Competitive Environments
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- Rosemary Morrison
- 8 years ago
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1 Industry Signposts
2 19-2 Competitive Environments arket events will serve as sign posts to assist hospital executives in assessing their IT system environments and strategies relative to their competitive positions. Hospitals will be forced to publish their prices, quality and outcomes metrics over the next few years to compete for employer and consumer business. Pay-forperformance initiatives from payers and the Center for Medicare and Medicaid Services (CMS) will force hospitals to become more efficient and safe. Obviously, this will be easier for hospitals that have more of their financial and clinical processes automated. Some examples of sign posts in this area: Healthcare Quality Alliance metrics that hospitals are submitting to the federal government for quality comparisons among hospitals that will impact hospital reimbursement Increased factor of HealthGrades.com on hospital selection by consumers LeapFrog Group impacts to hospital service contracts in large metropolitan areas where manufacturing is a key industry Competition from retail stores such as Wal-Mart, Walgreens and CVS for ambulatory services to a broad segment of healthcare consumers Global competition for surgical services from countries such as India and China for a broad segment of consumers relying more on flexible spending accounts and healthcare savings accounts to pay for their healthcare services. Physicians, becoming more competitive with hospitals in some regions by implementing free-standing imaging centers and even new hospitals. Revenue Cycle Management (RCM) Perhaps the biggest challenges for hospitals over the next three to five years will be emerging regulations that will significantly challenge hospitals to implement solutions within their RCM environments effectively, and on a timely basis. Hospitals that fail to enact appropriate changes to their RCM IT environments and workflows may suffer tremendous negative financial effects. The key regulation sign posts to monitor are the following: HIMSS Analytics Database (derived from the Dorenfest IHDS+ Database ) 2008 HIMSS Analytics
3 19-3 Recovery audit contractor regulations, which allow contractors to review all Medicare bills for under- and overpayment. Which one do you think they are really focused on? How well do the revenue cycle management applications in use by hospitals today provide protection for these types of audits? HIPAA Claims Attachment how well will legacy RCM applications be able to accommodate the implementation guidelines for this impending regulation? How badly will hospitals who struggle to implement this regulation be impacted on a cash-flow basis? Severity-adjusted DRGs this is a major upgrade for all medical record encoding applications, which will also significantly impact the registration and scheduling systems (think medical necessity checking, eligibility and service authorization transactions), as well as the patient-billing applications. ICD-10-CM encoding upgrades another upgrade to the encoding system used for billing and service analysis that will impact most of the RCM applications beyond the health information management encoding applications. Regional Health Information Organizations/Health Information Exchanges Regional health information organizations (RHIOs) or healthcare information exchanges (HIEs) are a good idea in concept, but few have created viable business plans, and many are not supported, because healthcare executives do not want to share their information with competitors. Most of the successful RHIOs or HIEs are supported by payers for disease management programs such as diabetes. Disease management programs are the genesis of what healthcare will become in the U.S. at some point in the future. We will begin to focus healthcare funding on wellness and disease management programs. What we learn from RHIOs and HIEs today, and our ability to evaluate effective information exchanges from these environments, will eventually allow us to become successful with new healthcare management and delivery programs. Union Healthcare Embracing Capitated Healthcare Models? The big three auto manufacturers have pushed their healthcare liabilities off on the unions for execution and management. We believe that the unions will have to implement some form of a capitated model to ensure they don t bankrupt the current funds they have to deliver these programs. This means that hospitals in cities with large union employee HIMSS Analytics Database (derived from the Dorenfest IHDS+ Database ) 2008 HIMSS Analytics
4 19-4 populations will be forced to become much more efficient if they want to compete for this business. The question is will other unions become administrators of their members health plans? If so, many hospitals in major manufacturing cities will have to adjust to a more confined payment environment. State Universal Healthcare Coverage Initiatives Several states are now undertaking the task of providing health insurance for their citizens. These efforts are being led by Massachusetts, California and New York. California s experience over the last year shows how difficult it will be to get legislators to implement these health plans, while Massachusetts has experienced the pain of underestimating the costs of these initiatives. The elections of 2008 have created an increased focus on the healthcare issues of the United States. But we do not believe any presidential candidate will be able to significantly improve the main challenges of reducing costs and improving care our system is too complex to change in a short time frame. The Government s EHR Initiative The Bush administration s EHR initiative, which forecasted widespread EHR use by 2014, is great fodder for a Dilbert cartoon. We will let you decide who in the administration wears the pointed hairdo. The Office of the National Coordinator was never effectively funded to drive this initiative, and the government provided very little funding for independent physician clinics those who deliver the largest proportion of care to buy the EHR solutions needed to deliver on this initiative. We believe that vendors are emerging with very low-cost EHR products that may create a tipping point for independent physician clinic EHR acquisitions, but the government still will need to provide some funding as an impetus for this market transformation. Relaxation of the Stark Laws has had some impact on moving the market forward toward adopting ambulatory electronic medical records, and some grant programs have provided some impetus for clinics to adopt ambulatory EMRs. However, we still need much better incentive and funding programs to get the desired effects. The 2008 Presidential Election Clinton, Obama or McCain If the Democrats win the presidential election in 2008, this could be the catalyst for creating a national universal healthcare insurance model that provides a safety net for all U.S. citizens over time. But we should remain somewhat skeptical, as we have seen politicians introduce several bills over the last few years intended to fund EHRs or drive universal healthcare, and none of them have passed. Obviously these actions were for HIMSS Analytics Database (derived from the Dorenfest IHDS+ Database ) 2008 HIMSS Analytics
5 19-5 political gain only. Insurance companies and pharmaceutical companies, which have the most to lose in a universal healthcare insurance model, have powerful political action committees that are extremely effective. So, even if a Democrat wins the presidential election, will that president be able to enact universal healthcare insurance if we have to raise taxes? You can bet that if consumers physician choices or service access are impacted in any universal healthcare insurance model, the population backlash will be significant. If the Republicans win the presidential election, then it will be even longer before we begin to create healthcare access for all U.S. citizens. The GOP will continue to favor free market economics for healthcare, which will mean that the payers and pharmaceutical companies will continue to increase the cost of our healthcare and its portion of the gross domestic product. Interoperability Still a Buzz Word The Interoperability Showcase at the HIMSS Annual Conference proves that we can create interoperability between various healthcare applications. But these examples are not easily replicated beyond the showcase, because of the continuing lack of standards that are needed to drive replicable solutions. The new Health Level 7 (HL7) Continuity of Care Document (CCD) standard moves the industry in the right direction. Now we need to demand its use by vendors with clinical application solutions. The government needs to take a leadership position and continue to drive industry standards, much like it did with HIPAA claims transactions, and we believe this is an inevitability of the market. The development of replicable interoperability between all healthcare IT applications will help to drive down the maintenance costs associated with application interfaces that represent a significant component of hospital IT operating costs. Interoperability will also increase the life cycle of applications that are able to accommodate this architectural function. Interoperability functions based on standards such as HL7 CCD will become a required element of application evaluation and acquisition processes. One reason that interoperability is not being adopted is because no one is forcing it on the vendors of healthcare IT solutions. If we were to add up all of the interface development and maintenance revenues that are recognized by the healthcare IT vendors in a year, you would understand why they have NO incentive to implement these standards. Economics Despite fence-sitting by economists, we clearly entered a recession in The question is how long will it last? If it lasts longer than two years, it could have a significant impact on healthcare IT spending, and the advancements of hospitals in implementing electronic HIMSS Analytics Database (derived from the Dorenfest IHDS+ Database ) 2008 HIMSS Analytics
6 19-6 medical records could be slowed or stopped. The current subprime mortgage fiasco has resulted in some hospitals paying hundreds of thousands of dollars in increased bond interest rates, and this will have an immediate impact on the operating and capital budgets of these facilities. Our forecast models for healthcare IT application spending over a fiveyear period suggest that the compounded annual growth rate over this period will barely achieve 4 percent for most applications. Some of the spending on healthcare IT will be conducted on infrastructure needs security, data storage, network upgrades and business continuity/disaster recovery. Unfunded mandates such as the HIPAA claims attachment regulations and severityadjusted DRGs will cause hospital budget conflicts. Do they invest to improve patient safety and outcomes, or do they shift budgets toward the unfunded mandates? The answer is obvious, and the advancements we have achieved in implementing electronic medical records will be impacted to some degree over the next two to three years. Sign Posts Be Vigilant Hospitals will need to remain vigilant in monitoring market and industry sign posts. Healthcare has become a front-page subject for all of the major newspapers and business journals. If we don t begin to reduce our healthcare cost impact as a component of the Gross Domestic Product, we will continue to lose our competitive position in the global business world. There are many initiatives being launched to address this issue, and these initiatives will impact all healthcare organizations regardless of their size, regional location, or service focus (e.g., private/public, academic/non-academic, medical surgical/ other). It will be important for healthcare organizations to identify their greatest opportunities and challenges, and the related sign posts, to ensure that they are prepared and ready for the great healthcare transformation we all face. HIMSS Analytics Database (derived from the Dorenfest IHDS+ Database ) 2008 HIMSS Analytics
7 2008 HIMSS Analytics Requests for permission to reproduce or photocopy any part of this report should be sent to: 230 East Ohio Street Suite 600 Chicago, IL
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