Got the Healthcare IT Budget Blues?
It’s an unfortunate reality: Heading into FY 2022, healthcare IT budgets are limited. Hospitals continue to feel the fiscal wrath of COVID-19 and uncertainty about the future in their healthcare IT budget planning. Nearly a third of U.S. hospitals will show a negative operating margin through the end of this year with hospitals nationwide losing an estimated $54 billion in net income. Additionally, there remains concern virus mutations will continue to drive up expenses. The AHA recently published a 2021 COVID-19 snapshot reflecting that hospitals saw a 18.3% increase in supply expenses per adjusted discharge as compared to 2019. There’s also concern about reduced revenue from outpatient services and elective procedures. Many organizations have limited their elective surgeries in the past year, and with so many unknowns regarding the impact of future virus mutations, it is nearly impossible to predict the FY22 financial picture.
Still, everyone wants a piece of the budget pie—and for good reasons—to meet goals such as enhancing patient outcomes, improving care efficiency and increasing revenue. The sea of investment wants, and needs, is endless. Executives must narrowly focus on what will bring the most value to the organization during times of financial uncertainty. And so begins the work of the chief information officer (CIO). Everyone defines their priorities a bit differently; the CIO’s job is to help the organization coalesce around the highest value for the patient and the organization.
3 Best Practices to Navigate Healthcare IT Budget Planning
Avoid Technical Debt
Too often, organizations steer money toward high-profile projects while accruing technical debt – the lack of maintenance for legacy systems, people and infrastructure. Technical debt can result in system outages, sub-optimal performance (systems and people) and risk exposure to ransomware attacks and cyber incidents. Beyond the obvious financial impacts, the loss of reputation and end-user and public trust is not easily undone. CIOs must be able to clearly articulate the risks associated with technical debt and explain why foundational investments are critical to the organization’s success.
Establish and Track ROI
Before moving forward with confirming budget targets, assess current system performance and measure outcomes. Did the new digitized patient engagement platform yield the anticipated results in market growth? Has the population health predictive analytics solution reduced cost of care and resulted in improved patient outcomes? By establishing KPIs and an evaluation process, organizations hold themselves accountable and may discover they can find better alternatives or even eliminate these systems entirely, thereby freeing up additional budget dollars for more worthwhile investments.
Be Strategic with Your Healthcare IT Budget
Not every healthcare organization will have the same priorities heading into the new year—nor or should they. Much depends on enterprise strategic goals and existing health IT maturity.
For example, if the organization plans to enter more value-based contracts in the coming year, population health analytics may be a necessary investment. Or perhaps the goal is to improve rankings on U.S. News & World Report. If so, investments in coding validation software might be front and center. When CIOs are involved in strategic discussions with their executive peers, they’re better able to allocate time and resources to align with and help meet business goals.
Five Investments that Should Be on Every CIO’s Radar for 2022
Cybersecurity
Between January and June 2021, there were 82 ransomware attacks on healthcare systems globally. Of those attacks, 60% impacted U.S. healthcare systems. In these cases, 72% resulted in data leakage. The impact on healthcare cannot be understated, especially as virtual care becomes more common. CIOs should plan for continued cybersecurity investment in remediating and reducing risk.
Analytics and Artificial Intelligence (AI)
The key here is to act quickly with a laser focus on use cases with the greatest return on investment. For example, organizations may want to consider using AI or Robotic Processing Automation (RPA) to assist with revenue cycle functions—specifically for adjustment posting, billing edits and claim status. Recent data indicate 78% of health systems currently automate their revenue cycle or are in the process of doing so. When organizations use revenue cycle automation, they can contain labor costs, redeploy talent more effectively and enhance revenue integrity. On the clinical side, AI can be used to monitor patient conditions, prevent costly negative outcomes and effectively manage patient populations to ensure quality and value-based care targets are met.
Virtual Care Maturation
Many organizations implemented telehealth and virtual care applications at the onset of COVID-19. Virtual care is now a part of the delivery fabric; more than 90% of patients recently said they were satisfied with their telehealth visits and were likely to use them again in the future. Smart investments will be paramount for patient retention. Now is the time to step back and assess these systems and services strategically, for scalability and satisfaction. What do patients want? Does the current virtual care platform have an architecture on which the organization can build and scale? Are there customer support and help desk resources to address patient technology challenges?
Decommission Unused Applications and Hardware
Whether through application replacement projects or merger and acquisitions, healthcare organizations have accumulated large application portfolios. Too often, these portfolios are laden with aging and/or underutilized products. Assessing and decommissioning applications for risk and low value can reduce operating costs and technical debt. The return on investment includes hard dollar savings, cost avoidance due to potential outages or security breaches and the opportunity to uncover additional funds for value-added projects.
Include People in Your Healthcare IT Budget
Health IT investments aren’t always about software and hardware. CIOs can’t forget that people are ultimately their greatest asset—investing in them can pay short- and long-term dividends. Employee churn, especially in critical roles, can disrupt the department’s performance, ultimately impacting services and patient experience. Creating a high-integrity culture, where employees feel inspired and motivated to contribute beyond their immediate and core responsibilities, can lead to better retention. Strategies such as offering high-quality benefits (e.g., ability to work from anywhere), taking steps to reduce burnout and investing in professional development to prepare employees for the future are essential in retaining top talent and long-term success.
When in Doubt, Ask for Help
Pivot Point Consulting works with CIOs and IT leaders across the healthcare ecosystem helping them budget, plan and operate financially strong departments and programs.
