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.