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Evolving Financial Models to Support HIT Investments: One Financing Expert’s View

February 2, 2018
by Heather Landi
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With an ongoing digital transformation taking place across healthcare, health system executive leaders are increasingly investing in IT and innovative technologies to meet clinical and operational goals.

Yet, at the same time a survey by the American College of Healthcare Executives found that healthcare CEOs cited financial challenges as their number one concern. Healthcare executive leaders are challenged with financing IT even while health systems continue to feel mounting financial pressure.

According to data from the Englewood, Col.-based Medical Group Management Association (MGMA), IT expenses for physician practices are on a slow and steady rise. Last year for example, physician-owned practices spent between nearly $2,000 to $4,000 more per full-time physician on IT operating expenses than they did the prior year. Total IT expenses per physician last year fell between $14,000 to $19,000, dependent upon specialty, according to MGMA.

What’s more, a 2016 cost and revenue report from MGMA found that physician-owned multispecialty practices spent more than $32,500 per full-time physician on information technology equipment, staff, maintenance, and other related expenses. In addition, technology costs have grown by more than 40 percent since 2009. Other trends in the healthcare industry, such as practices investing in online patient portals, have also contributed to increased technology costs.

Healthcare Informatics Associate Editor Heather Landi recently spoke with Gary Amos, CEO of Commercial Finance, North America, at Siemens Financial Services (SFS), about financing healthcare IT. Amos, who is based in the Philadelphia area, has been with the organization for 11 years. SFS finances both technology and healthcare equipment for Siemens Healthineers and other leading healthcare providers. Below are excerpts from that interview.

How do you see the landscape around the financing of capital acquisitions in healthcare at this time?

There’s a couple of ways to approach it, and I recommend we extend our perspective beyond IT. I think from what we see in the market and where the digital transformation is driving healthcare you need to view it along the entire healthcare continuum—from the experience of the patient, to healthcare provider and finally from the viewpoint of a financial expert.

First, let’s view it from the consumer perspective. A technology transformation has patients relying on mobile apps, seeking information online and becoming more engaged and proactive in managing personal health. Physicians and providers who can offer their patients further customized and automated diagnoses are at a competitive advantage for patient retention. Providers who adopt new digital technologies and equipment are able to further automate and connect patient data across larger healthcare IT networks. This enables providers to manage data smarter and provide stronger diagnoses for patients, increasing speed, efficiency and leading to higher patient satisfaction.

I think from the provider standpoint, we’re currently evaluating different financial models and seeing how they can enable desired outcomes across a wide array of scenarios. You hear a lot in the market right now about MES or managed equipment services. It’s no longer about how we finance a single asset. The conversation is shifting to how we are enabling larger projects that include not only the diagnostic equipment required, but involves services and performance-based metrics that allow for technology evolution and planning cycles over a longer period of time. The new demand for capital is in financing a bundled package with a commitment to a level of service in a formalized agreement with underlying performance metrics in place. Today’s healthcare providers require a return on investment with tighter budgets and being tasked to do more with less. That’s why bundled services that can promise specific outcomes are highly desired by today’s providers.

Now from the financial expert’s perspective, we are helping providers explore financing options that extend beyond a short-term goal. It’s about looking at needs over a longer planning horizon, determining the right equipment to support those needs and how we can structure the financing to improve equipment performance and consider asset longevity as the demands for digital technology evolves.

Healthcare organizations continue to face financial pressures. What are some financial techniques that healthcare organizations can use to meet today’s digital demands?

Healthcare digitalization, the collection and electronic exchange of vital biological and clinical data, helps organizations gain maximum value from new digital capabilities. In today’s industry, health systems will need to integrate digital tools and technologies into core processes.

According to the Centers for Medicare and Medicaid Services (CMS), U.S. healthcare spending grew 4.3 percent in 2016, and as a share of gross domestic product, it accounted for nearly 18 percent of U.S. spending. Though healthcare spending is up, budgets are still tight and the challenge is increasingly becoming how we can provide a more precise diagnosis to foster individualized prevention and therapy. In addition, how do we reduce the time frame of diagnosis and treatment and improve the patient experience across the continuum of care? In the past, your treatment or your protocol might have run a course of a number of months. Providers who can reduce the amount of time that’s required to treat or prevent illness will find themselves in a stronger financial position. Reimbursement of resources and capitation payments are driving the headwinds for hospitals, physicians and outpatient centers.

For example, when a primary care provider signs a capitation agreement, a list of specific services for patients must be included in the contract. The amount of the capitation will be determined in part by the number of services provided and will vary from health plan to health plan, but most capitation payment plans for primary care services include preventive, diagnostic, and treatment services, such as injections, immunizations, and medications administered in the office, outpatient laboratory tests done either in the office or at a designated laboratory, health education and counseling services performed in the office, and routine vision and hearing screening.

It is not unusual for large groups or physicians involved in primary care network models to also receive an additional capitation payment for diagnostic test referrals and subspecialty care. Through healthcare providers adopting such plans, managed care organizations can control healthcare costs and hold their physicians accountable to receive improved services.

What should healthcare CIOs and CTOs be thinking about right now?

I think from a CTO/CIO standpoint, a lot of what happened in the past is they were focused on EMRs (electronic medical records) and as those platforms became stable that allowed for the evolution of a more digitalized age. You were no longer moving patient records in a manila folder from doctor to doctor. It is now being moved through online platforms, mobile devices and being provided to your doctor with a holistic view of the patient’s records and data. Today’s executives need to be concerned with adopting digital technology and equipment that integrates data exchange and enables population health management. For example, if a clinician has a broader view of health patterns and trends across patients, it helps them to assess needs and transform care delivery models to improve the patient experience. Transforming care delivery is about leveraging established and new care models to provide more accessible and highly efficient healthcare offerings. For a leader in today’s healthcare environment the focus should be on digitalizing healthcare processes, expanding precision medicine, transforming care delivery and improving the patient experience.

With the overall trends in healthcare right now—population health, the transition to value-based care, and all the new regulations—how will this impact the financing of healthcare IT in the next few years?

As the country works to adapt to healthcare demands, private financing is uniquely positioned to take a leading role in supporting today’s digital market shift. An aging population, chronic conditions rising, and structural changes from the Affordable Care Act (ACA) impose many financial pressures on healthcare providers. Complex, clinical procedures are on the rise, but investments in technology can help make these procedures simpler. In order to meet consumer demands and keep U.S. healthcare infrastructure, technology and services modernized, the healthcare sector requires some serious investments. With today’s digital transformation overhauling healthcare, this is where private funding sources can step in to help by enabling organizations to keep pace through updated IT infrastructure.

And, again, you’re seeing financial models evolving as a result of all this, is that right?

Whether it’s a large institutional-type hospital or a smaller-scale physician owned practice, everyone will have a call to action to try to transform their business and operational model, using the technology that’s available. Some of the traditional financing products, such as loans or equipment leases, will remain but could take shape or form into different structures. Unitary payment models where there is a more holistic approach to healthcare management and financing will drive the digital transformation. Coupling payment models for equipment and services together will continue to be challenged and the unitary structures will move to the forefront of discussion.

The digital transformation of healthcare technology, through connecting patient data across greater IT networks, will require financial models to evolve with the acceleration of technological advancements. As healthcare technology becomes more automated, service and delivery methods will become more patient-centric than ever before. Financial models will enable healthcare providers to accomplish their clinical and operational goals through the adoption of digitized information technology.



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More From Healthcare Informatics


MGMA: Physician Compensation Data Illustrates Nationwide PCP Shortage

May 23, 2018
by Rajiv Leventhal
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Primary care physicians’ compensation rose by more than 10 percent over the past five years, representing an increase which is nearly double that of specialty physicians’ compensation over the same period, according to the Medical Group Management Association (MGMA).

Officials from the Colorado-based MGMA, attested that the data “is further evidence of the worsening primary care physician shortage in the American healthcare system.”

A closer look at this data—the 2018 MGMA DataDive Provider Compensation—shows that this rise in compensation is not necessarily tied to an increase in productivity. When broken down by primary care focus, family medicine physicians saw a 12-percent rise in total compensation over the past five years, while their median number of work relative value units (wRVUs) remained flat, increasing by less than one percent. Practices offered more benefits to attract and retain physicians, including higher signing bonuses, continuing medical education stipends, and relocation expense reimbursements.

The data for this survey was based on comparative data from more than 136,000 providers in over 5,800 organizations.

“MGMA’s latest survey has put strong data behind a concerning trend we’ve seen in the American healthcare system for some time—we are experiencing a real shortage of primary care physicians,” Halee Fischer-Wright, M.D., president and CEO at MGMA, said in a statement. “Many factors contribute to this problem, chief among them being an increasingly aging population that’s outpacing the supply of chronic care they require. And with a nearly two-fold rise in median compensation for primary care physicians over their specialist counterparts and increased additional incentives, we can now see the premium organizations are placing on primary care physicians’ skills to combat this shortage.” 

Further supporting this trend, the new survey identified meaningful growth in compensation for non-physician providers over the past 10 years. Nurse practitioners saw the largest increase over this period with almost 30 percent growth in total compensation. Primary care physician assistants saw the second-largest median rise in total compensation with a 25 percent increase.

The research also revealed that over the past five years, rises in median compensation varied greatly by state. In two states, median total compensation actually decreased for primary care physicians: Alabama (-9 percent) and New York (-3 percent). Many states saw much larger increases in median total compensation compared to the national rate, the top five being Wyoming (41 percent), Maryland (29 percent), Louisiana (27 percent), Missouri (24 percent) and Mississippi (21 percent).

Related Insights For: Revenue Cycle Management


Survey: Healthcare Orgs with Multiple RCM Systems Have More Challenges with Denials

May 15, 2018
by Heather Landi
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More than two-thirds of health systems (about 70 percent) use more than one vendor for revenue cycle management, and those organizations that do use more than one solution report larger issues with denials, a recent survey found.

For the survey, Dimensional Insight, an analytics and data management solutions company, collaborated with HIMSS Analytics to poll 117 senior-level decision makers in hospitals and health systems, including CEOs, CIOs, directors of IT and finance and heads of revenue cycle management. The survey examines the state of revenue cycle management, and highlights the difficulty in integrating data, and the impact it is having on revenue collection.

The survey found that more than two-thirds (70.9 percent) of hospitals use their EMR solutions for revenue cycle management. In addition, most hospitals utilize multiple vendors for RCM purposes. This is true of hospitals that leverage their EMR for RCM and those that use other solutions.

The survey also revealed relatively low levels of analytics-based automation in RCM, with 36 percent of hospitals say less than a quarter of their revenue cycle process is automated using analytics. Another 24 percent report that 51 to 75 percent of their RCM process is automated.

As healthcare delivery continues to evolve, hospitals are struggling to make the most of their revenues. The shift to value-based care, increased patient pay, and a flurry of mergers are creating new challenges within the financial ecosystems of health systems. Many organizations are looking for ways to improve their revenue cycle management.

According to the survey respondents, denials continue to be the biggest RCM challenge for health systems today, cited by 76 percent of respondents. Healthcare senior executives also identified revenue integrity (37 percent) and patient pay (34 percent) as top RCM challenges.

Organizations using more than one vendor mostly report bigger issues with denials than those using one RCM solution. Close to 70 percent of health systems using three or more vendor solutions report that denials are their biggest challenge, with only 63 percent of health systems using one vendor solution said denials topped the list of challenges within revenue cycle management. The highest rates of problems with denials (100 percent) were reported by health systems using their EMR plus one or two other solutions.

What’s more, nearly all respondents (98 percent) say collecting data from disparate sources is a challenge for revenue reimbursement. Of them, 65 percent said it was moderately challenging, while 33 percent said it is extremely challenging. The survey also asked health systems which areas within the revenue cycle posed the biggest challenges for collecting data. Performance tracking (27 percent), inability to identify billing errors (25 percent), and keeping up with variances (24 percent) were the top three responses, with another 14 percent citing difficulty monitoring trends.

And, 96 percent of health systems say the way data is collected is a challenge, with 58 percent calling it a moderate issue and 37 percent citing it as a big issue.

The survey drilled down into how disparate data sources can contribute to issues with revenue integrity. About two-thirds of healthcare senior executives cited “lack of interoperability” as an ongoing issue, and the same percentage cited “some systems are left in silos” as an issue that impacts revenue integrity. Another 30 percent of respondents cited another issue—“key stakeholders do not trust the data.”

The survey also examined organizations’ RCM governance processes. A majority of hospitals of all sizes reported that their RCM governance is centralized. Overall, 69 percent of hospitals have centralized RCM governance, with the highest percentage (73 percent) among hospitals with more than 500 beds and the lowest (50 percent) among hospitals with 50 – 100 beds. Overall, 16 percent report having no RCM governance process. The bigger the hospital, the less likely it had no RCM governance in place

The report authors concluded that health systems are struggling with interoperability, and the associated challenges have effects throughout the enterprise. “The survey revealed a patchwork of solutions, an arrangement that does not seem to be working particularly well. In addition to highlighting the challenge of collecting and integrating data from disparate sources, the survey shows a real financial impact. Lack of interoperability does not just affect clinical and operational decisions. It is hurting the bottom line. Health systems need solutions to bring data together and make it useful throughout the entire revenue cycle,” the report states.

 “Many hospitals and health systems are undergoing mergers in hopes of increasing efficiencies. Or they implement several different technologies as band-aids to compensate for the deficiencies of systems,” Fred Powers, president and CEO of Dimensional Insight, said in a statement. “Unfortunately, what they’re finding in many cases is that the different technology systems in place are hard to integrate, and now this is impacting the bottom line.”


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