By Todd Fitz and Munzoor Shaikh
As a major transformational force in health care, technology promises to significantly affect how health is managed and care is delivered in the United States. It will create a competitive market advantage for providers nationwide that are prepared to embrace it, while resistant legacy providers that fail to keep pace will experience increased market pressure.a
Hospitals and health systems are just now emerging from a period of massive investment in electronic health record (EHR) implementations. But they cannot expect any relief from high spending as new forces such as increased consumer expectations and new delivery models (e.g., telehealth) continue to reshape health care’s technological landscape. Significant capital spending will be needed to support investments in health and healthcare technology that meet the needs of digitally engaged consumers and other stakeholders.
Many healthcare executives are uneasy and uncertain about the appropriate level of IT spend and where to invest allocated dollars. Such concerns are understandable and appropriate. The cost of making bad capital investment decisions can be severe, if not fatal, for organizations.
A healthcare organization’s long-term success depends on the capital investment decisions it makes today.b Such decisions must be made on solid analysis; “gut feel” is not enough in the current environment. To fully prepare their organizations for a digital future, leaders of provider organizations must use planning processes that ensure sufficient capital can be allocated through right-sized IT budgets to the right technology solutions, tailored to organizational strategies.
Following are four tactics healthcare executives can use to integrate technology into systemwide planning. Such integrated planning forces leadership teams to be deliberate with investments, identifying and funding initiatives likely to most effectively position the organization for success.
1. Commit to an Integrated Planning Process
IT provides the platform for the delivery and financing of health care, so its inclusion in the organization’s overall planning process—encompassing strategy, budgeting, financial planning, and capital allocation and financing—is essential. The need for integrated planning might seem like common sense, but the fact is many organizations continue to perform planning and capital decision making for IT as a separate process. The problem with such an approach is that it is likely to result in a portfolio of technology investments that do not fully support the organization’s desired strategic position. Such investments may be duplicative, non-standardized, and more expensive than required, and they may pose considerable security-risk concerns.
The allocation of capital for IT should occur in the same way that other types of capital initiatives are funded in healthcare organizations—within a structured process that includes the following key elements:
- A high level of governance, education, and communication
- A coordinated calendar and planning cycle
- Direct links to a sound strategic and financial plan
- Clear definitions of available capital and capital expenditures, allowing equal access to dollars generated by the organization as a wholed
- A standardized, one-batch review of potential investments
- Consistent application of quantitative analysis using corporate finance-based techniques
- Data-driven and team-based decision making
- Rigorous post-approval project monitoring and measurement
Potential technology investments benefit from the same in-depth business planning and quantitative and qualitative analyses performed for all other potential major investments. This approach ensures comprehensive consideration of an IT initiative’s short- and long-term costs and benefits—its value-add and revenue—within the organization’s overall portfolio of investments. This approach also ensures the likely financial implications of that investment are transparent and available for review. Allocation decisions are based on an initiative’s fit with the organization’s strategic plan and its individual merits, not necessarily on past or present performance of a recommending entity.
Governance of this capital allocation and management process must involve high-level corporate and operational management, as shown in the exhibit below. The decisions this group makes will have significant strategic and financial consequences for the entire organization. Governance structures also vary from organization to organization. For example, some organizations currently do not extend voting privileges to CIOs or CTOs, although this situation likely will change due to the increasing size and scope of needed technology investments. The role of the board is to provide appropriate oversight of the process—as it does with other management processes, such as financial planning and operational budgeting—rather than being directly involved.e
2. Understand the Current State
To determine the right level and type of technology investment, leadership teams must understand their organizations’ current strategic-financial position. Each organization has its own unique strategy and capabilities. Readiness for health care’s transformation requires a specific set of competencies that includes physician integration, care coordination, service distribution, cost management, scale and market essentiality, brand identification, consumer experience and insights, payer relationships, capital capacity, and information systems sophistication that supports all these domains.f
A well-prepared organization has an IT platform that enables clinical decision making, convenient access points for consumers, information management, and facile communications for all stakeholders (e.g., clinicians, patients, and managers). The platform supports high-quality treatment and strategic decision making related to consumer-centric access, experience, health care, services, and pricing.g
Meeting the needs of digitally empowered consumers is a priority for providers, but the capabilities are not yet widespread. Ninety percent of respondents to a recent survey identified “improving customer experience” as a high priority, yet the survey also found that most organizations have a weak infrastructure for their consumerism efforts.h Only 64 percent identified “using digital tools to engage consumers” as a high priority, and less than 20 percent reported video visits and e-visits as being widely available. Organizations have much work to do to transform themselves into next-generation, consumer-centric enterprises. Deep consumer insights and analytics would allow leaders to create a realistic plan to make that transformation.
The strengths and weaknesses of an organization’s approach to technology investment can be identified through a specific assessment of the organization’s technology capabilities. To be thorough, such an analysis should look at how well applications, infrastructure/network, security systems, resiliency, and the IT organization support customer management (e.g., systems including patient relationship management, telehealth, imaging, population health/disease/care, and utilization management), workforce and facility management, billing management, reporting and analytics, and administrative back office function.
Key questions to answer in assessing the current IT platform include the following:
- What are the current pain points in key business and clinical processes?
- What business drivers have influenced current technology investment, and are these drivers congruent with organizational strategy?
- Who “owns” data and data storage, integrity, definitions, and maintenance?
- How aligned with current strategic priorities are technology-related operations, enterprise architecture, and governance?
The assessment will benefit from the engagement of the finance team and managers in departments or organizations that do not depend on IT for all their technology needs. Perspectives offered from beyond the IT department and outside the organization enhance credibility about needed future investments.i
Recent research conducted to gain a picture of how ready hospital IT platforms are for the digital future has identified three approaches hospitals are using to invest in technology. The profiles of these approaches differ based on the extent that they encompass the innovation necessary to fulfill the organization’s mission and strategy.
Traditional. Under the traditional approach, IT is solely a cost center, playing a support function to other business areas. If present, innovation is limited.
Experimenters. For hospitals employing an experimental approach, IT is a cost center for most functions, but in some of these organizations, technology partners with other business areas to improve operational efficiency and cost—for example, with billing and revenue cycle, and clinical documentation—and/or to positively affect revenue, such as with initiatives to enhance the patient experience and reduce referral leakage. Innovation tends to be home-grown and kept within the organization.
Innovators. Organizations that have adopted this approach are constantly leveraging and innovating technology, so that IT drives revenue as well as the optimization of costs. With a consumer-centric focus, innovators seek to deliver a superior consumer experience via a superior provider experience. The innovation pipeline is larger and broader—across patient engagement, analytics, technology-driven patient care, revenue models, and more.
With each approach, the appropriate spend as a percentage of revenue and the types of technology in which to invest are interpreted differently, as shown in the exhibit below.
3. Define a Desired Future Technology State and the Key Gaps That Impede It
After understanding the current state, the next step is to understand where the organization wishes to go and the technology that will be required to get there.j Not every organization needs to strive to achieve the innovator level of service delivery and technology maturity; the experimenter level may be appropriate. However, remaining a traditional player, which is not a recommended strategy, is a recipe for marginalization as profitability of core hospital services declines.
Extensive input from across the organization is required to define the desired strategic business and clinical capabilities and the technology that will drive and support such capabilities. That process is driven through significant contributions from, and close collaboration among, an organization’s business and IT executives.
Read the full article in HFMA.