Healthcare: Today’s challenges, IT investment, ROI and Optimization JULY 29, 2013

Healthcare: Today’s challenges, IT investment, ROI and OptimizationJULY 29, 2013

Challenges; IT investment, ROI and Optimization

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Overview

Today’s realities and current business state:Entitlement challenges and Federal spendingIT spend current and projected

Industry Trends: Operational and Technology ImpactEmerging and Near Term technologiesHealthcare Provider IT Marketplace and Impact of Last Four YearsCalculating the ROI (and Value) Associated with Healthcare IT InvestmentsEstablishing a Monitored Optimization and Benefits Realization Program


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U.S. Still Has a Huge Entitlement Funding Problem

Medicare, Medicaid, and Social Security are not self-funding and the main driver of deficits, responsible for more than 25% of all federal debt since 2000.Longer life expectancies, changing demographics and soaring costs make entitlements as we know them today unsustainable.Medicare’s annual cash shortfall in 2011 was $288 billion. Social Security had a cash flow deficit of $58 billion in 2012. Without reform, the typical 3rd grader will receive only about 75% of the benefits provided to today’s seniors.Entitlement costs are growing at an alarming rate.


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http://nationalpriorities.org/

2013 U.S. Proposed Federal Spending

25% of the US Federal Budget is devoted to Medicare & Health spending


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Challenges facing Medicare:Aging population in the US accustomed to full-service healthcare insuranceNational debt nearly 100% of US GDP

http://jamsidedown.com/2011/02/the-federal-budget-getting-what-we-asked-for.html

Macroeconomic Reality – Federal Healthcare Tab is Huge, Growing Fast and Hard to Reduce


US Healthcare IT spend:2012 - 2017

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• Spend will focus on aging financial systems and away from EHR technology

• Projecting in excess of $3B from current $1.9B for Revenue Cycle technologies

• Telecommunications services projected to $14.4B in 2017 from $9.1B in 2012

Industry wide IT spend could exceed $70B


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Industry Trends: Operational and Technology Impact


Trends/Impact8

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Trend Operational Impact Technology Impact

Comments

HC Reform and Affordable Care Act (ACA)

• ACO’s • MC Shared Savings Program • Health Insurance exchanges• Increased Patient Volume • Cheaper Premiums for

uninsured

• Content Management, ecommerce, CRM and Patient Portals

• HIE, EHR, analytics

• Mobile health/BYOD

9 Pioneer ACO’s quit

ICD 10 (October 2014) and ICD 11 (2015)

• Code format change• Code volume 13k to 68k• No simple mapping from 9 to

10• Costly and time consuming

• Allocate resources to support required system changes and testing

ICD 10 – perceived as positive by physicians

HIPAA • More strictly defined; greater risk for penalties

• Redefined data and access security infrastructure and monitoring


Trends/Impact9

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Comments

HITECH • Forced timeline of demonstration of MU to realize incentives

• Driving Automation (in general)• Increases need for new and

complicated policies and procedures (HIE)

• Increased spending and usage of EHR’s

• CPOE increasing• Establish and

participate in HIE

Mixed results and opinions of downstream benefits of EHR’s

M/A events

• AHA- Center for HC Economics and Policy Study- “…demonstrate that mergers and acquisitions are supporting the changing landscape of health in a positive way”

• AHIP – (America’s Health Insurance Plans)• Greater negotiation strength

limits competition; increasing prices

• RWJ foundation study – cost increase of 40% or more when merging hospitals are closely located

• Adoption of inherited technology and/or extended deployment of existing systems

• Re-evaluation of network and telecommunication architecture

Mixed opinions on benefits;depends on the nature of M/A event


Trends/Impact10

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Comments

Cost Reduction in a Changing Reimbursement Environment

• Employers, Payers, Providers looking to reduce costs

• Employer - Direct contracts with provider organizations (Intel and Presbyterian health Services, Walmart, Lowes, Kroger)

• Payers- Higher deductible plans- shift cost to insured; ACA and uninsured

• Providers- further movement to extend treatment outside of hospital (e-visit, retail locations, Urgent Care), focusing more on outcomes/metrics

• More sophisticated claims processing and insurance management functionality

• Upgrades and/or replacement of older revenue cycle components

• Infrastructure investments to support “off campus” care delivery


Trends/Impact11

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Trend Operational Impact Technology Impact Comments

Business and Clinical Intelligence and Analytics

• Current core systems/applications and processes need to support a more complicated and comprehensive data “picture”

• Real issue is merging the appropriate clinical and business data

• Requires a solid current state, optimized, standardized and efficient

• Core vendors are evolving and not yet deep with solutions for analytics and may look to third party

• Data everywhere: how to combine it to make sense and drive proactive decision making


Trends/Impact12

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Trend Operational Impact Technology Impact Comments

Patient Expectations Changing

• Patients are more aware and involved in their care than ever before

• “Consumerism” must be embraced in healthcare - truly informed consumers

• Support for BYOD• Mobile apps and

access• Adoption of social

media

Promoting consumerism is viewed as a key imperative for healthcare innovation

Dawn of Biotechnology Integration with Care Provision

• DNA sequencing• “Omics” cascade –

Genome, Transcriptome, Proteome.

• Becoming part of a routine health record

• Specialized “Pharma” and therapies

• GINA

• Big Data- significant data storage enhancement

• Will likely require virtualized storage in SAN with data replication

• Prepare for Petabytes of data (quadrillion bytes)!

Specialized Pharma costs offsetting generic savings


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Emerging and Near Term Technologies


Emerging and Near Term Technologies

RFIDPatient monitoring and safetyReduce theftTrack medical devicesPatient tracking

TelemedicineTargets – chronic disease, geriatrics, rural medicine, outreach

CloudMaking data more accessible yet still secure - public vs. private cloudsNeed to understand - what data is most important? What do we need to control and manage vs. allow access to?Less dependence on “in-house storage,” decrease costsLeverages the ubiquitous internetChallenges: data security, ownership

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Emerging and Near Term Technologies (cont.)

Social Networking (Facebook, Twitter ,for example) Immediate access to over a billion users (current Facebook members/users - 1.1B)Can provide instant feedback on mission, programs, services, productsCan generate market connection/ share with very little cost; consumer relates to the use of SM and makes a connection“You communicate the way I like to communicate”

Mobile Devices in Medicine (BYOD)Prolific “App” mentality - as of April 2012-13, 600 iPhone health applications are available*“Symptom Checkers” – personal apps with some medical credibility A recent IMS Health report forecast that 80% of the remote monitoring market will be mobile by 2016Utilize existing technology and infrastructure for specific applicationsExtend technical expertise to manage and support Apple/Droid/BB/Windows mobile architectures

* Mobile Health News 6/2012 – includes personal, provider, fitness

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Emerging and Near Term Technologies (cont.)

“Big Data” - Genomics/ProteomicsIntegrating external clinical and research data, episodic clinical data, genomics, proteomics, financial and outcomes data to treat patientsExponential data relationships driving clinical pictureManaging petabytes of data (1015) - quadrillion

Medical Body Area Network (MBAN) Ultra small and ultra low power wireless wearable/implantable devices for specific clinical data monitoring (i.e., blood glucose levels, eye pressure, cardiac function)Personal Pill-Sized Soft Medical Robots for the Gastrointestinal Tract - researchers (University of Washington and University of California at Santa Cruz) are developing a pill-sized soft capsule robot that can be precisely controlled remotely to enable diagnostic and therapeutic functions in the digestive tract for clinical and potentially personal useFCC recently approved new band spectrum to support MBAN technologies

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Impact of the Last Four Years and the Healthcare Provider IT Marketplace


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HITECH Continues to Drive Automation

ONC Data Brief No. 9 – March 2013Hospital adoption of EHR systems has more than tripled since 2009 Hospital adoption of at least a basic EHR system more than tripled since 2009 from 12% to 44%Percent of hospitals possessing certified EHR technology increased by 13% between 2011-2012 from 72% to 85%


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HITECH Update


EHR Adoption Projections

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Current Healthcare Market Overview– HIMSS Analytics Adoption Trends


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Stage 3 = 8% Decrease

Stage 4 = 7% Increase

Stage 5 = 9% Increase

The percentage that has moved from lower to higher stages has not increased dramatically after 2009Ex: In 2009, 13% were Stage 4 or higher

In Q3 2012, 35% were Stage 4 or higherSurprising that this number is not significantly higher following HITECH

Where’s the Dramatic Growth in Higher Stages?


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Software Vendor Consolidation

HIT Vendor Market:Today: 7 major vendors and 250+ small-mid sizedSeveral of these players are facing existential challengesConsolidation is inevitable

Fortune 1,000 ERP Market:Early/Mid-1990s: 100+ vendorsToday: SAP and PeopleSoft (Oracle), Lawson (Infor)

http://www.industryweek.com/articles/erp_vendors_big_get_bigger_9670.aspxhttp://www.healthdatamanagement.com/issues/19_6/health-information-technology-vendor-acquisitions-

42542-1.html


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Calculating the ROI (and Value) Associated with Healthcare IT Investments


ROI Is Difficult to Measure in Healthcare IT

The ability to measure ROI becomes increasingly difficult as the complexity of the systems increases.

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“Finding Value from IT Investments: Exploring the Elusive ROI in Healthcare” http://www.himss.org/content/files/Code%20159_Finding%20Value%20from%20HIT%20Investments_Vogel_JHIM.pdf


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Smith, C. “ROI In Health IT Is More Than Just A Price Tag.” September 21, 2012. http://blog.himss.org/2012/09/21/roi-in-health-it-is-more-than-just-the-pricetag/

Efficiency savings• Reduced paper costs• Reduced cost of records

transport, storage• Reduced cost of dictation

and transcription services

Improved outcomes of care

• Increased patient safety• More accurate diagnoses

and successful treatments

Additional revenue generated as a result

of an IT implementation

• MU dollars• Quicker and/or more

thorough reimbursement from insurance, Medicare/Medicaid

Non-financial gains • Increased patient

satisfaction with care encounters

• Decreased provider time at work

• Higher levels of employee satisfaction

Increased provider knowledge

• Patient population data• Evidence-based outcome

analytics

Classic economic models for ROI do not appropriately reflect the healthcare businessHIMSS recommends a new model for ROI:

Measuring Healthcare IT ROI: A New Model


HIMSS Health IT Value Suite- STEPS

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Provides content and examples for evaluation of the value of your IT investment


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*Bell, K. & Thornton, L. “From Promise to Reality – Achieving the Value of an EHR.” Healthcare Financial Magazine. February 2011.

The right model and categories of return will vary from one organization to the nextROI is there for most organizations over a 5-10+ year periodElectronic records $2/record/year vs. $8/record/year for paper records!!Optimization will accelerate ROI to an acceptable payback periodBased on the size of the health system and the scope of the implementation, benefits for a large hospital can range from $37 million to $59 million over a five-year period following an EHR implementation.

In addition to the incentive payments earmarked in ARRA and includes benefits primarily from length-of-stay (LOS) reduction, readmission rate reduction, emergency department (ED) revenue reimbursement, ambulatory revenue reimbursement, and drug cost reduction.*

Healthcare IT ROI – It’s There


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http://www.readperiodicals.com/201102/2273326421.html#ixzz2KEqVdi1xhttp://www.emarketer.com/blog/index.php/tag/how-many-people-shop-online/

EHR benefit outcomes can vary depending on a number of factors, including organization size, complexity, scope of implementation, etc. As a result, the benefits can be wide-ranging, but include key areas such as:

Improved decision-making capabilitiesReduction in medical errorsImproved medication safety via fewer adverse drug eventsImproved patient outcomes resulting in standardization of care

Not All Rosy: Mixed opinions and evidence as to the overall benefits of EHR’s on clinical outcomes

Where Are the Non- Financial Benefits?


Cash Flow and Revenue Benefits

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Cash Flow Increases Benefit Example

Reduced A/R days and cash acceleration

Illinois academic health system reduced Accounts Receivable days to 35 in Medical Group’s 75 practices

Improved coding accuracy

Leading national health system gains 1.5-5% increase in charge capture

Increased inpatient turnover / Reduced

adverse drug events

National health system gains increased capacity for new patients/procedures = $1.8-$2.2 million increased net

revenue for facilities at capacity

Top-Line Revenue Growth Benefit Example

Increased revenue

National managed care organization’s procedure volume increased 30% for colon cancer screenings, 11% for

breast cancer screenings, 5% for cervical cancer screenings

Increased revenue Multi-site hospital and ambulatory system saw 10%

increase in mammograms , 5% increase in M.D. patient load

Integrated registration-POS collections /

Improved documentation

National health system reduced denied claims brings ~ $6 million revenue increase


Cost Reduction and Avoidance Benefits

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Cost Reductions Benefit Example

Improved staff efficiency

Hospital system serving Southeast gains $1 million in savings from reductions in medical records and coding

staff

Improved inventory management / Reduced waste

Multi-hospital and clinic system in Iowa achieved 568% ROI

first 18 months and $500,000 hard-dollar savings the first year

Reduced supply costs Children’s hospital in Boston reaps $40,000 annual

savingsby eliminating paper, chart folders and supplies

Cost Avoidance Benefit Example Avoidable

readmissions prevention

Missouri health system reports 35% reduction in readmission rates of home care patients

Improved patient care / Chronic disease

management

New York hospital system reports 9% improvement in A1C levels across 22 locations =

~ $18,000 savings per point improvement per patient

Reduction of document imaging staff

National health system’s CPOE to reduce shared services document imaging staff by 16% = 0.5 FTEs per hospital

by 2015


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Establishing a Monitored Optimization and Benefits Realization Program


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Successful Implementations• Emphasis on clinical workflow process

improvement care quality enhancement• Emphasis on change management• Emphasis on ROI elements of initiative

Less Successful Implementations• Heavy focus simply on MU criteria as

project objectives• Heavy focus on MU Stage 1 deadlines for

attestation• Didn’t plan for “Optimization”

While every implementation is different, some patterns have emerged regarding what makes one successful or not

Implementation Lessons Learned – What We’ve Seen


What is Optimization?

The Merriam-Webster dictionary defines optimization as “an act, process, or methodology of making something as fully perfect, functional, or effective as possible.”In Healthcare Information Technology, Optimization has come to be known as the act of improving clinical information systems (as well as the environments in which they operate) in a manor that yields continual improvement well beyond a product implementation go-live!

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BaselineFunctionality

Time

AdvancedFunctionality

Go-Live Event


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Fact: EHRs are the new normal in healthcareBaseline implementations act as a “springboard” from which organizations can meet future requirementsDesign with optimization in mind – “we get smarter as we utilize the technology”The work is not complete at go-live; it’s just begun!To make the most of your EHR, it is crucial to form a dedicated optimization team

Spanning multiple departments of the organizationWorking with members from every level of the organization

Proactive optimization is rooted in the principles of TQM, LEAN, CQI, etc. and will work to:

Improve the overall effectiveness of healthcare workersImprove patient safetyAddress issues of cost

Optimization Programs


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Identify benefit

objectives, key metrics

Set specific targets

Institute processes, timeframes

, accountabil

ity

Institute tools for status,

tracking, governance, structure

Should be understood as a substantial undertaking with significant resource/operational investmentOptimization efforts should be viewed broadly as an operational improvement effort, keeping ROI constantly in focus

Monitored Optimization & Benefits Realization Program


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Healthcare: Today’s challenges, IT investment, ROI and Optimization JULY 29, 2013