Hospitals Put IT in Second Place

By Stacy Lawrence  |  Posted 12-26-2005
Nearly one-third of American hospitals aren't profitable or are just breaking even. That's consistent with the previous finding of a survey of hospital CEOs conducted two years ago by consulting firm Deloitte & Touche.

And while that may not sound very upbeat, the good news for the industry is that it hasn't gotten any worse lately.

But it does mean that most hospital CEOs are closely focused in on financial issues including addressing the needs of the uninsured, rather than the implementation of new information technology.

Medicare is becoming an increasingly large source of revenue, up to 37 percent from 33 percent in the previous survey.

This trend is expected to continue as the Medicare population grows. Hospital CEOs are concerned that increased dependence on Medicare revenues could create additional financial challenges for hospitals.

Pay-for-performance systems, which are still largely experimental and rely heavily on IT to assess hospitals and doctors via a variety of quality indicators, are not yet fully in place.

Hospital payments continue to be primarily based on discounted charges and fee-for-service payments.

Only one-third of hospital CEOs believe that the potential measures for pay-for-performance—clinical/quality outcome data—should be made available on a mandatory basis. But almost all of them believe quality evaluations should be made available on a voluntary basis.

It's difficult for many hospital CEOs to justify significant budgets for quality measurement and reporting.

Two-thirds feel like they can only spend money to improve quality reporting if it will produce financial benefits like increased efficiencies or higher patient volumes.

But measuring return on investment for IT has actually fallen slightly in importance for CEOs. It's increasingly viewed as an unattainable goal.

"Some of the improvement in quality is going to be really hard to quantify into dollars," said Tom Hochhausler, partner with Deloitte & Touche's life sciences and health care practice. "How do you really effectively measure higher quality?"

Still, pay-for-performance is gaining traction. Almost all of the nation's 4,200 general hospitals are providing Medicare with quality data in exchange for higher reimbursement rates.

And there are almost 50 hospital sites that voluntarily report quality indicators to the public, according to a recent report from PricewaterhouseCoopers.

With the recent, highly publicized inability of some hospital EMR and CPOE systems to decrease medical errors, it makes sense that hospital CEOs are primarily focusing on education, training and standardization of treatment as having the most potential to reduce medical error.

Still, technology is seen as playing a supporting role with 75 percent of hospital CEOs placing it in their top five strategies for reducing medical errors.

Another recent survey of health care leaders by PricewaterhouseCoopers showed a similar result.

While about three-quarters of respondents saw IT as crucial to providing consistent care, only half thought it important to improving patient safety.

The vast majority of CEOs expect technological advances to shift care into the outpatient setting such as physician offices, while a smaller group expects them to decrease the demand for acute care services through reductions in average length of stay (65 percent of CEOs expect this) and hospital admissions (54 percent expect this).

A great majority of CEOs expect that technological advances will increase consumer demand for specialty/high-end services and for products and technologies that allow self-diagnosis.

The most urgent capital needs are buying replacement and new medical equipment, with almost three-quarters of hospital CEOs citing each of these.

Still, two-thirds plan to make long-term strategic investments in IT systems; four in 10 single out their need for a CPOE system as among their hospital's most pressing needs.