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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.

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