not provide adequate incentive for widespread, rapid adoption of innovations, even though these innovations have shown to improve patient care. For example, hospitals that equip patients with state-of-the-art devices for home care can reduce overall expense and improve outcomes, but they realize less net revenue as a result.

What's on Your To-Do List?

In the near term, many hospitals are considering investments in the following IT initiatives.

Comprehensive Electronic Records.
According to a 2006 American Hospital Association study of more than 1,500 community hospitals, 68 percent of hospitals had either fully or partially implemented electronic medical records (EMRs).¹ Current interviews with hospital executives echoed what was reported in the study. "Electronic records are really important in health care right now," says Stanley Hupfeld, CEO of Oklahoma-based Integris Health. "Twenty years from now, people will look back and be amazed that we actually wrote things down with a pencil. Until we have an electronic health record that's pervasive and completely eliminates paper, we're really not where we need to be." The next step, then, will be fully implementing electronic records and investing in applications that leverage existing systems to increase recordkeeping efficiency and improve the stream of information about whole populations rather than individuals. Patient population data will allow hospitals to better identify trends and measure performance on a wider scale than ever before to improve the quality of health care.
Computerized Provider Order Entry (CPOE) Systems.
CPOE systems also are a high priority because they directly impact patient safety. Many providers see them as key because they provide real-time access to relevant clinical and decision support information while reducing interpretation errors associated with paper or verbal orders. CPOE systems also save money by potentially eliminating duplicate prescriptions and reducing patients' length of stay in hospitals due to adverse drug interactions.
Robotic Devices.
Use of these technologies is occurring in a variety of settings to automate manual tasks, such as testing specimens in medical laboratories, delivering materials to specific locations in the hospital, or performing specific surgical processes.
Telemedicine.
Telemedicine is also hot right now. Viewing patient status from a remote location means the patient can be monitored more frequently—and more affordably. Patient travel is reduced, physicians' time is optimized, and access to a wider range of care is improved for those who live in rural or remote areas or who are unable to travel. Telemedicine also supports self-management of chronic diseases, such as diabetes or heart disease. Sophisticated devices are being developed, including cell phones with probes that collect blood from diabetics before sending the results to a lab. Such innovations help patients to monitor their own conditions, which reduces money spent on unnecessary physician visits and improves patient satisfaction.
Integrated Medical Devices.
Since most hospitals have established a core infrastructure, there is also a trend toward investing in medical devices that directly link into information systems in the interest of centralizing patient data. For example, data related to patients' health may be entered into the medical record directly from imaging equipment or cardiac monitors.

Additionally, many hospitals' overall approach toward IT purchasing is changing. Best-of-breed solutions are rapidly losing favor as hospitals find themselves with a network that is a hodge-podge of different systems and interfaces. Hospitals frequently find that tying systems together with a variety of different interfaces increases the likelihood of security risks and may lead to maintenance difficulties.

Moving Forward

Most healthcare organizations have already invested time and money in core technologies and are in the beginning to middle stages of implementation and deployment of large-scale systems. While the uncertainty of technology funding in the near term makes rapid, widespread adoption of tomorrow's innovations unlikely, experts contend the coming years should not be a time of inaction. The rise of consumerism and quality-based payment heightens the importance of properly deploying technology to stay competitive and improve quality of care. Continued Progress: Hospital Use of Information Technology, American Hospital Association, February 2007, p. 5.

SOURCE:

Today's Technology Spending Trends: Strategies for the Healthcare Executive, HFMA's Financing the Future III, Report 2

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