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Study Sees Clinical IT Investment Increase

December 9, 2010
by John DeGaspari
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IT spending on RCM may take back seat to clinical

A survey released last month by CapSite Consulting, a healthcare technology research and advisory firm in Williston, Vt., revealed that healthcare providers face a series of challenges as a result of the passage of the 2010 Affordable Care Act, and approaching deadlines for conversion to ICD-10 and the Health Insurance Portability and Accountability Act (HIPAA) 5010. One of the objectives of the study was to assess how various drivers, as well as the healthcare industry focus on meeting meaningful use, are influencing providers’ plans for revenue cycle management (RCM) software purchases. Participants included C-suite executives, including chief information officers, chief operating officers and financial executives.

Overall, two-thirds of healthcare provider organizations plan to increase their IT budgets next year, according to Gino G. Johnson, vice president of CapSite. Over the next few years, meaningful use will dominate investments, with electronic health records and clinical IT ranking high in terms of strategic priorities over the next 12 to 18 months.

Clinical IT will take precedence over revenue cycle management solutions, according to the survey’s results. Only 28 percent of respondents indicated they were planning to increase their RCM software and services budget in fiscal year 2011. Despite the overall projected increase in IT outlays, “that increase in spend is likely to be more towards clinical than revenue cycle at this time,” Johnson notes.

Despite the fact that vendors have been articulating a message of the clinically driven revenue cycle, many providers are not buying. When respondents were asked if they view RCM solutions as a potential vehicle to improve clinical care, only 31 percent said yes—particularly larger healthcare providers. “There is more work to be done in convincing the market that revenue cycle management is a potential vehicle to improve clinical care,” Johnson says.

A majority of respondents from larger hospitals (60 percent of those with at least 400 beds) believe there will be a need for bolt-on RCM solutions after upgrading their core patient accounting. “You have much greater traction with large academic organizations,” Johnson says of bolt-on RCM solutions. “These aren’t going to go away, and the core patient accounting system is not going to eliminate the need for this in the short term.”

Respondents identified challenging RCM areas that impact financial performance. The top five categories are: patient propensity to pay; clinical documentation; point-of-service collection; denial management; and accounts receivable collections optimization. Those areas represent gaps that have been filled by bolt-on solutions, Johnson says.

In 2009 and 2010, eligibility verification and clinical documentation ranked highest in investment of new or replacement RCM bolt-on solutions, while patient propensity to pay ranked as one of the lowest areas. When asked about plans to invest in RCM solutions during the next 12 to 18 months, respondents ranked clinical documentation and point-of-service collection highest.

One potential strategy of core patient accounting vendors may be to try to fill niches currently occupied by bolt-on RCM solutions, Johnson says. “We’ve gotten quite a bit of traction with this study. Our plans are to conduct it again in six months to see how some of these indicators are playing out.”