Health Execs Look to Boost IT Spending, Cut Administrative Costs

Senior financial executives in the healthcare industry continue to ramp up spending in information technology, but only a small percentage say they’ll spend more on administrative staff and services.

Those were among the findings of a new report by the Healthcare Financial Management Association, which is holding its 2015 National Institute in Orlando this week.

The report, titled “Strategies for Reconfiguring Cost Structure,” looks at how information technology infrastructure is revamping the cost structure of the industry. It says healthcare organizations need to strengthen their IT capabilities when it comes to healthcare analytics, care coordination, and other services.

In a press release, HFMA President Joseph J. Fifer, FHFMA, CPA, said the economics are clear cut.

“The basic strategy is to reduce spending in established service areas to free up resources needed for new investments in value-based care,” he said. “Those investments will deliver the most value to patients and other healthcare purchasers.”

A survey included in the report found 71% of senior financial executives plan to use IT investment to bolster their population health management capabilities.

Meanwhile, just 8% said planned to increase spending on administrative staff. In fact, more than two-thirds of respondents said they expect to decrease administrative staff and services in the next 5 years. Less than half said the same of clinical staff and services.

The report noted that Phoenix, AZ’s Banner Health was able to save nearly $60 million in 2012 and 2013 by optimizing their general and administrative expenses, rather than focusing on clinical cuts.

Fifer encouraged his group’s members to embrace the changes enabled by technology.

“It’s better for an organization to disrupt its own business model than to have it disrupted by others,” he said.

The report also profiled Providence Health and Services, in Renton, WA, which has started its own venture fund to invest in developing healthcare IT companies.

HFMA urges providers to develop strategies to lock in efficiency gains so they don’t erode over time, and consider affiliation as opposed to ownership as they seek to expand their population health management networks.

The report is based on responses by 146 senior financial executives, about half from standalone hospitals and half from health systems. It can be downloaded at http://www.hfma.org/valueproject.