Technology ROI

How ‘digital transformation’ will help, hurt hospital finances

July 29, 2019 9:29 pm
  • Among financial benefits for hospitals from emerging technologies is an improved capacity to prosper under outcome-based payment models.
  • Financial costs will include those related to upfront investments in systems, personnel and cybersecurity.
  • Consumerism will drive the adoption of technology that allows easier and less-expensive access to care.

Hospitals can expect new revenue opportunities, increased near-term costs and loss of revenue to new competitors due to expanding digital technologies in healthcare, according to Moody’s Investors Service.

A new report from Moody’s laid out the opportunities that not-for-profit and for-profit hospitals and healthcare stakeholders will have from proliferating digital technologies, including:

  • Telemedicine will provide rural hospitals with access to clinicians.
  • Technology that aids in data collection and predictive analytics will facilitate a shift to outcome-based payments.
  • Use of data analytics and artificial intelligence (AI) will help hospitals identify medical histories and examine demographic trends to prevent readmissions penalties and uncompensated-care costs.
  • Cutting-edge analytics that can detect illness or predict outcomes will boost efficiency.

Challenges created by those same technologies include:

  • Increased upfront investments will be required in systems, personnel and cybersecurity.
  • Revenue will be reduced as nontraditional telemedicine competitors increase their appeal to patients.
  • The required upfront investments in digital technologies may be significant enough to hurt hospitals’ credit quality.

Top examples of investors in digital technology

Johns Hopkins Health System was cited as a leading example of a hospital that uses  predictive analytics to manage real-time data regarding clinical capacity. The health system operates under Maryland’s rate-setting system, which caps payments and incentivizes providers to coordinate care and keep patients out of the hospital.

Johns Hopkins uses the technology to forecast future demand for patient beds and staffing targets, to improve efficiency.

Also cited was HCA Healthcare, which has developed an alert system to facilitate the early detection of sepsis in patients. The system has been credited with helping to save an estimated 8,000 lives in the past five years, according to a release.

Hospitals with the most advanced analytics generally are those that operate their own health plans, given that they already rely on sophisticated systems for managing risks and medical costs, according to Moody’s.

Consumer appeal as a major influencer

Moody’s analysts saw the increasing role of consumerism in healthcare as likely to drive several hospital developments, including:

  • Hospitals will upgrade technological capabilities for easier and less-expensive access to care.
  • Hospitals will increase the use of patient portals and digital applications so patients can directly access their own data and play a greater role in their own care.
  • Nontraditional competitors will develop telemedicine and virtual offerings that allow online tests and patients to treat themselves in some cases.
  • Wealthier hospitals will invest more heavily than smaller entities in cutting-edge technology.
  • Some smaller and rural hospitals will form telemedicine partnerships with larger systems.
  • More hospitals will use telemedicine in response to a nationwide physician shortage

Partnerships look likely to become more common

Moody’s analysts predicted hospitals will increasingly partner with technology companies and private-equity investors to develop telemedicine and other technology.

Providence St. Joseph Health recently partnered with Microsoft to combine tools and capabilities around AI and research.

“The two organizations will develop a portfolio of integrated solutions designed to improve health outcomes and reduce the total cost of care by combining technologies from Microsoft with Providence St. Joseph Health’s data and clinical expertise,” according to a release. “The alliance will accelerate the healthcare industry’s adoption of the cloud and enable data-driven clinical and operational decision-making by leveraging Microsoft Azure, and industry interoperability standards like FHIR, to integrate siloed data sources in a cloud environment that enables security and compliance.”

However, Moody’s noted that increased data-sharing and digital access points will contribute to a rise in cybersecurity threats, which will expose hospitals to unintended reputational and financial risks.


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