IT exception to cutback in hospital capital spending

By Bernie Monegain
09:42 AM

Spending on information technology is the one exception to a marked slowdown in capital spending by hospitals, according to a new survey from the Premier healthcare alliance. Premier pins the slowdown on legislative and economic uncertainty.

Premier’s spring 2012 “Economic Outlook” survey projects continued focus on health IT requirements; insights from industry experts on reform and improving patient care while reducing costs.

“The nation’s current debt concerns and looming reductions in reimbursement have, for the most part, slowed hospital spending and increased demand for greater value,” said Premier chief operating officer Mike Alkire. “The one exception is HIT, where hospitals are placing a great deal of fiscal and operational focus."

Also, impending reimbursement reductions and uncertainty around the potential impact of health reform could be leading to more conservative hospital capital budget expenditures, according to the survey.
Sixty-five percent of the 730 survey respondents indicated that capital budget expenditures for 2012 remained flat or increased as compared to 2011, down from 69 percent in fall 2011 and 72 percent a year ago.
Overall, 43 percent of respondents suggested an increase in capital spending, versus 40 percent in fall 2011 and 46 percent a year ago. Of them, 43 percent expect to make the largest capital investments over the next 12 months in healthcare information technology (HIT) and telecommunications, up from 35 percent last spring.
However, 35 percent of respondents suggested a decrease in capital expenditures, versus 31 percent in fall 2011 and 28 percent a year ago.
Future reimbursement cuts were cited by 76 percent of all respondents as one of the top three trends having the largest impact on their organizations over the next 12 months, with 53 percent citing HIT requirements. And 41 percent of C-suite respondents selected health legislation as the greatest or second-greatest driver of healthcare costs.

Other key findings:

  • Physician employment has grown across the board, with 61 percent of respondents indicating that up to half of their practicing physicians were employed through hospital-owned practices, compared to 55 percent last fall.
  • Half of respondents expect an increase in patient admissions this year as compared to 2011, with the other half anticipating admissions to remain flat or decrease. These results may signal a plateau in expected patient admissions, as 60 percent indicated growth in admissions last fall.
  • However, 29 percent of non-acute care respondents expect patient admissions in that sector will increase by more than 5 percent – an18 percent increase since last fall.

“Ultimately, hospitals know they can’t just cut their way to the future,” said Alkire. “Instead, they need to make across-the-board improvements. Key to this is eliminating costs that aren’t leading to better outcomes, which requires an enhanced focus on comparative effectiveness and resource utilization using meaningful data and more sophisticated analyses.”

Spring 2012 Economic Outlook
The semiannual Economic Outlook helps Premier’s 2,600-plus hospital and health system members better estimate supply cost inflation during their budget processes, projecting rates of inflation for the ensuing 12 months, Alkire added.
According to the spring 2012 edition, annual market inflation rates will increase on average between 2.2 percent and 5.6 percent across categories such as cardiovascular services, facilities, imaging and nursing. Premier's existing contracts, excluding foodservice and pharmacy, are expected to increase by about 0.82 percent on average in the next year. This is lower than overall market increases, which are predicted to average 3.2 percent during this time frame.