THE INDUSTRY TRANSITIONS TO ICD-10… The healthcare industry finally “flipped the switch” and made the highly anticipated conversion to ICD-10 code sets this past Thursday (October 1st). According to Modern Healthcare, “by most accounts, the first 12 hours [went] off without a hitch.” It is obviously still very early though, and as the article notes, “even CMS won’t know for sure how well the transition to ICD-10 is going for a while.” The organizations expected to be most at risk are smaller physician practices and health plans, who had more struggles upgrading systems and training staff compared to their larger counterparts.
Impact Advisors’ Thoughts: It is definitely encouraging that there weren’t any widespread problems when the clock struck midnight on Thursday, as that would have likely been a disastrous sign for the transition. That being said, there are only so many conclusions that can be drawn in just two days – and there are certainly potential issues that can (and will) arise for many providers in the coming weeks and months. The good news for most organizations is that October 1st is finally behind us, so the focus can now be on adapting to the transition rather than worrying about another last minute change to the deadline.
THE IMPACT OF THE HEALTHCARE LAW ON M&A… An article in the Wall Street Journal looks at the “health-care merger frenzy” since the Affordable Care Act was passed five years ago. Despite increasing concerns from regulators, the Journal reports that the pace of consolidation among provider organizations (and among health plans) continues to pick up speed as “companies in both industries [try] to gain the scale and heft to succeed amid changes unleashed or accelerated by the health law.” For example, as ACO-like payment models become more prevalent, many health systems are making acquisitions in an effort to expand their services so they can more effectively coordinate and deliver all aspects of a patient’s care. The Journal also reports that another driver behind the increased consolidation is the provider industry and the health plan industry are each trying to “amass leverage in contract negotiations against the other.”
Impact Advisors’ Thoughts: The article – which is recommended reading – largely looks at the M&A trend from a national perspective. We think it is important to note that many M&A decisions are driven by local and regional factors though. Often times, a big hospital or health system merger can set off a domino effect of other activity in a market or region, as competitors scramble to respond. Additionally, as the Journal notes, regulatory concerns have not slowed healthcare M&A activity thus far – but if the federal government decides to get more involved, things could change abruptly.
NONPROFIT HOSPITALS EXPECT AN INCREASE IN CAPITAL SPENDING… More than half (53%) of nonprofit hospitals believe capital spending will increase over the next five years, according to a new survey from Fitch Ratings. The highest capital priority cited by respondents was information technology, but Fitch notes that the importance of IT “has narrowed relative to other capital priorities.” In addition to IT, other factors expected to drive nonprofit hospital capital spending are consumerism and investments in outpatient services.
Impact Advisors’ Thoughts: We unfortunately don’t have access to the full report, but we wouldn’t be surprised if a fair amount of the planned IT spending is related to projects that help organizations get more value out of the increasing volume of data available in their enterprise EHR – especially as providers take on more accountability for the costs and quality of care. [Note: for more information on how CIOs are trying to realize more value from their EHR investment, download the results of Impact Advisors’ recent survey of CHIME members.]
IN CASE YOU MISSED IT… According to new data from Irving Levin Associates, 2015 is shaping up to be the “Year of the Small Hospital Deal.” Through September 25th of this year, hospitals with 100 or fewer beds have already been a part of 45% of all hospital deals.