Healthcare: Today’s challenges, IT investment, ROI and Optimization

1. Healthcare: Today’s challenges, IT investment, ROI and Optimization • July 29, 2013

2. Today’s realities and current business state: • Entitlement challenges and Federal spending • IT spend current and projected • Industry Trends: Operational and Technology Impact • Emerging and Near Term technologies • Healthcare Provider IT Marketplace and Impact of Last Four Years • Calculating the ROI (and Value) Associated with Healthcare IT Investments • Establishing a Monitored Optimization and Benefits Realization Program Overview

3. U.S. Still Has a Huge Entitlement Funding Problem • Medicare, Medicaid, and Social Security are not self-funding and the main driver of deficits, responsible for more than 25% of all federal debt since 2000. • Longer life expectancies, changing demographics and soaring costs make entitlements as we know them today unsustainable. • Medicare’s annual cash shortfall in 2011 was $288 billion. • Social Security had a cash flow deficit of $58 billion in 2012. • Without reform, the typical 3rd grader will receive only about 75% of the benefits provided to today’s seniors. • Entitlement costs are growing at an alarming rate.

4. 2013 U.S. Proposed Federal Spending • 25% of the US Federal Budget is devoted to Medicare & Health spending http://nationalpriorities.org/

5. Challenges facing Medicare: • Aging population in the US accustomed to full-service healthcare insurance • National debt nearly 100% of US GDP Macroeconomic Reality – Federal Healthcare Tab is Huge, Growing Fast and Hard to Reduce http://jamsidedown.com/2011/02/the-federal-budget-getting-what-we-asked-for.html

6. US Healthcare IT spend:2012 - 2017 • Spend will focus on aging financial systems and away from EHR technology • Projecting in excess of $3B from current $1.9B for Revenue Cycle technologies • Telecommunications services projected to $14.4B in 2017 from $9.1B in 2012 Industry wide IT spend could exceed $70B

7. Industry Trends: Operational and Technology Impact

8. Trends/Impact

9. Trends/Impact

10. Trends/Impact

11. Trends/Impact

12. Trends/Impact

13. Emerging and Near Term Technologies

14. RFID • Patient monitoring and safety • Reduce theft • Track medical devices • Patient tracking • Telemedicine • Targets – chronic disease, geriatrics, rural medicine, outreach • Cloud • Making data more accessible yet still secure - public vs. private clouds • Need to understand - what data is most important? What do we need to control and manage vs. allow access to? • Less dependence on “in-house storage,” decrease costs • Leverages the ubiquitous internet • Challenges: data security, ownership Emerging and Near Term Technologies

15. Social Networking (Facebook, Twitter ,for example) • Immediate access to over a billion users (current Facebook members/users - 1.1B) • Can provide instant feedback on mission, programs, services, products • Can generate market connection/ share with very little cost; consumer relates to the use of SM and makes a connection • “You communicate the way I like to communicate” • Mobile Devices in Medicine (BYOD) • Prolific “App” mentality - as of April 2012-13, 600 iPhone health applications are available* • “Symptom Checkers” – personal apps with some medical credibility • A recent IMS Health report forecast that 80% of the remote monitoring market will be mobile by 2016 • Utilize existing technology and infrastructure for specific applications • Extend technical expertise to manage and support Apple/Droid/BB/Windows mobile architectures * Mobile Health News 6/2012 – includes personal, provider, fitness Emerging and Near Term Technologies (cont.)

16. “Big Data” - Genomics/Proteomics • Integrating external clinical and research data, episodic clinical data, genomics, proteomics, financial and outcomes data to treat patients • Exponential data relationships driving clinical picture • Managing petabytes of data (1015) - quadrillion • Medical Body Area Network (MBAN) • Ultra small and ultra low power wireless wearable/implantable devices for specific clinical data monitoring (i.e., blood glucose levels, eye pressure, cardiac function) • Personal Pill-Sized Soft Medical Robots for the Gastrointestinal Tract - researchers (University of Washington and University of California at Santa Cruz) are developing a pill-sized soft capsule robot that can be precisely controlled remotely to enable diagnostic and therapeutic functions in the digestive tract for clinical and potentially personal use • FCC recently approved new band spectrum to support MBAN technologies Emerging and Near Term Technologies (cont.)

17. Impact of the Last Four Years and the Healthcare Provider IT Marketplace

18. HITECH Continues to Drive Automation • ONC Data Brief No. 9 – March 2013 • Hospital adoption of EHR systems has more than tripled since 2009 • Hospital adoption of at least a basic EHR system more than tripled since 2009 from 12% to 44% • Percent of hospitals possessing certified EHR technology increased by 13% between 2011-2012 from 72% to 85%

19. HITECH Update

20. EHR Adoption Projections

21. Current Healthcare Market Overview– HIMSS Analytics Adoption Trends

22. The percentage that has moved from lower to higher stages has not increased dramatically after 2009 • Ex: In 2009, 13% were Stage 4 or higher • In Q3 2012, 35% were Stage 4 or higher • Surprising that this number is not significantly higher following HITECH Where’s the Dramatic Growth in Higher Stages? Stage 5 = 9% Increase Stage 4 = 7% Increase Stage 3 = 8% Decrease

23. HIT Vendor Market: • Today: 7 major vendors and 250+ small-mid sized • Several of these players are facing existential challenges • Consolidation is inevitable • Fortune 1,000 ERP Market: • Early/Mid-1990s: 100+ vendors • Today: SAP and PeopleSoft (Oracle), Lawson (Infor) Software Vendor Consolidation http://www.industryweek.com/articles/erp_vendors_big_get_bigger_9670.aspx http://www.healthdatamanagement.com/issues/19_6/health-information-technology-vendor-acquisitions-42542-1.html

24. Calculating the ROI (and Value) Associated with Healthcare IT Investments

25. The ability to measure ROI becomes increasingly difficult as the complexity of the systems increases. ROI Is Difficult to Measure in Healthcare IT “Finding Value from IT Investments: Exploring the Elusive ROI in Healthcare” http://www.himss.org/content/files/Code%20159_Finding%20Value%20from%20HIT%20Investments_Vogel_JHIM.pdf

26. Classic economic models for ROI do not appropriately reflect the healthcare business HIMSS recommends a new model for ROI: Measuring Healthcare IT ROI: A New Model Smith, C. “ROI In Health IT Is More Than Just A Price Tag.” September 21, 2012. http://blog.himss.org/2012/09/21/roi-in-health-it-is-more-than-just-the-pricetag/

27. HIMSS Health IT Value Suite- STEPS Provides content and examples for evaluation of the value of your IT investment

28. The right model and categories of return will vary from one organization to the next • ROI is there for most organizations over a 5-10+ year period • Electronic records $2/record/year vs. $8/record/year for paper records!! • Optimization will accelerate ROI to an acceptable payback period • Based on the size of the health system and the scope of the implementation, benefits for a large hospital can range from $37 million to $59 million over a five-year period following an EHR implementation. • In addition to the incentive payments earmarked in ARRA and includes benefits primarily from length-of-stay (LOS) reduction, readmission rate reduction, emergency department (ED) revenue reimbursement, ambulatory revenue reimbursement, and drug cost reduction.* Healthcare IT ROI – It’s There *Bell, K. & Thornton, L. “From Promise to Reality – Achieving the Value of an EHR.” Healthcare Financial Magazine. February 2011.

29. EHR benefit outcomes can vary depending on a number of factors, including organization size, complexity, scope of implementation, etc. • As a result, the benefits can be wide-ranging, but include key areas such as: • Improved decision-making capabilities • Reduction in medical errors • Improved medication safety via fewer adverse drug events • Improved patient outcomes resulting in standardization of care • Not All Rosy: Mixed opinions and evidence as to the overall benefits of EHR’s on clinical outcomes Where Are the Non- Financial Benefits? http://www.readperiodicals.com/201102/2273326421.html#ixzz2KEqVdi1xhttp:// www.emarketer.com/blog/index.php/tag/how-many-people-shop-online/

30. Cash Flow and Revenue Benefits

31. Cost Reduction and Avoidance Benefits

32. Establishing a Monitored Optimization and Benefits Realization Program

33. While every implementation is different, some patterns have emerged regarding what makes one successful or not Implementation Lessons Learned – What We’ve Seen

34. The Merriam-Webster dictionary defines optimization as “an act, process, or methodology of making something as fully perfect, functional, or effective as possible.” In Healthcare Information Technology, Optimization has come to be known as the act of improving clinical information systems (as well as the environments in which they operate) in a manor that yields continual improvement well beyond a product implementation go-live! What is Optimization? Advanced Functionality Go-Live Event Baseline Functionality Time

35. Fact: EHRs are the new normal in healthcare • Baseline implementations act as a “springboard” from which organizations can meet future requirements • Design with optimization in mind – “we get smarter as we utilize the technology” • The work is not complete at go-live; it’s just begun! • To make the most of your EHR, it is crucial to form a dedicated optimization team • Spanning multiple departments of the organization • Working with members from every level of the organization • Proactive optimization is rooted in the principles of TQM, LEAN, CQI, etc. and will work to: • Improve the overall effectiveness of healthcare workers • Improve patient safety • Address issues of cost Optimization Programs

36. Should be understood as a substantial undertaking with significant resource/operational investment Optimization efforts should be viewed broadly as an operational improvement effort, keeping ROI constantly in focus Monitored Optimization & Benefits Realization Program

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