The Impact Advisor 3Q21

The Impact Advisor 3Q21

The Impact Advisor - Impact Advisors' Quarterly eNewsletter

The Impact Advisor is a digital newsletter focused on healthcare IT news topics, trends, and disruptors. We hope you find this quarterly publication valuable to the work at your own organization. Please engage with us (by subscribing), so we may continue to share our industry insights and thought leadership with you. 

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August 2021

EPIC “DECISIVELY OUTPACED” THE COMPETITION IN 2020, ACCORDING TO KLAS

Per Healthcare Innovation, the latest EHR vendor market share report from KLAS finds that “despite the COVID-19 pandemic, [EHR] purchasing was up in 2020, fueled in large part by decisions among large organizations as well as standalone community hospitals.” According to KLAS (via Healthcare Innovation), “[Epic’s] growth has never so decisively outpaced the competition’s.” Cerner experienced a second straight year of net market share decrease, with the vendor’s 2020 wins coming “largely from smaller organizations and hospitals who were drawn to the pricing and competitive functionality.” Meanwhile, per coverage from HIStalk, “all the hospitals that Meditech added in 2020 were under 100 beds and 62% of its legacy customers that made EHR decisions in 2020 moved to other vendors.” HIStalk adds: “Epic’s market share is 31% of all hospitals and 42% of all beds, while Cerner has 25% and 27%, respectively.”

Source: “U.S. Hospital Market Share 2021,” KLAS, May 2021 (via HIStalk on 5/21/21)

Why It Matters:

2020 was obviously a year without any precedent, and any survey or study that was conducted during that period should be looked at through the prism of the historic public health crisis. We think the fact that EHR purchasing decisions actually increased during a time of such uncertainty makes Epic’s net wins relative to the competition even more significant. Epic is dominating the large hospital / health system market and even continues to gain traction with smaller hospitals – both as recently-merged health systems seek to align on a single vendor, and via EHR extension programs (i.e., Community Connect). Eventually, there will only be so many small or midsize independent hospitals left for the other vendors to compete over, only a portion of which may be seeking – or in a financial position – to replace their EHR.


INCREASING SCRUTINY OF HOSPITAL M&A ACTIVITY

On 7/9/21, President Biden signed an executive order that (among other things) “encourages the Justice Department and FTC to review and revise their merger guidelines to ensure patients are not harmed by [hospital mergers].” According to the excellent Keckley Report: “The [executive order] signals a more aggressive posture toward industry consolidation, especially among hospitals… Regulators and legislators believe hospital consolidation has been more about market leverage and less about community benefit – a rare bipartisan consensus.”

Hospital and Health System M&A Activity, 2000-2020

Source: Adapted from “2020 M&A Year in Review,” Kaufman Hall (Jan 2021) and “2017 M&A in Review,” Kaufman Hall (Jan 2018)

Why It Matters:

It is important to note this is an executive order rather than a law or regulation, and as such, it is inherently more limited in terms of what it can stipulate. A lot of the impact on hospital consolidation will ultimately depend on the review the Justice Department and FTC are “encouraged” to conduct, and the extent to which any revisions to current guidelines are implemented. Either way, the executive order underscores the significant increase in scrutiny over hospital and health system M&A activity, fueled at least in part by a growing body of research that suggests hospital mergers lead to higher prices. However, we think it is also worth noting that M&A activity doesn’t always result in the expected savings for the hospitals involved either. For example, although slightly dated, this article highlights an August 2018 study on M&A activity that finds “hospitals, on average, save about 1.5 percent per year on common expenses in the supply chain, far lower than most pre-merger estimates.” For organizations involved in an M&A event who are considering potential synergies, the due diligence phase is the time to be very intentional and deliberate, carefully mapping out not only the potential benefits but also the likely costs associated with the merger or acquisition. 


KEY CONSIDERATIONS WHEN ADOPTING EMERGING DIGITAL TECHNOLOGIES

According to a recent survey published in NEJM Catalyst Innovations in Care Delivery, almost 60% of respondents “say their organizations either are slow to adopt new technologies (25%) or wait until there is sufficient evidence to adopt new technologies (34%).” The authors also found that “while three-quarters of [respondents] believe that emerging digital technologies [such as artificial intelligence and digital chronic disease management tools] will have a positive impact on access to care, fewer than half (49%) believe it will be positive for clinician experience.” Respondents to the survey were “a qualified group of executives, clinical leaders, and clinicians at organizations worldwide who are directly involved in health care delivery.”

Why It Matters:

The tolerance for risk among most hospitals and health systems when adopting emerging digital technologies has always been fairly low (especially when compared to other industries), and the first finding above is a good reminder that largely continues to be the case. When it comes to highly complex technologies like artificial intelligence (AI) and machine learning (ML) in particular, we fully expect cautious attitudes to continue. Reality has started to catch up with the years of hype and unrealistic expectations surrounding how quickly AI and ML can transform health delivery, and there is growing acknowledgement in the industry that while the promise of artificial intelligence and machine learning is undeniable, very real barriers remain (especially with clinical use cases). We also think the finding about concerns over digital technologies having a negative or eroding impact on the clinician experience is worth noting. Dissatisfaction among physicians with the perceived “usability” of enterprise EHRs is well documented, and new digital technologies or tools that don’t optimize workflow, address current frustrations, or somehow improve the overall quality of life for clinicians – specifically from clinicians’ perspective – will simply not gain traction. Any digital adoption needs to be “additive” to the clinician experience including compelling evidence that the technology is consistent with clinical / evidenced-based practices. 


ANNUAL DIGITAL HEALTH FUNDING RECORD BROKEN… IN JUST 6 MONTHS

Per the H1 2021 Digital Health funding report from Rock Health: “H1 2021 comprised the two largest quarters of funding activity in the US digital health market ever… In addition to overall funding, 2021 is on pace to more than double 2020 in terms of both number of deals (372) and companies funded (359).” According to the authors: “While enterprise-facing companies are still the dominant players in the digital health marketplace, we were intrigued to see that over one quarter of all digital health companies funded in H1 2021 were direct-to-consumer (D2C)-only startups. This is the largest percentage in Rock Health’s ten-year tracking history, almost two-fold higher than the mid-decade baseline, and five percentage points higher than in 2020.”

Source: “H1 2021 Digital Health Funding: Another Blockbuster Year…In Six Months,” Rock Health, July 2021

Source: “H1 2021 Digital Health Funding: Another Blockbuster Year…In Six Months,” Rock Health, July 2021

Why It Matters:

The fact that last year’s record funding amount was eclipsed in just the first half of 2021 is remarkable. For health delivery organizations who are more risk tolerant and embrace being “early adopters” of digital technologies, one obvious takeaway is there continues to be no shortage of digital health startups to serve as potential partners, providing early access to – and important experience with – emerging technologies and products. We think the increased funding in direct-to-consumer (D2C) only digital health startups (while not surprising given the pandemic changed how many consumers view their health) is also something to keep an eye on. On the plus side for providers, growing VC funding in “D2C only” digital health startups increases the chance for truly innovative and transformative products to gain traction in the market and further engage patients in their health and care. However, most – if not all – of these products will be standalone tools that exist outside of the provider’s core IT ecosystem. Some offerings (e.g., on demand care tools, etc.) from “D2C only” digital health startups may even directly compete with traditional health delivery organization services. Many emerging consumer-facing digital health tools also capture or record patient data directly, which could result in multiple “sources of truth” that need to be reconciled. There is already a vast ecosystem of third-party apps and tools available to patients, but we think the increased VC funding for “D2C only” digital health startups is notable since it could further complicate existing challenges among providers to create a cohesive and seamless patient experience and a single “digital front door.”


“AWARENESS” OF INFO BLOCKING REQUIREMENTS IS NOT ENOUGH

An April 2021 survey from vendor Life Image of 300 “clinical, technology and administrative leaders from provider, payer, IT, and other organizations” looks at awareness of the information blocking requirements that went into effect on 4/5/21. According to the press release, “nearly half of the respondents had either not made any changes or did not know how to ensure their facility meets all of the rule requirements.” The vendor also found that 47% of respondents “were not familiar with the term ‘information blocking’” while an additional 48% “were not aware of practices or policies that would be considered ‘information blocking.’”

Source: Adapted from Life Image survey on Information Blocking Requirements, 4/5/21

Why It Matters:

We would definitely take the numbers above with a huge grain of salt since the breakdown of the 300 respondents was not disclosed (i.e., provider respondents vs. vendor respondents vs. payer respondents vs. “other” respondents). That being said, we do think the survey is a good reminder that there remains some lack of awareness (and certainly a lack of deep understanding) in the industry about information blocking requirements. Many hospitals and health systems may have scrambled to meet the 4/5/21 deadline, and as a result, expertise in the organization may be concentrated among only a few staff members. Looming in the very near future though is 10/6/22, the date when the scope of the requirements will be expanded, and information blocking will be prohibited for all electronic protected health information (PHI) defined by HIPAA. That is a significant difference from what was required as of 4/5/21 – and the time, effort, and resources needed to ensure compliance prior to October 2022 should not be underestimated. The 10/6/22 requirements build directly on the existing ones, and success will require that key clinical, operational, IT, and legal stakeholders alike throughout the organization all have a firm grasp on the details, nuances, and implications of the rule.  Information blocking is incredibly complex, and one of the biggest mistakes hospital and health system leaders can make when it comes to ensuring compliance is waiting too long to get up to speed. In order to successfully meet the 10/6/22 deadline, planning and key decision making needs to be well underway today.


FREE CONSULTING

Q: Has the pandemic created a greater need for an ERP?

A: The pandemic has impacted everyone especially healthcare systems and hospitals.  While recovery was moving in the right direction, it is now more slow-going in many areas of the country.  Many ERP projects were put on hold at the start of COVID-19, but the pandemic made many organizations realize there were system inefficiencies, break downs in the supply chain, and difficulty accessing data remotely. Some organizations found ways to leverage their ERP systems for remote work and established, almost overnight, “work from home” processes and policies that focused on the workforce being able to access systems and data to be able to productively get their jobs done.

Getting ERP systems updated to support today’s “new normal” of remote work, has organizations realizing a greater need to assess their current ERP systems and determine where the inefficiencies might be. Your ERP Assessment may show that a new ERP may be needed.  Below are a few areas to consider as we continue fighting our way through the pandemic:

  • Assess your ERP’s current functionality and determine the gaps that need to be addressed.
    • Identify the functionality gaps, and then determine any enhancements that can be made to your current ERP solution. You might uncover a need to evaluate a newer ERP cloud solution.
    • Uncover advantages that ERP cloud solutions offer over on-premise systems such as easier remote access to tasks that workers need to accomplish and easier access to data for reporting.
  • Review Cyber Security and remote access tools to determine any weaknesses.
    • Review remote worker policies that may have been put together quickly at the start of the pandemic. Confirm if any policies need to be updated or/modified.
    • Revisit the technology support provided to the workforce such as providing laptops, providing collaboration tools, assisting with the cost of enhanced internet speed to support connectivity and video meetings, etc.
  • Review manual processes that no one wanted to change because “they worked ok.”
    • Remote work has uncovered broken processes that could have been overlooked because of the physical proximity of the workforce.
    • Seek out ways to automate and digitize those processes especially in the areas of financial reporting, monthly close activities, written signature approvals, PPE purchase orders, etc.
    • Determine steps in the process that can be completely removed leaving only the steps required and/or steps that provide the most value.
  • Review areas that had declines in productivity.
    • Identify the functional and technical areas, prioritize the issues, and then determine the root cause to take action.
    • Review your virtual learning programs and determine how they can be enhanced. Roll out training to the workforce specifically around “how to virtually perform their jobs” providing ideas around new ways of working, tips with remote tools, and how to alleviate some stress.
    • Assess the communication plan and determine any enhancements that can be made to support workers to increase their levels of productivity by providing more timely information.

(Response provided by Yvette Riddle, Principal at Impact Advisors)