Insights and Impact

The Impact Advisor 3Q18

The Impact Advisor - Impact Advisors' Quarterly eNewsletter

The Impact Advisor is a digital newsletter focused on what we believe are the most important news topics, trends, and disruptors impacting the healthcare industry. We’re committed to delivering value through this quarterly publication. Please engage with us (by subscribing), so we may continue to share our insights and lessons learned with you.  Subscribe


August 1, 2018

FEED ME, SEYMOUR: SMALL HOSPITALS HUNGRY FOR TECHNOLOGY

A recent KLAS report states that small hospitals (<200 beds), which are “hungry for new technology but often resource poor,” accounted for 80% of all inpatient EHR purchasing decisions in 2017.  Could this mean more opportunity for large health systems to gain traction with EHR extension programs?

According to KLAS, “Over half [the small hospitals] that signed a new contract in 2017 chose a less expensive or less resource-intensive platform – namely, athenahealth, MEDITECH, and the community deployment models from Cerner and Epic.”  Among acute care hospitals of all sizes, Epic had the most net wins (+46), followed by Cerner (+29), and athenahealth (+28).  Overall, KLAS reports that more than two-thirds of all U.S. hospitals are currently on either Epic, Cerner, or MEDITECH.

KLAS Report 2017 US Acute Care Hospital Wins & Losses

(Source: US Hospital EMR Market Share 2018, KLAS via HIStalk on 5/25/18)

KLAS Report 2017 US Acute Care Hospital EHR Market Share

(Source: US Hospital EMR Market Share 2018, KLAS via HIStalk on 5/25/18)

Why It Matters:

Small hospitals (1-200 beds) also accounted for a disproportionate percentage (78%) of all EHR purchasing decisions in 2016 – so there continues to be momentum in the small hospital market (at least for now).  It will be interesting to see which large health systems try and capitalize on smaller hospitals’ “hunger for new technology” by more aggressively marketing EHR extension programs to small independent hospitals in their area.


CONSIDERING A MERGER? YOU MIGHT NEED A LITTLE PRE-MERGER THERAPY

According to a survey from HealthLeaders Media, financial stability is the top reason why healthcare organizations are “tying the knot.” But like any good marriage, significant work is required to keep the family happy.

When HealthLeaders Media surveyed a group of health delivery execs about the financial objectives of their merger, acquisition, and partnership (MAP) planning and activity, the top response was “improve financial stability” (cited by 63% of respondents), followed by “improve operational cost efficiencies” (61%).  The most commonly cited clinical objective was “improve position for care delivery efficiencies” (65%).  See charts below.

Graphic indicating top financial objectives of healthcare M&A

(Source: Adapted from “Mergers, Acquisitions, and Partnerships,” HealthLeaders Media, April 2018)
[Note: Call out boxes added by Impact Advisors.]

Graphic indicating care delivery objectives of healthcare mergers and acquisitions

(Source: Adapted from “Mergers, Acquisitions, and Partnerships,” HealthLeaders Media, April 2018)
[Note: Call out boxes added by Impact Advisors.]

Why It Matters:

The results above serve as a good reminder about some important market realities right now, particularly:

  • the growing pressure on many provider organizations to achieve scale and increase market share, and
  • the increasing need for efficiency and better clinical integration.

It is also important to note that actually achieving the objectives cited in the charts above is not a forgone conclusion.  Significant work is required from a cultural, clinical, and IT perspective.  In fact, we think the competitive dynamics in many markets moving forward will not be shaped as much by the M&A events themselves, but rather the degree to which the provider organizations involved in the M&A succeed (or fail) to align cultures, integrate IT systems, and standardize processes.


HEY SIRI, HOW’S MY HEALTH?

Apple announced it has opened its Health Records API (application programming interface) to developers, a move that underscores Apple’s ongoing efforts to disrupt the way patients access their health information.

By making the API available, third-party apps will have access to patient health information stored in Apple’s native iOS Health app and hopefully “create an ecosystem of apps that use health record data to better manage medications, nutrition plans, diagnosed diseases and more.”  According to the press release, “when consumers choose to share their health record data with trusted apps, the data flows directly from HealthKit to the third-party app and is not sent to Apple’s servers.”  The news follows Apple’s big announcement in early 2018 of an upgrade to the iOS Health app that provided patients at participating hospitals and clinics with access to data from multiple provider organizations on their iPhone.

Screenshot of the Medisafe app, which “will integrate with Apple’s Health Records API to help consumers keep track of medications and learn about harmful drug-drug interactions.” 

Screenshot of Medisafe app

(Source: Apple press release, 6/4/18)

Why It Matters:

The announcement is important because it underscores Apple’s ongoing efforts to disrupt the way patients access their health information.  It is no coincidence that the “ecosystem of health apps” described in Apple’s press release has the company squarely in the center, essentially serving as the bridge between EHRs and patient-facing, third-party apps.  Whether that vision comes to fruition remains to be seen, but an important first step will be monitoring whether any of the new third-party apps gain traction with consumers when iOS 12 is released this fall.


VALUE-BASED CARE, LIKE ANY GOOD PERENNIAL, CREEPS BEFORE IT LEAPS

A recent survey finds that value-based payment models are becoming more prevalent, but we urge a bit of caution.

A new survey of 120 payers sponsored by Change Healthcare looks at the state of value-based payment in 2018.  Overall, responding payers indicated that pure fee-for-service currently accounts for only 37.2% of reimbursement, down from 51.7% in 2016.  According to the report: “for the first time, commercial lines, not government lines of business, are leading adoption, advancement, and innovation of value-based care models and strategies.”  Responding payers also acknowledged challenges related to engaging providers in episode-of-care programs.  Almost 60% of payers said “gaining agreement [with providers] on contracted budgets and risk / gain sharing” is either extremely or very difficult, while more than half of payers said “gaining agreement on episode of care performance metrics / reports” is extremely or very difficult.

Graphic indicating proportion of business aligned with payment models

(Source: Adapted from “Finding the Value: The State of Value-Based Care in 2018,” Change Healthcare, 6/18/18)
[Note: Call out boxes added by Impact Advisors.]

 Why It Matters:

Although fee-for-service is declining, we urge a bit of caution when it comes to jumping to conclusions about the pace of change.  One key element that is essential to the transition to true value-based payment (but difficult to account for in surveys) is the amount of financial risk that a provider organization assumes under a given model.  Right now, although value-based programs are becoming more prevalent, the overall level of risk providers are taking on is still relatively low.

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