Implications of Healthcare Technology Investments

Implications of Healthcare Technology Investments

“We’re at the golden spike phase of the electronic health record (EHR),” said Frank Byrne in reference to the ceremonial spike that completed the nation’s first transcontinental railway. “We’re at the beginning of this journey,” added the senior executive advisor of HealthX Ventures, a digital healthcare-focused seed fund.

And according to Byrne, there’s more than a bit of catch-up taking place at the moment. “Let’s be honest with ourselves,” he said. “We dug this hole by underspending on IT for years.” Banking was an industry that moved forward with IT as a strategic tool, and the health care field only did enough to get by and survive. “We are going to have to overspend until we get it right,” Byrne noted, “and we’re not there yet.”

Fellow panelists joined Byrne at the Disruptive Healthcare Conference in Madison during a session entitled “Wall Street’s Perception of the Financial Impact of Healthcare Technology Investments,” including Jennifer Brown, managing director of Ponder & Co., a financial services company focused on not-for-profit healthcare providers.

Financing new technologies that can carry incredible price tags is no simple task, she pointed out. The cost of healthcare IT investments such as EHR systems is actually affecting financing in today’s market because there’s a shorter asset life involved. Ten years ago, there weren’t the same types of attempts to finance IT, but now huge dollars are going into these tools.

“That’s changing the way my clients do business,” Brown added. “I would say Wall Street, to a certain extent, hasn’t exactly caught up in that there isn’t a great tool; there isn’t a great way to finance short term assets over the long term.”

Ratings Perspective

Emily Wadhwani, director of public finance healthcare group with Fitch Ratings pointed out that EHRs aren’t viewed from a ratings standpoint as a potential financial benefit but rather a tool that exists for clinical quality, and an increase in IT spending isn’t necessarily viewed from a ratings perspective as a concern, she added.

But it does depend on where you are with your capital cycle along with existing needs. “Not to oversimplify, but we’re big on bottom line” she said, “and so any expense that competes with debt service we want to know about. Is there a magic number? No. We tend to take a broader view.”

Evaluate the Challenges

There are pitfalls that can stem from overhauling an IT system, however, and this process can become even more complex as healthcare service providers consider affiliation or mergers and acquisitions.

“I think bigger isn’t necessarily better,” said Brown. “It’s extremely challenging to merge healthcare systems and providers.” Brown is seeing systems that are merging and spinning off the ones that don’t make sense after discovering that trying to integrate them is just too challenging and time consuming.

Consolidation Complexity

In a separate session entitled “Marketplace Consolidation: Don’t Forget the EMRs,” Greg Smith, senior vice president/CIO with Wheaton Franciscan Health Care joined a panel of experts as they considered the ramifications of consolidation from a technology standpoint.

One of the key challenges stemming from a consolidation is how to integrate all the disparate clinical systems so that meaningful data can be provided to clinicians. “You are fundamentally affecting the workflow of the people who take care of patients, and you can’t do that superficially,” he said. “You have to do that very, very thoughtfully.”

Consolidating operations becomes far more evolutionally than revolutionary, Smith added, because you can’t put patients at risk. The result is that information systems serve an incredibly important role in terms of determining what to do in the immediate term, short term and long term so that technology can be utilized in a way that makes sense and delivers an actual benefit.