What does HealthLeaders Media's 2013 Industry Survey reveal about healthcare organizations' financial prospects? Our newly released report, with 823 respondents who form a representative sample of healthcare leaders from a cross-section of organizations across the United States, shows big concerns about reimbursements, specific plans to fuel financial growth, and maybe a touch of overconfidence about the bottom line in the coming year.
Healthcare executives are overwhelmingly concerned about reduced reimbursements in 2013: 92% say it's the top threat to their organizations. Medicare and Medicaid payment rates are scheduled to decrease this year.
Where will the shortfalls be made up? Healthcare executives tell us they will try a range of tactics. To begin with, they plan to look for adjacencies to their existing business. The top option in the Industry Survey for fueling financial growth over the next five years is to expand outpatient services, chosen by 57% of respondents.
In a similar vein, the next most popular move to create financial growth is starting or increasing promising businesses or facilities (chosen by 43% of respondents). Service line expansion comes to mind. Healthcare leaders also say they need to do a better job of marketing—both their organizations' existing offerings (chosen by 43% of survey respondents) and new businesses (30%).
A second category of expected activities to boost growth prospects is structural: entering into joint ventures (41%), acquiring physician practices (38%), and acquiring or merging with other hospitals or health systems (27%).
We wrote recently about M&A strategies for small hospitals, which are particularly vulnerable in the current climate, but the ongoing trend toward consolidation affects healthcare organizations of all sizes and types.
So with industry income likely to drop, and an increasingly competitive market in which to create new sources of revenue, are healthcare leaders despondent about their prospects in 2013? Well, no. A majority of Industry Survey respondents expect positive (45%) or strongly positive (10%) financial results this year. Another 30% say their financial results will be flat. Only 12% say the 2013 forecast is negative (9%) or strongly negative (3%).
This math doesn't seem to add up. It's unlikely that a majority of organizations will be immune from a negative climate. Can healthcare leaders really expect bad things to happen only to other organizations?
A clue to this seeming paradox may lie elsewhere in the HealthLeaders Industry Survey. We asked the respondents for their take on the state of the industry. The top choice was that it's on the wrong track—chosen by 39%. Nearly a third (32%) say the industry is on the right track, and 28% aren't sure.
Yet when asked about the state of their own organizations, the respondents overwhelmingly (71%) say they're on the right track! Only 14% believe they're on the wrong track, and for another 15% the jury is still out.
Healthcare leaders seem to have confidence in themselves and their own organizations—that's good. But it would be bad to be caught off-guard by overly optimistic forecasts. It's not too late for healthcare leaders to adopt a new resolution for 2013: take an honest look at reliable income, accounting for likely lower reimbursements.
The HealthLeaders Media model is to combine research and conversations with healthcare leaders on the issues they face today. One of their biggest concerns is costs—how to get a handle on them, how to cut costs, and how to keep them down permanently.
In our newly released Industry Survey, available for free download on our website, healthcare executives tell us that cost reduction and process improvement is their number-three concern (ticked by 45% of the 823 qualified respondents), not far behind patient experience and satisfaction (54%) and clinical quality (48%).
While 20% of healthcare leaders responding to the survey said their organizations needed to reduce operating costs by only 1%-3% beyond previous reduction efforts, 29% said that 4%-5% more costs had to come out, 26% said 6%-10%, 14% said 11%-20%, and 9% said they needed to cut more than 20% of operating costs!
That's a tall order, and the coming changes in healthcare won't make it easy. One of our Industry Survey advisors, Dennis Vonderfecht, president and CEO of Mountain States Health Alliance, a 13-hospital system based in Johnson City, TN, told us, "Our concern is, can we reduce our costs fast enough, as fast as reimbursements are coming down and as fast as volumes are coming down, and still have a positive bottom line."
Last fall, HealthLeaders gathered 30 hospital and health system finance leaders for our second-annual CFO Exchange, held at Kiawah Island, SC. In one of the breakout sessions, these CFOs shared their approaches for "Leading from Your True Costs, and Driving Them Out." You can read an edited transcript and view video clips of the comments of nine CFOs in our latest Impact Analysis report available as a free download.
The entire conversation is insightful and honest. I want to highlight a couple of the points that the assembled finance leaders discussed. The first is how they plan to pull out the necessary costs. There is no single answer, since different health systems face differing situations, but to begin with, many CFOs feel the need to get a better handle on income and spending. For this, they will need better IT systems—a significant expense in itself.
CFOs are poring through their expense sheets and looking for ways to reduce high-cost line items, such as lab services and patient sitter utilization. They examine labor costs—i.e., nurses—which are typically the number-one operating expense. Efficiency is the watchword.
It's for this reason that programs such as Lean, Six Sigma, and continuous improvement continue to find fertile ground in healthcare. Lean production methods and related concepts such as Kaizen became popular in American manufacturing two decades ago after Toyota Motor showed the way.
Six Sigma spread from Motorola in the 1980s. These efficiency methods have become standard in manufacturing and other sectors, but many healthcare organizations are still coming to understand the possibilities.
But will efficiency alone be enough? Or will another manufacturing trend—reengineering, that bugbear of the 1990s—be the next phase in healthcare? As one CFO Exchange member, Rick Hinds, executive vice president and CFO for UC Health in Cincinnati, noted, "We continue to squeeze everything we can out of today's cost structure, but then we've got to really step back and redesign the way we deliver healthcare to take out large amounts of costs."
I predict that costs will continue to be a leading priority, a main topic of conversation, and a serious headache for healthcare finance leaders for many years to come.
This article appears in the April 2012 issue of HealthLeaders magazine.
Hospital-physician alignment is a sought-after state of being. It ranks as the fifth-highest priority for healthcare leaders responding to our annual Industry Survey, and 12% of executives say it is their single highest priority. But what does alignment actually mean? The answer may depend on where you stand within your organization's structure.
For healthcare CEOs and CFOs, alignment can refer to doctors who keep readmissions low and don't order too many tests. For physician leaders, alignment can mean hospital executives who stay out of the way and let physicians practice medicine as they know how—never mind initiatives for quality, efficiency, and the like. Meanwhile, patients are unlikely to talk about alignment, but they hope that everyone is pulling together for their benefit.
In the larger picture, alignment really means that everyone is working to navigate the changing structure of today's healthcare business. This issue's cover story shows how economic incentives now encourage—even demand—alignment between hospitals and physicians. The upshot of closer collaboration can be better care for patients.
Yet it would be Pollyannaish to predict that everyone will get along, get rich, and get better at delivering healthcare. Big hurdles exist to the solutions cited in our article. Not all physicians will want to become employed by hospitals. Not all healthcare executives will want to cede control to physician leaders. Not all hospitals can afford and manage the information systems required for coordinated care.
Most physicians still feel the need to practice unnecessary and expensive defensive medicine, as discussed in this issue's Council Connection section. In our monthly Intelligence Report, which draws on a survey of HealthLeaders Media Council members, less than half of executives tell us that they are ready to align with other organizations and commit to an accountable care structure.
Recently I had the pleasure of moderating a Roundtable discussion of healthcare leaders regarding the strategic importance of operations. Operational excellence and efficiency affects the patient experience, clinical quality and safety, and organizations' bottom lines.
In a wide-ranging, three-hour conversation, our panelists detailed the necessary conditions and the barriers to operational excellence (see the edited transcript in this issue). Although information technology is a great enabler of hospital operations, in the end our speakers agreed that IT is only a tool for healthcare leaders. The driver of excellence is healthcare leaders' ability to work together. In a word, alignment.
This article appears in the April 2012 issue of HealthLeaders magazine.
This article appears in the February 2012 issue of HealthLeaders magazine.
The concept of the patient-centered medical home, introduced by the American Academy of Pediatrics way back in 1967, continues to gain steam. But what does it mean to be patient-centered?
Lee Penrose, president and CEO of St. Jude Medical Center, a 384-licensed-bed hospital in Fullerton, CA, part of populous Orange County, recalled the concerns he had after hiring a consultant to interview patients. "We asked them to come in and look with fresh eyes, talk with some of our patients, talk to community members about what they think about healthcare," Penrose said. "The resounding answer we got back was: Healthcare is something you have to navigate your way through.
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"We didn't always like a lot of what we heard," Penrose admitted. "But we listened and made changes so that we could develop the essential elements of a patient-centered home—working closely with our communities, inspiring the team and setting common goals for our patients' health."
The interviews were early in the formation of a PCMH within St. Jude's parent organization, St. Joseph Health System, which has annual revenues of $4.5 billion. Penrose and other executives discussed the motivation for PCMH and the path to creating one at the HealthLeaders Media Rounds event, The Business and Clinical Path to Medical Home, hosted by St. Joseph in Orange, CA.
Today, St. Joseph Heritage Medical Group, one of several physician practices under the St. Joseph umbrella, operates as a Level 1 PCMH, as recognized by the National Committee for Quality Assurance. Penrose and his colleagues emphasized that achieving this designation was a slow process, requiring substantial investment and groundwork, even for an already integrated health system.
"This isn't a journey that started 18 months ago, or whenever it was that [PCMH] became a big topic. This started for us in 1994, and we built on it. The long-term perspective is very important," said G. Scott Smith, MD, the medical director at St. Joseph Heritage Medical Group.
The medical home approach is in keeping with St. Joseph's approach to healthcare, Penrose said. "We're all about promoting health … thinking about population health, the health of the communities we serve. It's very important to us that we do more than just acute care, but also reaching out into the community—and what a great way to do it," he said. The organization's working definition is that "The Patient-Centered Medical Home describes how primary care practices should operate to ensure high-quality care and patient safety, as well as work within an integrated healthcare system."
Information technology is important for PCMH. The integration necessary for a medical home requires IT connections. St. Jude invested $15 million in information systems, including an electronic medical record system.
In 2009, the Healthcare Information Management Systems Society named St. Jude Medical Center among the top 1.6% of the nation's hospitals for its use of EMR to benefit patient care. EMR adoption did not come immediately, but has since become a key element of the medical home infrastructure.
C.R. Burke, president and CEO of St. Joseph Heritage Healthcare, the physician practice organization of St. Joseph Health System, lists five elements of the medical home's IT infrastructure: EMR/EHR, patient health records, shared case management, utilization, and risk stratification and predictive modeling. All of these must work in concert within the PCMH.
The medical home is not simply an IT project, however—a point emphasized by Jeff Gartland, senior vice president of connectivity and clinical integration services provider RelayHealth, which sponsored the Rounds event. PCMH "is deployed through technology and supported by technology, but it is a true business model transformation," he said.
Another important step in building a successful medical home is getting the buy-in of physicians, Smith said. "The real big winner for doctors with PCMH is quality of care," he said. Physicians "like to do two things: They like to take care of patients, and they like to provide quality care. If a healthcare system can provide the structure to do that and then give them the reward and feedback … you've got a medical home."
When the IT infrastructure is in place and doctors are on board, physician practices and healthcare systems preparing to launch a medical home should take five steps, "because we are transforming practices into the patient home-centered model," said Ewa Matuszewski, CEO of Medical Network One, a physicians' services organization based in Rochester, MI.
Appraise your practice's readiness for change: Does the culture frown on innovation or see a need for a
new approach?
Evaluate the people who will be part of the medical home team: Are key players resistant, and if so can they be won over?
Identify a medical home champion from within the practice
Create a mission and vision for the new medical home
Create a specific project plan
So what comes after the PCMH? St. Joseph executives envision a patient-centered medical neighborhood on the near horizon. A collection of PCMHs within a single healthcare system would dovetail nicely with accountable care organization requirements. The medical home is a critical step to achieving ACO status, Penrose said. The PCMH is designed to foster collaboration with physicians across the continuum of care and is the most efficient model for adopting clinical IT with both hospitals and physician offices. And so, after 45 years, the PCMH model is finding a home at a time when coordinated and accountable care is becoming increasingly relevant.
This article appears in the February 2012 issue of HealthLeaders magazine.
Healthcare IT is expensive. Just for starters, consider that the per-bed cost to implement EHRs and CPOE runs between $14,000 and $65,000 in the US, according to the federal Office of Management and Budget. Even at the low end of the estimate, that's an astonishing amount of money, and it doesn't include higher-order IT systems such as clinical decision support.
The high cost of IT creates a catch-22 for healthcare leaders already strapped for cash and forecasting declining revenues in years to come. IT systems offer a way—perhaps the only way—to lower healthcare system cost in a sustainable manner. But where do you find the money to invest in IT?
A useful perspective comes from a US–European Union comparison. Jean-Pierre Thierry, MD, MPH, points out that the comparable cost for implementing EHR and CPOE is a magnitude lower in western European countries—under $6,000 per bed, on average, and as low as $3,000 per bed in Germany. Part of the discrepancy comes from higher administrative costs in the US due to the multiplicity of payer approaches and billing systems.
Put differently, it's bureaucracy, but not in the usual sense of the word. The state-organized payment systems in Europe run more efficiently than the maze of homegrown systems in the US.
So is US healthcare spending lacking in ROI? Thierry says there's more to the IT spending gap than simple overhead. "Everyone [in Europe] is looking at the US," he told me in a conversation at the HIMSS conference last week. "Innovation in healthcare is led by the US." Thierry had traveled from France to see some of the latest examples of innovative IT for improving quality and patient safety while controlling costs.
Yet not all healthcare IT has to cost a lot. I spoke with hospital CEO Tom Gregorio, head of Meadowlands Hospital Medical Center in Secaucus, NJ, about his turnaround story. Gregorio led an investor group that purchased Meadowlands in 2010 for $17.5 million from LibertyHealth, which was happy to shed a facility losing $1 million a month.
Technology investments helped Meadowlands turn a profit within a year, Gregorio says. Some of the spending has been on shiny, big-ticket items such as hyperbaric chambers to attract patients and physicians.
But some of the most effective technology investment has been on telemonitoring for population health management. Meadowlands has installed inexpensive monitoring devices in homes and apartments of the elderly and diabetics, among other high-risk populations.
Back to the US-EU comparison: Thierry observes that European health systems are typically fixated on a quick ROI for any technology investment, whereas in the US, "it's not there is no concern with ROI, but [healthcare leaders] are taking the bet to modernize healthcare." The different healthcare entities in the US are free to seek a variety of ways to do things better.
The ROI from telemonitoring is hard to calculate because it comes from so many sources: early warning of serious health problems, avoided readmissions, reduction in chronic health issues, word-of-mouth publicity from patients, and a sense that this hospital serves its community. Yet this relatively low-cost investment could be considered technological innovation of the highest order.
Healthcare organizations are desperately in need of innovative ways to work their way out of the bind of rising costs and decreasing revenues, while staying true to their mission of patient care. Technology investments alone won't solve all ills, but they can enable the solution. Innovation, not ROI, is the necessary benchmark.
To healthcare executives charged with meeting the compliance deadline for ICD-10, last week's announcement must have come as sweet relief. The heavy yoke of the impending deadline was mercifully lifted by Health and Human Services Department Secretary Kathleen Sebelius.
The reasons behind the move had less to do with concerns about any technological hurdles than "about the administrative burdens [healthcare providers] face in the years ahead. We are committing to work with the provider community to re-examine the pace at which HHS and the nation implement these important improvements to our healthcare system," Sebelius explained in a media statement.
So CIOs and their colleagues are, for now, off the hook for ICD-10. But they're still responsible for a great deal of other important work including the
implementation of electronic medical records
pursuit of meaningful use attestation
continual responsibilities associated with protecting patient data and adhering to HIPAA and HITECH compliance
implementation of computerized physician order entry (CPOE) systems
None of these tasks is simple or inexpensive, federal monetary incentives notwithstanding. In fact, among healthcare executives, information technology is one of the top three drivers of health costs, the HealthLeaders Media Industry Survey 2012 shows.
Being handed an extension on ICD-10 may feel liberating today. But wise leaders will take a lesson from the words of Michelle Mahan, Vice President and CFO, Frederick Memorial Regional Health System, Frederick, MD.
Some, she says ,"may not totally appreciate the enormity of [the] task, and that might be something that comes back to bite them."
Mahan served as a panelist in a roundtable discussion of costs incorporated into an Impact Analysis report titled ICD-10: Skating on Thin Margins. The roundtable met before the deadline extension was announced, but Mahan's words resonate with meaning. This is not the time to put ICD-10 plans on the shelf.
Rather, it is time to re-assess your team's readiness, and as soon as possible, to modify your plans. Otherwise, with time and neglect , ICD-10 will again come to feel like a yoke.
Our fourth annual Industry Survey, comprising the views of over 1,000 healthcare executives from a cross-section of organizations across the country, shows technology as a fairly low priority—sixth out of 12 concerns. Health IT, EMR, clinical technology, and other types and uses of technology are a top priority for only 29% of leaders. Move along, nothing here to see?
Yet when you examine executives' highest priorities, technology isn't far under the surface. The top priority listed in our survey is patient experience and satisfaction. While the actions of physicians and nurses most directly affect patient care, caregivers today rely on technology to get their jobs done.
Obviously, clinical technology such as informatics is important in this instance, but healthcare IT also has a big impact. Electronic health records can play an enormous role in improving patient experience. Is anything more powerful in caring for a patient than comprehensive health information delivered quickly?
The second highest priority in our Industry Survey is clinical quality and safety. A study sponsored by the Robert Wood Johnson Foundation linked clinical quality with computerized physician order entry (CPOE), which reduces the likelihood of errors in medication. Clinical informatics and clinical decision support can also protect quality and safety. Payment reform, in the form of accountable care, is another top priority. EHRs and other electronic linkages are prerequisites for new models of shared savings.
So who's going to help healthcare executives with their priorities? Or, as our survey puts it, who's going to save the healthcare industry? Seven percent of leaders look to technology, but the largest share say it will have to be hospitals. And hospitals are looking to IT tools such as business intelligence systems to help them figure out how to control costs and where revenue possibilities lie.
But technology is no panacea. It costs—a lot. IT and clinical technology are the third and fourth highest cost drivers in our survey. And technology doesn't always work as intended without a lot of human intelligence behind it.
Next week, I'm heading to the HIMSS annual conference and exhibition to see what's new in health technology. I will be meeting not only with many technology companies but also technology users. As always, HealthLeaders Media's emphasis is on how healthcare leaders and organizations can achieve their ends.
Although I like cool new gadgets as much as anyone (okay, maybe more than most), the discussions I most look forward to at HIMSS are panel sessions with healthcare leaders discussing complex, critical issues such as operational efficiency, care collaboration, and risk management. In other words, how they use technology to achieve these ends.
Back to our Industry Survey: nearly twice as many healthcare leaders say the industry is on the wrong track (46%) rather than the right track (25%). (The remaining 29% are on the fence.) Healthcare faces a host of challenges today. Regardless of what they think of the particulars of the Patient Protection and Affordable Care Act or its chances for overturn, our readers tell us almost unanimously that reform is needed. Technology is part of the solution.
The federal government is offering bonus money to hospitals for meaningful use of healthcare IT, even as it terms 2012 the year of meaningful use. To spur developers to come up with better tools to track patients after discharge, the Office of the National Coordinator for Health IT has launched a challenge to create a Web-based application that could empower patients and caregivers to better navigate and manage a transition from a hospital.
Incentives like this are easy money, but they really shouldn't be necessary. Technology is the only means by which healthcare systems can make it out of their current impasse.
Last week, at one of our Roundtable events—HealthLeaders Media's gatherings of small groups of hospital executives to discuss topics of top concern—Dave Brooks, CEO of Providence Health and Services' Northwest Washington Region in Everett WA, said his system will need to cut costs by 10–15% over the next few years, beyond its already efficient operations.
We hear targets of this magnitude repeatedly from healthcare CEOs and CFOs. That's a huge gap from current practice, in an environment of already-strained balance sheets at many organizations.
Brooks, an experienced executive who has worked at multiple healthcare systems, is experimenting with several ways of controlling costs: improving primary care access, meting out specialty care, and finding a better way to deal with patients who return again and again for expensive ER treatment for chronic conditions.
Case management for such "frequent flyers" offers a remarkable opportunity for savings. Better care for diabetes patients alone can easily cut costs by 4%, according to another of our Roundtable participants, Dr. Edward Jeffries, CMO of Baton Rouge (LA) General Physicians. It's notable that all these moves would improve patient health as well as save money.
Underpinning these necessary changes is technology. Electronic medical records that are accurate, portable, and based on real-time data are a precondition for identifying frequent flyers and improving their care. Clinical informatics, along with nurse informatics and pharmacy informatics, is a key to preventing readmissions. Data analytics offers a way to flag problems before they slam your bottom line.
Like many of their colleagues, Brooks and Jeffries laud the patient-centered medical home model as a means of cutting costs while improving care quality. Although PCMH is much more than an IT project, it requires a substantial IT investment to become reality.
At one of our recent Rounds events, which are executive discussions hosted by a healthcare system and simulcast to a wide audience, C.R. Burke, president and CEO of St. Joseph Heritage Healthcare, listed five elements of the medical home's IT infrastructure: EMR/EHR, patient health records, shared case management, physician utilization, and risk stratification/predictive modeling. All of these must work in concert.
There is, of course, a catch in this happy scenario. Along with technology solutions come technology problems. Although healthcare IT is hardly in its infancy, many other industries are farther along the curve of IT adoption. Executives in financial services, manufacturing, retail, and other IT-intensive industries have learned some hard lessons:
No IT system ever works as seamlessly as promised. That smooth demo you saw applies to ideal conditions, never to you. Siloed systems that can't communicate with one another, dirty data problems, and stupid user tricks aren't just the stuff of Dilbert cartoons.
No IT department can do all the work; users have to meet them halfway. Complicating matters is that for healthcare, the users include hospital executives and administrators, physicians and nurses, and patients and their families—parties that have different needs and points of view.
IT systems cost a lot, but IT consultants often cost more. Yet without consultants who can get into the details of linking disparate data systems in ways that different departments and functions can use, your expensive new system will become shelfware.
In short, IT's role in healthcare will continue to rise, but so will IT's prominence in your role—no matter what your title.
Healthcare IT is subordinate to the medical mission. Information technology in hospitals and healthcare systems operates in the service of executives, medical staff, and especially patients, and healthcare CIOs tend to focus on industry-specific issues such as meaningful use, healthcare information exchanges, and EMRs/EHRs/PHRs. The professional organizations for healthcare CIOs, CHIME and HIMSS, speak to the specific issues of their members.
Yet I am struck by how similar the healthcare CIO's job is becoming to that of CIOs across other industries. John Halamka, CIO of Beth Israel Deaconess Medical Center and Harvard Medical School and a noted blogger, recently penned a column titled "The modern healthcare CIO job: It's becoming a Mission Impossible." He recounts a host of difficulties, including "compliance burdens, overwhelming demands, and impossible expectations."
These issues are common to many CIOs, no matter what industry they work in. Though IT executives in healthcare may face more than their share of regulatory compliance requirements, the CIO is often the default chief compliance officer. A bigger concern is the gap between the expectations of IT and the CIO's ability to deliver.
It may help or just depress you to know that this gap is endemic and is hardly limited to healthcare.
The disparity between expectations of IT and reality results, paradoxically, from the success of technology. People have come to expect instant communication and copious data from their devices. In an age of Internet protocol, it's hard to explain why systems can't talk to one another. (Legacy systems are meaningless to those who haven't invested money in buying them or training time in using them.)
To people used to downloading new, ever-more-inventive apps, it's hard to explain why IT systems can't accomplish seemingly simple tasks. Reliability and privacy are always someone else's problem?i.e., yours.
If there is some solace, it may be that other CIOs have foundered on these rocks before you, and have come back with a handful of strategies for coping:
Focus on the foundation. Many CIOs have observed that balky email systems and network downtime do more to undermine the credibility of IT than just about anything else, no matter how mundane you might consider them. Real-time dashboards now allow you to be transparent about IT services delivery. Of course, transparency also means accountability.
Manage expectations. Of course your users want everything yesterday, and they want it free. Wouldn't you? CIOs across many industries have adopted various approaches to improve contact?business analysts, IT governance meetings, and IT marketing campaigns, to name a few.
But successful measures generally boil down to communicating what is realistic versus what would require a new infrastructure, to understanding what people really need to do, and to saying "yes, but" rather than no.
Gain a seat at the table. This phrase, along with the word "alignment," is sometimes used wistfully to envision a nirvana where the CIO is consulted on all important business decisions, and IT and its business-side partners march in lockstep. In reality, a seat at the executive table is usually hard-won and requires constant work to prove the value of IT.
Even without such a seat, you can work to show that you're a willing partner with business departments, physicians, and partners to enable them to do what they should be doing.
Agile management. Not agile IT, necessarily. Your IT department must be able to respond quickly to crises, new demands, and new technologies.
What's missing from this list? Technology?which is simply the means to the ends that your organization seeks. Although it helps to understand technology, if only to know when a vendor is trying to snow you, in the end, the job of healthcare technology leaders is to help lead the organization. That's a job they share with all CIOs.
Disruptive innovation is the concept that new technologies can turn industries upside down, yet are exceedingly hard for established companies to recognize and harness. While technology might provide the fix for healthcare, it clearly has created a large part of the problem—much of the ever-increasing cost of healthcare is attributable to ever more expensive machines and IT systems. It's worth asking whether the cause of healthcare's problems can really be its solution.
To tease out this conundrum, it helps to think clearly about the different types of technology that affect healthcare. Christensen holds that technology has already disrupted healthcare over the past couple of decades. Yet he's not speaking of electronic medical records or higher-resolution imaging machines.
Rather, technologies such as air travel that affect society on a large scale have undermined the rationale for many hospitals; whereas travel used to be difficult and expensive, nowadays people routinely fly across time zones and even international boundaries for medical procedures. Fewer hospitals are needed as a result.
"Over time, we'll need fewer and fewer hospitals. Boards of those institutions need to just remember that the scope of what they need to do is to be responsible for the health of people, not the preservation of the institutions," says Christensen, one of this year's HealthLeaders 20 honorees.
A second type of technology that has changed healthcare fundamentally is the plethora of monitors, testing equipment, and other devices that make the delivery of healthcare possible in any setting—in a retail clinic, at home, or in a hotel room, for instance. Individually, many of these devices are prosaic, but their total impact is enormous.
At HealthLeaders Media's CFO Exchange event in September, Joe Smith, MD, chief medical officer of the West Wireless Health Institute, gave a persuasive keynote address on the potential for wireless devices, along with data analytics, to disrupt (there's that word again) the practice of healthcare.
Now consider that these two categories of technology are not what people talk about when they talk about healthcare IT. Instead, the focus is on EMR, EHR/PHR, CPOE, HIEs, and other of the three-letter acronyms that IT vendors and government agencies love. These informatics solutions have the potential to make healthcare much more efficient, but at a cost.
Yet there is a fourth type of technology that makes healthcare informatics inevitable. The ICU equipment that keeps people alive and allows quick and accurate diagnoses, the operating room devices that make formerly improbable procedures now routine, the medical devices that return sick people to a relatively normal life—this kind of medical technology is a wonder of the modern world, yet it nearly costs the earth, too. Medical hardware has raised the practice of healthcare but also raised expectations of what healthcare can accomplish.
All four of these categories of technology have disrupted the practice of healthcare and will continue to do so. Some technologies increase overall costs, others decrease it or have great potential to do so. As Christensen says, the solution to disruption can only be disruption. But the path to a future state of healthcare business bliss won't be straight, and it won't "just happen."
It will take a lot of work from many actors—IT vendors, medical device makers, government agencies, and most especially hospitals and healthcare systems—to bring about disruptive changes that lower healthcare costs while maintaining quality.
Besides, change never ends. What comes after the current disruption? More disruption.
