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In evolving healthcare business model, tech plays vital role

Brian Eastwood | Sept. 24, 2014
The healthcare industry's shift from its dominant fee-for-service structure forces organizations to rethink the way they do business. Embracing a value-based, bundled payment model means doing more to connect patients to providers, providers to each other, providers to payers and patients to payers.

The healthcare industry's shift from its dominant fee-for-service structure forces organizations to rethink the way they do business. Embracing a value-based, bundled payment model means doing more to connect patients to providers, providers to each other, providers to payers and patients to payers.

Technology plays an important role on a number of levels, from consumer health applications and patient portals to analytics and electronic health record (EHR) systems. In fact, the success of payment reform and the accountable care organization (ACO) model may depend on IT, in part because value-based payment models beget administrative complexity.

That said, ACOs' health IT capabilities remain rudimentary, and even health systems embracing less-risky Medicare Shared Savings Program or pay-for-performance models struggle to implement the technology they need. Meaningful use is tough enough, and even it's a "floor" compared to the data exchange, analytics and IT infrastructure that shared savings and coordinated care demand. Even payers, whose more advanced systems captured the bulk of the health data during the failed capitation efforts of the 1990s, have trouble meeting the needs of healthcare consumers.

To adapt to today's healthcare market, and tomorrow's, all players need to take a hard look at their IT systems. It's not a stretch to say that failing to do so could put them out of business.

Healthcare IT Needs Helping Drive Industry Consolidation

Consolidation represents the healthcare industry's major theme in the last five years, says Greg Hagood, senior managing director at Solic Capital, a financial advisory and investing firm. That trend has only accelerated in the last two years — and it's bound to continue, he says, with as many as half of the nation's remaining 1,000 independent hospitals expected to consolidate in the next five years.

A recent survey suggests that medical practices prefer integration to merger, though financial realities may make that preference difficult to see through. With reimbursement models changing, independent hospitals — even those with broad support and a good management team — find it increasingly difficult to remain independent, Hagood says.

The capital investment required to move to the next phase of EHR use or data management is simply too high for these hospitals, and it's often but one step in "totally overhauling" IT infrastructure, he says. Affiliating with or selling to larger health systems helps defray the cost. It helps that IT consulting firms and software vendors alike both tend to see hospitals as their primary clients these days, Hagood says.

This scenario mirrors what happened in the banking industry in the 1990s, when independent banks sold out to "super-regional" firms in large part to be able to afford the move to a common IT platform. Many of the health system transactions Hagood has seen in the last two years have included specific IT commitments — namely, migrating to a common system (typically Meditech, Cerner or Epic) and subsequently taking advantage of group licensing.

 

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