01 Dec Economic woes may not cause big cuts in Wisconsin hospital technology
Milwaukee, Wis. – A new report from the American Hospital Association says health information technology spending could be a casualty of the nation’s economic woes, but early indications are that Wisconsin hospitals will continue make strategic IT investments.
As the financial health of hospitals worsens, and their ability to borrow to update technology and facilities is restricted, the AHA said 56 percent of survey respondents are considering or actually holding off on renovations, 45 percent are delaying the purchase of clinical technology or equipment, and 39 percent are putting off investments in new information technology.
In Wisconsin, hospital officials say discretionary projects are being examined to see which can be cut back or delayed, but technology implementations that are strategic to the business will proceed.
“My sense is that there probably will be an impact here, but it’s likely to be somewhat milder than what is going on nationally, where there has been a significant pull back,” said Steve Brenton, president of the Wisconsin Hospital Association. “In an anecdotal sense, some projects may take five years rather than three years.”
Hospital cost pressures
The AHA survey findings are based on queries to 736 hospitals and information from DATABANK, a web-based reporting system that tracks hospital trends.
The survey found that several trends are ratcheting up cost pressure on hospitals. The AHA survey found that more than 30 percent of hospitals report a moderate to significant decline in patients seeking elective procedures, a sign that consumers are cutting back on discretionary health spending. Nearly 40 percent of the respondents report an overall drop in admissions, and a majority reports an increase in uncompensated care.
These trends are impacting the bottom lines of hospitals nationwide. According to the AHA, total margins fell to negative 1.6 percent during the third quarter of 2008, compared to a positive 6.1 percent during the same period in 2007.
Since many hospitals rely on investment income to make ends meet, their financial conditions have likely been impacted by recent stock market turmoil. In contrast, from July to September of 2007, AHA said hospitals saw interest payments on borrowed funds increase by an average of 15 percent.
Through the first nine months of 2008, several hospitals and health systems in metropolitan Milwaukee have reported operating losses in the tens of millions.
The bad news probably will keep coming. Medicaid expenditures, which represent the largest and fastest-growing part of many state budgets and cover half of the patient care provided by American hospitals, historically increases faster during economic downturns. As enrollment grows and state tax revenues drop, the prospect of cuts to Medicare and Medicaid grow.
Wisconsin hospitals also face the prospect of a new tax that could generate $75 million for the state of Wisconsin, which faces a $5.4 billion budget shortfall.
Taking a HIT?
What does this mean for the pace of healthcare IT deployment?
The Wisconsin Hospital Association is conducting new surveys of its members to measure the bottom line impacts of current economic conditions. An August 2008 WHA survey, taken before the nation’s worsening financial situation became a full-blown crisis, found that 90 percent of Wisconsin hospitals have implemented several key health information technologies.
This includes the electronic medical records that integrate data gleaned from multiple HIT systems. Forty-one percent of Wisconsin hospitals had either fully or partially implemented EMRs, and 21 percent had fully implemented all the HIT systems that contribute data to an EMR.
The Wisconsin report, based on a survey of 122 acute care hospitals, focused on 16 healthcare information technology systems used by hospitals, including lab information systems, pharmacy systems, medication administration systems, radiology information systems such as picture archiving and communication systems (PACS), and computerized physician order entry (CPOE).
Cost remains the main barrier to further adoption, so current economic conditions are forcing a re-examination of discretionary projects.
Marshfield Clinic has been an early adopter in a number of HIT areas, but it’s not completely immune from broader economic concerns.
“It’s fair to say we’re slowing down like everyone else is,” said CIO Carl Christiansen. “We’re not stopping because we simply can’t afford to stop. Anything discretionary, we’re putting on hold. Anything deemed necessary to maintaining service levels and keeping pace with our growth, we’re doing.”
Christiansen declined to offer specifics as to which HIT systems are feeling the pinch, but he said information technology is so core to the organization’s business that it has be careful with such decisions.
He also cited a Gartner, Inc. report that said 71 percent of IT investments fall into the non-discretionary category, and noted that investments in automation can produce the type of cost-cutting and efficiency that organizations want in any economic situation.
One technology investment that Marshfield Clinic is proceeding with is a redundant data center that is part of its disaster recovery strategy. The clinic has signed a contract with TEAM Companies to use TEAM’s new Fitchburg data center as a back up to its Marshfield data operations.
The Milwaukee-based Aurora Health Care also is keeping strategic options alive, according to vice president of information services and CIO Philip Loftus. Aurora, which has nearly completed its system wide EMR adoption, is proceeding with plans to build a new $189 million hospital in the Town of Summit in Waukesha County, which is set to open in early 2010, and then build another new hospital in the Ozaukee County community of Grafton.
Loftus said both hospitals will be equipped with the most up-to-date healthcare IT. They also will be wireless with a Wide Area Network as a back up to cover Aurora’s geographic expanse in eastern Wisconsin.
The construction and technology commitment to these new facilities, which follows nearby expansion by health system competitors, does not mean existing hospitals and clinics are being shortchanged. Aurora recently implemented CPOE, one of the most expensive HIT systems, at hospitals in Oshkosh and Burlington, and will include these systems at the new hospitals in Summit and Grafton. Loftus also said plans are proceeding for a new PACS at Aurora BayCare Medical Center in Green Bay.
“We’re looking long and hard at our discretionary spending, but we want to save money without impacting our business services or business performance,” Loftus said.
According to Loftus, operational efficiencies have been achieved through server consolidation involving VMware, and with the implementation of a Storage Area Network that enables Aurora to manage storage across its major business systems.
However, with new systems come new costs, and Loftus cited PACS as an example. EMRs and PACS are the two biggest drivers of HIT spending, and when the latter technology was first introduced, it was deployed mainly in hospitals and used solely by radiologists. Now clinics also want their own systems, and physicians, cardiologists, and other specialists want to view the storage-consuming images they produce.
“Each time we build a new clinic now,” Loftus said, “they want a new diagnostic imaging system. It has expanded from hospitals to clinics and from radiologists to specialty physicians.”