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Hospitals look for immediate return on investments in tough operating environment

Originally posted by Healthcare Dive | April 20, 2023

Hospitals are curbing non-essential expenses in today’s tricky operational environment, but they’re still looking to invest — just with more due diligence and in companies that can immediately save money or add revenue, executives said at the annual HIMSS conference in Chicago.

We’re not going after anything that’s kind of cool that takes a couple of years to get to the bottom line. This is about immediate returns,” said Rasu Shrestha, chief innovation and commercialization officer at nonprofit Advocate Health, on a Wednesday panel about health systems post-COVID-19.


Hospitals — especially large nonprofit systems with substantial cash pools — have been acting more like venture capitalists in recent years, ramping up investments in companies with products they can use and scale down the line.

At the same time, many health systems have been struggling financially. About half of U.S. hospitals finished 2022 with negative margins as expenses outpaced revenue, according to Kaufman Hall. Though early data is showing an improvement in 2023, hospitals continue to report higher labor expenses and lower patient volumes.

As a result, hospitals that used to spend funds based on projections for future clinical outcomes improvement or revenue growth are instead refocusing on solutions with a proven return on investment.

It’s what do we know, rather than making real bets on things,” said Rebecca Stametz, VP of digital transformation at regional health system Geisinger, on the panel.

Lauren Hopkins, assistant VP of virtual care and community engagement at Augusta University Health in Georgia, said her system is looking to partner with organizations with solid revenue that are honest about what they can achieve.

There’s a ton of technologies out there. A ton of people are going to tell you they can do X, Y and Z, and then they can’t,” Hopkins said on a panel about provider operating models. “Right now we’re living in a world where unfortunately we don’t really have time to demonstrate. We need to show immediate return on investment for some type of product.

Other hospital executives said they’re looking to spend on companies that are aligned with their strategic priorities, interoperable with other IT systems and willing to take on financial risk.

The current operating environment hasn’t affected client demand for technology, but it has narrowed the problems hospitals are trying to solve as they work to become more efficient, Andy Puterbaugh, the head of Teladoc’s hospital and health system division, told Healthcare Dive on Wednesday.

Hospital leaders said they’re most interested in tools to ameliorate workforce shortages, streamline administrative functions and help them care for patients at home.

The confluence of demographic and labor trends is expected to soon create a perfect storm for hospitals, according to experts. Hospitals are reporting growing shortages of doctors, nurses and other essential staff, and the problem is only expected to worsen as the U.S. population ages, creating additional demand for medical services.

Academic medical center Mayo Clinic is better resourced than many other hospitals, but still has critical areas with vacancy rates of 30%, like nursing, said Cris Ross, CIO of Mayo Clinic, on a Wednesday panel on health system financials.

But there’s potential to leverage tools like automation and artificial intelligence to ameliorate labor shortages, experts said.

In every rich country I have worked in, especially in the last year, the issue of not enough caregivers, whether it’s doctors or nurses, has become the issue that everyone is afraid of,” said Kaveh Safavi, senior managing director of healthcare at Accenture. “This is where technology can help us out, because we can shift tasks from humans to machines and create more capacity.”

Hospitals are also open to building hospital-at-home programs, which allow patients to receive acute-level care at home while shaving down costs. Adoption of the models has been growing slowly, but has been held up by a number of factors, including concerns about initial investment costs in remote monitoring and telehealth technology.

For health systems facing capital constraints, the return from home hospital programs should eventually fund that infrastructure — especially right now, with payment parity from the federal government, said Tom Kiesau, chief innovation officer at the Chartis Group.

Over time, hospital at home costs less than providing care in the hospital, results in new tech capability and doubles revenue potential by adding capacity, according to the CIO.

Doing the math is something that a lot of health systems don’t do,” Kiesau said.

Companies that sell to hospitals advised startups to understand hospital pain points and demonstrate clear clinical and economic value. It’s key to give hospital administrators hard evidence of savings while navigating the bureaucratic buying process, said Kevin Von Keyserling, CEO of software company Readyset Surgical.

Hospital leaders admitted they could pare back the bureaucracy and work to be more responsible with companies looking to partner, but said today’s high bar for spending money is unlikely to lower anytime soon.

We’re in the midst of really trying financial times,” Shrestha said.

Original post by Healthcare Dive.

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