New Frost & Sullivan research forecasts changes in hospital IT investments as healthcare organizations make significant investments in business and administrative information systems, ushering in a post-EHR era. According to the author of the research, the shift in the hospital EHR market reflects transformations in healthcare consolidation and reimbursement.
“Hospitals understand they must establish new business models in order to survive under a dramatically transformed provider landscape,” Frost & Sullivan Connected Health Principal Analyst Nancy Fabozzi said in a public statement.
“Most impactful will be cuts in Medicare reimbursement required by the Affordable Care Act as well as the shift to value-based reimbursement by commercial payers,” she continued. “Additional concerns are the growing competitive pressures from retail pharmacy clinics and third-party telehealth providers as well as the rise of the health insurance marketplace that requires individuals to select their own health plans and provider networks.”
The most immediate driver of new health information system (HIS) investments is reimbursement based on quality and efficiency, which hospital report as a major focus over the next one to two years. Provider consolidation and increasing demand healthcare services are expected to influence IT implementations more dramatically as EHR data increases in volume and hospitals work to contain costs and participate in new value-based reimbursements care models.
As for HIS market restraints, financial challenges related to shifting reimbursement away from fee-for-service are likely to continue through the next five years whereas the effects of provider consolidation on pricing and uncertainly about the future of meaningful use are not expected to persist beyond a couple years.
Here’s rundown of key findings from the Frost & Sullivan research:
- US HIS market was valued at $11.1 billion in 2013 and expected to grow at a compound annual growth rate (CAGR) of 5.7 percent between 2014 and 2020.
- Total market revenue is expected to increase steadily, reaching $17.6 billion by 2020, representing a 58.9 percent rise from 2013.
- Administrative information systems will be the fastest growing market segment with a CAGR of 10.4 percent over the forecast period.
- Financial information systems will follow, registering a CAGR of 9.7 percent over the same period.
- Clinical information systems will grow more slowly than the other segments with a CAGR of 0.6 percent.
The projections support previous findings by Black Book Rankings indicating an increased focus on revenue cycle management among healthcare executives whose non-clinical systems lag behind their clinical counterparts, due in large part to the timetable for EHR adoption required by the EHR Incentive Programs.
A survey from last June indicated that 93 percent of chief financial officers at struggling hospital had prioritized investments in RCM software, coding and collections solutions, and infrastructure to support the move to value-based reimbursements.
“With so many organizations facing operating margins below the minimal thresholds for long-term financial stability and sustainability, boards and CEO’s are moving financial support solutions and outsourcing initiatives to the top of their 2015 capital expenditure priorities,” Doug Brown, Managing Partner of Black Book Market Research, said at the time