Healthcare executives are still counting on information technology to improve every facet of their organization, but they are reining in their ambition to have it all at once.
Senior managers are refocusing on getting nuts and bolts in place before plunging ahead on complicated data repositories and computerized patient records. Those are the eventual goals of healthcare networks hungry for quick and comprehensive information.
Even in setting the parameters of their information systems planning, executives are pulling back from grander visions of previous years. They are rediscovering the hospital and immediate vicinity as a place to concentrate before getting ambitious about expanding to payers and the surrounding community.
And in the interests of making basic computer capacity available and dependable, hospitals are beginning to bolster the budgets for information systems operations. Capital spending on new systems continues to show growth, but the rate of growth is moderating.
Executives responding to MODERN HEALTHCARE's seventh annual survey of information systems trends are sweating about the same things as last year and the year before: managed care and the need to integrate diversifying organizations.
But executives of healthcare facilities may not feel as much heat to mobilize for the predicted end-game of capitation management, says Tim Zinn, president of Chicago-based Zinn Enterprises, a healthcare information technology consulting firm.
In the survey sample, capitated contracts make up only 8% of total revenues on average, while indemnity insurance still accounts for 23% and discounted or per-diem fees another 23% of the total. Government contracts account for most of the rest.
Needing time. Respondents acknowledge the eventual imperative of capitation and the information demands that go with it. But they are finding they have to complete a lot of prerequisite steps to build a solid technical foundation for it, Zinn says.
And that takes time, says Everett Hines, a Parsippany, N.J.-based principal with the integrated healthcare consulting practice of Coopers & Lybrand, a national accounting and consulting firm.
"People can pull off a merger in six months and change the status of six or seven hospitals," Hines says. "But it takes them years to get a common repository, a common network, a common way to reach across."
The survey, a four-page mailed questionnaire, was conducted for MODERN HEALTHCARE*by Coopers & Lybrand and Zinn Enterprises.
Of the senior executives responding, 33% are chief financial officers and 25% are chief information officers. About 20% are chief executive officers or administrators, and 7% are chief operating officers. The remainder hold various other executive posts.
Of the 214 hospital organizations represented in the survey, 25% have more than 400 beds, while 48% have 200 or fewer beds. The remainder have 201 to 400 beds.
This year's survey captured a higher proportion of smaller hospitals compared with the 1996 survey, in which 23% of respondents were from institutions with fewer than 200 beds.
That demographic change partly explains differences from last year in capital investment committed to information systems and in the implementation of expensive projects. Both levels are uniformly lower this year.
But when respondents are asked about their information systems priorities and the pressing needs underlying them, the results are much the same year to year-which makes the exceptions stand out.
Basic needs prevail. Hospitals haven't seen any letup in their need to gain access to sources of information from anywhere in the facility or network, Zinn says. That issue tops the list of pressing needs in the areas of managed care and integrated healthcare delivery systems (See chart, p. 112).
Nearly as pressing is the need to establish a common way to identify patient/member data throughout the hospital's hodgepodge of disparate databases by implementing a solution called a master patient index.
Those two priorities are the same 1-2 crunch as last year. Respondents could pick a maximum four of the 11 choices listed in the survey as current needs, and the same for longer-term concerns during the next four years.
Other top needs bolster the theme of basic access, Zinn says: Interface engines, which enable different systems to communicate, and "user-friendly" displays of information on computer screens.
But comprehensive organizational needs that involve complex technology solutions have sunk to the bottom this year.
Software to help fashion a long-term electronic patient file of all care delivered at all sites-the longitudinal patient record-plummeted to the next-to-last priority this year, from third-highest last year.
The only priority ranking lower on the list is the need to install systems to coordinate scheduling of patients and resources.
Zinn says the priorities reflect "realism on the part of hospitals." Instead of getting caught up in complex database and electronic-record projects, they are "building infrastructure, then stepping back, getting the right pieces and doing it cost-effectively."
Hospitals also are well aware of what is needed once the basics are in place. That's when software for the longitudinal record goes from being the second-lowest priority to second-highest.
It is outweighed only by the need for a data repository to get full value out of the information that will have become available. That's a second phase of the infrastructure construction schedule, and a more complex and time-consuming one, Zinn says.
Order of implementation. So many information technology projects are on the docket these days that executives find themselves struggling to order their priorities.
This year's survey lists seven major steps generally considered necessary to build the infrastructure of an integrated healthcare delivery network. Respondents were asked to number them in the order they would implement each step.
According to a weighted calculation, with low score the best score, respondents are definite about two steps they would take first and two that they would leave until last (See chart, p. 114). The middle three are toss-ups.
The two top implementation priorities "go to the heart of multifacility integration," Zinn says. Those clear preferences for a common master patient index and common data-exchange standards also are in line with what executives say are their most pressing needs, he says.
The projects saved for later are the same ones viewed as low on the list of current needs: the more clinically oriented data-building projects and networkwide coordination of resources.
Priorities. For the third consecutive year, the survey designates improvement of managed-care capabilities as a top institutional priority for computerization; 50% of respondents deemed it so. Also at the top is improved decision support for clinicians, chosen by 50% of respondents, after being the second-highest priority last year (See chart, p. 114).
Equally important among respondents (50%) was integration of databases, which charged to the front of the line after being in the middle of the pack last year. That confirms the problems healthcare organizations are having as a result of building onto their existing computer systems rather than replacing them, Hines says.
"Anything that works, they'll keep it and connect something around it," he says.
Next on the priority list is another basic project: the technical coordination of software, hardware and cabling to connect information systems and organize them into local computer networks. That was only a lukewarm priority last year.
Moving in the opposite direction is a priority for improved ambulatory and outpatient capabilities, which was among the top three last year.
The survey results indicate that even though healthcare continues to focus on managed care, information systems strategies are changing as providers deal with basic shortcomings before higher-level problems such as capitation management, Zinn says.
Narrower scope. That inclination to get the house in order before looking too far ahead also is reflected in a narrowing scope of planning and vision for information systems, Zinn says.
About 25% of respondents say their scope covers principally the hospital environment, while another 23% envision plans that encompass the hospital and links to physicians (See chart, p. 122).
This year's vision was a sharp contrast from last year's, when no respondents subscribed to a hospital-only vision and only 4% limited plans to hospital and physicians. Though smaller hospital organizations make up nearly half this year's sample, last year's survey base included nearly 25% representation from hospitals of fewer than 200 beds.
An expansive vision of a community enterprise, including other hospitals and links to payers and individual homes, continues a slide to 21% of respondents this year, compared with 36% last year and more than 40% in 1995.
Construction continues. The 1996 survey picked up a sudden increase in the completion or active implementation of key projects that together create a foundation for computerized patient records and efficient operations.
This year's survey records more modest percentages of completion and implementation, but the ranking of 11 projects by their level of activity beyond the planning stages stays almost the same (See chart, p. 116).
The only noticeable exception is managed-care software for such tasks as membership accounting, eligibility, claims management and provider management. That project registered the fourth-highest level of activity last year but slips into a tie for sixth this year with a related project, the networkwide tracking of patients and resources along with the cost per episode of care.
The survey's measure of implementation progress shows a higher activity level for complex data-repository and patient/resource scheduling projects when compared with stated current needs and near-term priorities. Those may be carryovers from optimistic decisions made a year or two ago, before the industry fully grasped the time and trouble required, Zinn says.
"Clearly the reason they're around is because these projects are very complex and involve many areas of the hospital," Zinn says. "It does take a long time to implement them. And some of the successes, because there is such a high degree of change management required, have not been as sterling (as in other areas of computerization). So the projects go on and on."
Capital shift. A sharp decrease was recorded in the total spending planned for capital and operating expenditures per year on information systems initiatives during the next three years.
More than half the survey respondents say they plan to spend $3 million or less per year, compared with 12% last year. At the other spending extreme, about 15% say this year that their spending will reach $11 million or more per year, compared with 45% last year (See chart, this page).
An analysis of planned expenditures by size of organization shows a close correlation. For example, hospitals planning to spend less than $1 million a year average 117 beds, while those planning to spend $1 million to $3 million average 208 beds. Hospitals planning $11 million or more in annual spending average 646 beds.
The spread of dollar figures is backed up by the pattern of capital spending measured as the average annual percentage change in budgets for information systems (See chart, p. 116).
More than half the respondents plan to increase their spending 10% or less during each of the next three years. Partially offsetting that trend, 14% of respondents forecast annual capital spending increases of more than 20%
Overall, the weighted average increase in capital budgets is 9.4% for each of the next three years-the first decline recorded since the average was first computed in the 1993 survey. Last year's average was 10.9%
The weighted averages were arrived at by taking the midpoint of each spending range and multiplying it by the percentage of respondents selecting each spending range.
Hines sees a dichotomy of spending that may separate winners and losers in healthcare's business transformation. "Some institutions are betting their entire futures on information systems," he says. "Others still treat it as an annoying expense item. And clearly they're going to be wiped out."
Without adequate investment in information technology, providers' promises of effective care management won't be possible, "so the efficiencies they preach on a piece of paper are not going to be realized," he says.
Running it right. Some of the spending emphasis may be moving to internal computer operations, where hospital organizations are realizing that recent advances in information systems capability bring new and permanent operational challenges, Zinn says.
The weighted average increase in operating budgets had been falling by about one percentage point per year since 1994, bottoming out last year at 7.4%. But this year that average increase turned back upward to 8.2%.
Last year, nearly three in four respondents resolved to keep operating increases to 10% or lower, and only 3% envisioned an increase of more than 20% annually.
But this year, slightly more than half the survey respondents are planning operating increases in single digits, while 6% of them see an increase of more than 20% a year in their future (See chart, p. 120).
Zinn says some of the increase can be traced to the upfront expense of combining different systems as a result of mergers and affiliations. "Clearly as we construct healthcare systems, we're going to have some operating costs to iron out until we get the benefits of (information systems)," he says.
But providers also need more network-focused computer analysts and operational specialists to manage, monitor and secure a more complex collection of technology, he says. In-house pros are now taking responsibility for spread-out maintenance and support functions that once were left to the vendor of a stand-alone system.
Connecting with doctors. The survey's measure of information systems vision confirms a pullback from previous ambitions, but it highlights a sharper focus on including physicians in the planning for hospitals, says Frank Cavanaugh, a principal at Coopers & Lybrand and national director of its integrated healthcare consulting practice.
"If there's a clinical focus, you have to be in sync with what the physicians want-or you have to change their minds," Cavanaugh says.
This year's survey was distributed for the first time to a sample of medical groups and physician practices. Though the sample was small-84 respondent groups-it gives some indication of how physicians' business and clinical priorities are lining up with hospitals and health networks, Cavanaugh says.
Many of the top priorities are the same, starting with managed-care capabilities as the No. 1 concern, he says. Integration of databases is the second-highest priority, and improved productivity and cost reduction ranks third in a tie with the need to relate costs of care to outcomes.
Both physician groups and hospitals are reserving about the same amount of room for information systems in their capital budgets, Cavanaugh says. Asked where their capital dollars went in 1996, executives said information systems made up 28% of hospital budgets and 29% of physician groups' (See chart, p. 124).
The two provider groups also are in substantial agreement on the most important core elements to include in an electronic patient record. Patient histories and test results ranked 1 and 2, respectively, in both surveys, and high on both lists are two guidance-related features: procedure ordering with alerts, and diagnostic and treatment advice (See chart, p. 122).
"Hospitals must be listening to their physicians because they recognize the key things that need to be in," Cavanaugh says.
The agreement holds true for some areas that hospitals are keeping as a low priority even though they would appear to be important to physicians, he says.
For example, comparisons of inpatient and outpatient views on a particular patient are nearly as low a priority for physicians as for hospitals, Cavanaugh says.
For physicians, utility appears to be more important than high-powered analysis at this stage, Hines says. "They want the bread-and-butter applications working and on the floor," he says.