Beyond the Health IT Boom: the Crash Is Coming

Beyond the Health IT Boom: the Crash Is Coming
Steven Heck

Guest post by Steven Heck, president MedSys Group.

The thriving provider based healthcare IT industry is no longer news. The history and evolution of the American healthcare system is unique. In 2009, Congress agreed that better information technology was needed and approved a $20B stimulus under the Affordable Care Act (ACA). The technology being deployed is expected to result in better patient outcomes. Medicare/Medicaid “carrots” and “sticks” were tied to “Meaningful Use (MU)” criteria. We are now in Stage 2 and it is not getting any easier.

However, that stimulus is being consumed and time is running out. But, providers have spent far more than $20B and they are running out of margin and time. The provider sector remains a highly fragmented delivery system of primary, acute and post-acute caregivers. This sector is mostly nonprofit and historically local and/or regional in nature.

Virtually every provider organization over the last five years has deployed some form of electronic health record and will be required to use them in a very prescriptive manner. The activity level has been quite dramatic. Vendors, consultants and health IT professionals have had the full employment act and compensation has increased accordingly. Every healthcare provider across the country is automating and integrating.

Health IT-related capital spending has garnered a disproportionate share for at least five years. IT operating expense has increased dramatically while internal governance struggles to identify and realize tangible offsets in overall operating costs. Given strict deadlines imposed by the meaningful use, most of these systems are being “installed” rather than “implemented.” As a result, most providers have deferred difficult workflow and operational decisions until the “optimization phase” currently anticipated to begin in 2014-2015.

Unfortunately, there is an undercurrent to this “provider IT boom” that does not indicate a soft landing. Health-related costs are increasing much faster than revenue. Elective procedures have started to decline in many areas of the country. Employers are pushing back on private insurance and employees will pay more. Federal entitlements are under tremendous pressure and our public healthcare system is fundamentally broken. We are ranked 33rd in population health and spend 100 percent more (per capita) than other developed countries.

Consolidation of physicians and hospitals has started. Insurance companies are becoming providers and Walgreens now offers some primary care services. As total healthcare expenditures approach 20 percent of GDP, there is little doubt that a major correction will be required. As the financial services market contracted post-2007, we all witnessed a dramatic reversal in how and where their IT investments were made. The financial sector merely reacted to a crisis. Hopefully, the re-structuring healthcare industry will better anticipate the inevitable and minimize their post-boom chaos.

We can see the train coming and have the opportunity to focus on the fundamentals. Health IT governance has been more form than function. Demand remains unfettered and resource constraints are real and being felt every day. Alignment of interests remains complex, which confuse investment strategies and ongoing expense structures. Few organizations formally define the relationship between scope, service levels and cost. This lack of objective measurement makes it difficult to benchmark and/or improve specific areas of performance.

Given that shared services are generally the initial and primary target for cost reduction, objectives measures will be critical to any third party evaluation. The commercial IT outsourcing vendors will be close behind the cost reduction firms. IT outsourcing can be leveraged effectively, if and only if, companies understand how to manage their IT function with metrics. The suppliers are very skilled with metrics and better with contract management.

Finally, the provider industry has the incredible opportunity to drive immense value from the technology that has recently been deployed. We have the best clinicians, medical schools and hospitals in the world. To date, the complexity and layering of government policies has resulted a dysfunctional public healthcare system. The ACA is compelling migration from increasing volume at lower rates to quality and more holistic care. We now must improve workflow, practice variation, quality and outcomes.

The EHRs, HIEs and BI tools will allow us to accomplish these goals if we can overcome the historical roadblocks of fragmentation and unintended consequences.

In 1969, we landed on the moon. By 2020, we should aspire to be ranked on the top 10 in population health and not be more than 17 percent of GDP expense. There’s no doubt that a train is rushing toward healthcare IT. The question is, will healthcare IT get hit or will it figure out a way to get on board before the crash?

MedSys Group president Steven Heck has more than 35 years of healthcare information technology experience. This includes consulting and sourcing skills in the provider, payer and life sciences segments of the healthcare industry. Heck is responsible for overseeing the Advisory Services Division at MedSys Group that focuses on three major service areas: Best Practices to achieve the efficient use of IT resources, practice redesign and optimization to dramatically improve returns from huge IT investments of the last five years; and IT planning. Many of the country’s leading healthcare organizations have sought his leadership and advice with investment, planning and deployment strategies. Heck is a frequent speaker at Scottsdale Institute, HIMSS, CHIME and the Outsourcing Congress.

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