The dream of an information-powered, integrated delivery system in healthcare is still alive. But in many cases, it's not well.
Healthcare organizations everywhere are trying to fight off a computer bug, known as Y2K, that's sapping financial resources and threatening the basic systems that keep a medical institution going.
Some organizations are way behind in meeting the threat. One-third of the respondents to MODERN HEALTHCARE's ninth annual survey of information systems trends were still trying to identify the extent of their vulnerability as of the fourth quarter of 1998.
Others were at least coping with the worst of the problem. Nearly one-fourth had gotten as far as testing remedies to beat the Y2K disease.
Regardless of an organization's condition, the bout with the computer syndrome has caused senior executives to realize that information technology plays a crucial role in the health of a healthcare network.
"Y2K has helped information systems become a believable management tool in the executive suite," says Tim Zinn, president of Chicago-based Zinn Enterprises, a co-sponsor of the survey.
But it also has driven home the importance of securing financial and administrative information systems before anything else, he says.
That appreciation of fundamentals has altered strategic priorities and influenced plans for buying technology, and it will continue doing so, perhaps for years to come.
Among the survey's findings:
* The quest for improved managed-care capabilities slipped from the No. 1 information systems priority for the past four years to barely an afterthought this year.
* General accounting ability, which had fallen so low as a priority in previous surveys that it was almost left off the list for 1999, quadrupled in popularity compared with last year.
* The average percentage of an organization's operating budget represented by information systems rose by just a fraction, but more of the industry clustered into the middle range. For the first time, more than half the respondents budgeted between 2% and 4% of total spending on the information challenge.
Throughout the survey, the Y2K problem reigned. Respondents cited it as the top information systems priority in the near term, a key factor in delaying needed projects and a prime influence on the ultimate goal of developing an integrated delivery network.
But for all its impact on the state of information affairs, the Y2K threat has not stopped providers in their tracks.
In fact, consultants are doing brisk business helping clients develop comprehensive plans for information technology, says Frank Cavanaugh, a principal at PricewaterhouseCoopers, another sponsor of the survey.
"We're bidding on as many long-range plans on most effective use of technology as we've ever done," says Cavanaugh, national director of the firm's Chicago-based integrated healthcare consulting practice. "Y2K hasn't stopped them from saying they need to get things done that are significant to the organization."
Faced with an unpredictable final scene in the Y2K drama, executives are looking past that plot and hoping they can head off the millennium glitch. "They're counting on that (Y2K effort) going smoothly-or their plans fall through," Cavanaugh says.
Getting larger, more diverse. Of the respondents to the survey, 22% were chief executive officers, and 13% were chief operating officers. Chief financial officers made up 20% of the survey sample, and chief information officers, 28%. The rest held other executive titles.
Of the 301 organizations responding, 52% were multiple-facility provider systems. About 8% of systems had 10 or more facilities, and about 25% of system respondents had 900 or more inpatient beds.
Physician practices also are well-represented and varied: Nearly one-third of systems had between 10 and 29 participating practices, and nearly 20% had 100 or more practices.
The survey also had its share of smaller organizations, with 58% reporting annual revenues of less than $200 million. But nearly 5% reported revenues of more than $700 million; about 13% had revenues of $500 million or more.
The preponderance of systems affords a good look at the impact of the Y2K problem, because complex organizations have more going on, and consequently more can be affected, says Everett Hines, a Parsippany, N.J.-based principal with the integrated healthcare consulting practice of PricewaterhouseCoopers.
"The more sophisticated places have more things on hold," Hines says. More than 40% of respondents had delayed at least one information systems initiative until the Y2K threat passes (Feb. 15, p. 42).
Running behind. Most organizations still have a long way to go before their operations are millennium-ready. "Everybody's doing something, but nobody's where they want to be," Cavanaugh says.
The blanket initiative relies on identifying thousands of problem areas, separating big problems from annoyances, determining how to fix flawed components and repairing or replacing them, and testing the changes through routine operation.
In other industries, such as banking and securities, 1999 will be the proving ground for remedies already implemented. But in the MODERN HEALTHCARE survey, only 19% of respondents were at the testing stage, and just 4% of organizations had completed testing and were implementing final remedies. About one in 10 was verifying changes made by vendors and others (See chart, p. 52).
That means two-thirds of respondents were still in preliminary phases of corrective work, Zinn says. Nearly one-fourth were still identifying the extent of their Y2K problem, he adds.
The survey is a snapshot of respondents' achievements between October 1998 and December 1998, the period when questionnaires were received.
Most organizations, mindful that the Y2K problem spans all areas of operation, had launched an institutionwide task force rather than defining the issue as only an information systems problem.
In about 45% of the organizations, the information systems department was leading the institutional effort, while in nearly 40%, administration was in charge (See chart, p. 53).
Impact vs. investment. Recognizing the potential for problems beyond those in information systems, respondents overwhelmingly pointed to faulty monitoring equipment as the top ramification of failing to get their organizations in order by year-end.
Other top concerns were errors or inaccuracies in lab tests, pharmacy orders or patient records (See chart, p. 54).
Yet spending to address those concerns seldom amounted to as much as 5% of organizations' total budgets. Two-thirds of respondents projected their 1999 institutional spending on Y2K compliance initiatives at less than 5% and another fourth anticipated devoting 5% to 15% (See chart, p. 54).
In addition, 60% had not developed a disaster recovery plan by the end of 1998 to serve as a backup if all Y2K initiatives are not completed in time.
Executives in the survey registered tremendous concern about Y2K ramifications such as biomedical malfunctions, but their "lack of progress bordering on indifference" in disaster recovery shows the concern is not backed by prudent action, Hines says. "You don't figure these things out the day after New Year's," he says.
With the gradual increase in the proportion of important data committed to computers instead of paper, disaster recovery has become an issue during the past several years. But it hasn't taken hold, because of competing capital priorities, Cavanaugh says.
The threat of millennium glitches hadn't moved many decisionmakers to embrace a disaster recovery plan, he says.
Part of the problem is that executives are not focused on the financial damage a millennium disaster can cause, Zinn says. Asked to predict the financial consequences to operations-excluding liability issues-half the survey respondents said they were uncertain (See chart, p. 58).
Impact on priorities. That's not to say executives don't know that faulty systems can disrupt their businesses. By a wide margin, addressing Y2K problems seized the top spot on a list of information systems priorities (See chart, p. 64).
What's more telling is that the Y2K priority, added to the list of choices this year, sapped strength from nearly all the others. Respondents could choose up to four priorities, but many didn't-resulting in a lower overall percentage of support for most other initiatives compared with last year's figures.
The Y2K issue also nearly knocked a perennial top priority off the chart: improved managed-care capabilities.
Last year the managed-care concern was mentioned by 70% of the executives surveyed. This year it rated a mention from only 21% of respondents, which dropped it to ninth among 13 choices.
The reversal resulted partly from a change in the immediate needs brought on by the Y2K deadline, but it went deeper than that, the survey's consultants say.
Executives are acknowledging changes in the healthcare marketplace, and they realize that improvements in managed-care capabilities require other, more basic improvements first.
Four years ago, providers viewed managed care as a threat that required some kind of response, Cavanaugh says. But while many organizations were counseled to whip themselves into shape to manage capitated payments, the managed-care market tilted toward open access to providers instead of cost-effective but restrictive health networks.
In addition, the threat may have lost its edge. Providers feel "declining pressure in some markets of managed care," Cavanaugh says. "It seems to mean less than it did."
What's more, executives analyzing managed-care capability are recognizing that it can't be a top project priority, because it builds on prerequisite software and systems, Zinn says.
"Managed care is nothing more than keeping track of the Ps and Qs so you know what you're doing," he says. For providers, managed care is care management: a process of improving cost containment and care delivery, not a discrete package.
Business support. Systems to manage financial information and costs of care are gaining visibility as senior executives battle for a handle on the larger, more diverse networks created by mergers and acquisitions, Zinn says. The keys to controlling the business side are knowing costs, communicating standard information across facilities and consolidating operations.
In that effort, the role of information technology has been brought home by Y2K scenarios predicting the havoc that could be caused by glitches in core systems.
Executives expressed concern about clinical disruptions such as equipment malfunctions. But in private, "CEOs and CIOs are pretty worried about getting the bills out and paying their people," Zinn says.
Although financial and administrative systems are most likely to be older models imperiled by Y2K, Zinn says, their forced replacement is an opportunity amid crisis: the chance to scrap incompatible legacies of mergers and to standardize operations.
Among information system priorities listed in the survey, the only choices rating a higher percentage than a year ago involved general accounting, payroll, personnel and patient accounting.
In addition, those categories dominated a list of information systems installed and operational throughout integrated delivery networks, attaining more than 50% penetration (See chart, p. 66). By contrast, communication links to physicians were in place at less than 40% of networks. Clinical data repositories and common decision-support software were installed in one-fourth of respondent organizations.
As core business systems are put in place, they form the foundation for enhanced cost accounting and decision support, the next opportunity facilitated by information technology, Zinn says.
Rudimentary financial-decision-support systems are in place at many larger organizations, Cavanaugh says. But executives identified them as the systems that most needed replacement to ensure competitiveness as an integrated delivery network (See chart, p. 68).
Getting back on track. Progress in overall information integration continues to be slow but steady. The percentage of key projects completed or in the works has risen gradually during the past three years.
Half the respondent organizations use computerized order entry, for example, and another one-fourth are implementing such projects (See chart, p. 68). One-third of the organizations use a networkwide system to match patients with their data, and one in four has a clinical data repository capable of adding value to information.
But with market pressure to do more with less, information systems progress to date is not enough, Hines says.
Healthcare executives, especially in the heat of mergers, are promising dividends of cost-effectiveness from consolidation, and employers are pushing them to make good on those promises. "But that can't happen unless they have the glue to hold their systems together," he says.
The ultimate goal has to be a well-coordinated network that uses information skillfully, says Hines. And that calls for a networkwide patient identification system, a clinical repository and networkwide appointment scheduling. Yet less than 20% of respondent organizations use those systems, he notes.
Reflecting that deficiency, patient-care coordination and the usability of information are foremost among the immediate needs in the integration challenge.
For survey respondents, a networkwide master patient index was the second-highest need, the same as for last year (See chart, p. 70). And the need to gain access to information from any location was close behind, though it slipped a bit after being the top need for the past two years.
The new No. 1 need: to implement user-friendly system interfaces. Those are the screen presentations of computer features and functions that healthcare workers depend on to search for, use and transmit data.
Healthcare networks are developing the physical access to databases and software that their clinicians and other employees require, Zinn says. But once that happens, he says, it exposes another issue: the ease of finding and using the information in daily work.
For cobbled-together healthcare organizations, the ability to share standardized data is another hurdle, and respondents are starting to appreciate the need for that, Zinn says. Respondents cited adherence to standards for easier data exchange as the fourth-highest need, up from sixth a year ago.
Spending settles down. The money to pay for all the information projects is increasing, though not as fast as in the past several years.
The weighted average increase in capital spending on information systems dipped to 6.9% this year compared with 8.3% a year ago. Direct spending on operating those systems increased an average of 8.5%, down from 10.5% in the 1998 survey.
Overall, the weighted average percentage of total operating budgets allocated to information systems is 2.59%, barely higher than last year's 2.55%.
Respondents selected from a broad number of spending ranges, allowing the survey to pinpoint a pattern of spending at each range. Weighted averages are calculated by multiplying the midpoint of each spending range by the percentage of respondents selecting each range.
About 15% of respondents said they spent more than 4% compared with 20% who said they spent that much a year ago. One-third of those surveyed for this year are keeping spending under 2% compared with four in 10 last year.
Thus 51% are spending between 2% and 4% on information systems, the midrange for the industry (See chart, p. 72).
In direct spending on computer operations, 7% of respondents planned to decrease their spending from that of a year ago, and nearly three-fourths projected increases of 10% or less (See chart, this page).
Capital spending was expected to decrease at 13% of respondent organizations, and more than half projected increases of 10% or less (See chart, this page).
In some cases, the crush of Y2K-related activity may be cutting into spending levels for the overall strategic and operational activities of healthcare organizations, Zinn says.
Though most respondents reported relatively low levels of Y2K-influenced spending as a percentage of total operations, the activity represents millions of dollars per institution. Five percent of a $500 million operating budget, for example, is $25 million.
But provider networks also may be reaching the point where spending on information technology is settling down after several years of increases of about 10%. "People believe they are finally spending the right amount of money," Zinn says.