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11/29/07
Health Information Technology and Long-Term Care
By Marc Zimmet
Healthcare providers will spend as much as $39.5 billion on Health Information Technology (“HIT”) by 2008, according to new industry research. While hospitals and physician practices will fuel much of the anticipated 7.4 percent five-year compound annual growth rate, long-term care providers continue to lag behind in adopting management systems.
While nearly every skilled nursing facility (“SNF”) maintains software for specific functions such as billing and MDS completion, comprehensive systems for electronic medical records and more complex functionality seen in other healthcare venues have not yet achieved significant market penetration. In fact, many of our clients have been “shopping” systems, but do not foresee purchasing for at least two years. They fully expect to eventually implement, but not until provided with a compelling business reason to do so.
According to “Health Information Technology: Are Long Term Care Providers Ready,” an April 2007 study prepared for the California Healthcare Foundation, “HIT implementation has been more a reaction to crises than a voluntary investment based on an overall strategy.
There are two key factors hindering HIT in long-term care: Perceived return-on-investment (“ROI”) and the nascency of available product offerings.
When considered as a percentage of overall revenue, information systems are more of a financial load for relatively low revenue skilled nursing facilities than for hospitals, so providers are unlikely to invest without expecting a reasonable ROI.
Furthermore, the market has not yet provided the catalyst for widespread implementation. Most systems for long-term care are new and many are offered by unfamiliar companies. The post-acute market is immature compared to the robust HIT environment for hospitals and physicians, and SNFs are reluctant to risk the investment on an unknown entity. We have already seen some aggressive vendors exit the market, leaving early adopters administratively and financially burdened by abandonment. Accordingly, even some providers now “in the market” for IT are taking a wait-and-see approach.
The primary impetus for voluntary adoption of HIT is to improve the facility’s revenue cycle. The aforementioned study noted that HIT is primarily used for payment purposes, while there is “minimal use of clinical HIT applications.”
This is evidenced by our anecdotal evidence that HIT adoption at every scale is greater in states that set Medicaid payment based on reported acuity (“case-mix index”). In these markets, financial outcomes are more easily quantified as a function of case-mix enhancement.
Our best advice at this time is to select an experienced vendor with a fully scalable and modular product. In doing so, you will be able to implement individual functionality as needed with limited exposure.
Most operators acknowledge that HIT will likely improve operations and even clinical outcomes. However the industry’s general perception is that comprehensive HIT may not provide the required return-on-investment. We may not see widespread adoption in the long-term care setting until state or federal mandate requires implementation (and hopefully provides funding).
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