Technology remains top area of capital spend, according to health system C-suite
CHARLOTTE, N.C. — Capital expenses needed to effectively manage population health are on the rise, according to C-suite respondents to Premier, Inc.’s (NASDAQ: PINC) fall 2015 Economic Outlook survey. A leading healthcare improvement company, Premier conducts the biannual survey to highlight economic and industry trends affecting health systems.
When asked about capital budgets compared to last year, nearly 60 percent of health system C-suite survey respondents – primarily CEOs, chief financial officers and chief operating officers – said they plan to increase their capital spend this year. Of those increasing capital expenditures, 39 percent reported increases of 10 percent or more – more than quadruple the number of health systems citing these increases a year ago (Figure 1).
“The enactment of the Affordable Care Act brought reimbursement cuts and increased pressure on health systems to tightly manage budgets,” said Michael J. Alkire, chief operating officer, Premier. “Six years later, that pressure continues as well as the pressure on providers to transition from the historical fee-for-service environment toward alternative payments, such as shared savings and bundled payment. The shift requires that health systems make new investments in infrastructure and high-value care networks to deliver better outcomes, as well as manage risk-based contracts and less reimbursement.”
The majority (72 percent) of C-suite respondents agree that they are successfully managing the transition from fee-for-service reimbursement to alternative payment models. However, the move to alternative payment models also requires heavy investments, with start-up fees estimated at $1.7 million, as well as maintenance and administrative costs between $6 and $14 million, according to DC-based research firm Urban Institute.
For the past five years, Premier members reported the most significant capital investments in health information technology (HIT), which remains the largest area of added investment, cited by 72.2 percent of C-suite respondents. Other top areas of capital investment include facility renovation, cited by 51.9 percent of respondents, and imaging equipment, cited by 44.4 percent (Figure 2).
“Investments in HIT, data analytics and modern clinical infrastructure are foundational for providers to seamlessly deliver population health services across their inpatient, outpatient and alternative care sites,” said Alkire. “Increasing capital budgets are a positive indicator that health systems are better equipped to invest in building and wiring care centers that can meet these new demands.”
When asked about population health investments over the next three years, C-suite respondents reported a strong focus on expanding capabilities to provide patient engagement in health and personal care (54.7 percent), followed by care management for chronic diseases (53.8) percent), wellness programs (51.9), creation of physician and multi-specialty groups (49.1 percent), patient outreach and reminders (47.2), and advanced population health data analytics (46.3 percent) (Figure 3).
Other trends cited in the survey included the development of post-acute care networks. Ninety percent of respondents indicated that they will expand their post-acute care network over the next three years.
About the Economic Outlook survey
Premier’s Economic Outlook survey highlights emerging economic and industry trends impacting health systems. C-suite respondents to the most recent survey, which was conducted online in summer 2015, represent 55 health system executives across the U.S.
About Premier Inc.Premier Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of approximately 3,750 U.S. hospitals and more than 130,000 other provider organizations. With integrated data and analytics, collaboratives, supply chain solutions, and advisory and other services, Premier enables better care and outcomes at a lower cost. Premier, a Malcolm Baldrige National Quality Award recipient, plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premier’s news and investor sites on www.premierinc.com; as well as Twitter, Facebook, LinkedIn, YouTube, Instagram and Premier’s blog for more information about the company.