Healthcare industry executives at the Non-Profit Health Care Investor Conference in New York last week said investment in technology is likely to become more prominent in hospitals' capital spending plans in the near future.
The conference is the most popular industry venue for not-for-profit healthcare debt issuers to meet with healthcare investors to discuss their operational and financial health. This year, the near-term financial outlook appears to be relatively good, attendees said. Though Modern Healthcare was invited into the hallways where the conference was held, media were not allowed into any of the sessions. Citigroup, the American Hospital Association and the Healthcare Financial Management Association sponsored the event.
Investment in technology was the theme of the conference, and industry executives agreed the timing was right to focus on that issue, given that hospitals and health systems are gearing up for big investments in clinical technology.
The biggest focus, though, remained on hospital presentations from many of the largest systems, as well as a smattering of smaller operations. In general, healthcare providers reported better-than-expected financial health for 2004, and 2005 may also exceed expectations, industry executives said.
"Overall financial performance is very strong this year," said Emily Wong, director for bond ratings agency Fitch Ratings. Wong said she expects to see more upgrades this year than last year. "Fiscal '04 is looking to be a financially outstanding year," she said.
Trinity Health, Novi, Mich., was one of the systems reporting improving finances. Its operating margin rose in each of the four fiscal years through 2004 and rose again through March 2005 to more than 3%, according to its presentation packet. Texas Health Resources, Arlington, reported its 2005 first-quarter operating margin to be 6.4%, down from a high of 9.9% in 2004, according to its presentation packet.
Most of the news coming out of the sessions was positive, said Terry Goode, senior municipal credit analyst for Wells Capital Management. Attendees noted, though, that the conference's presenters are likely to be healthier than the industry as a whole.
There are enough fiscally strong not-for-profit healthcare borrowers that it is not as hard to find them for presentations as it might have been in years back, said James Cortez, associate director in credit market services for Standard & Poor's.
One municipal bond analyst, who agreed to talk only on condition of anonymity, said the presentations tend to gloss over some important issues, such as specifics on how healthcare providers are tackling cost and quality issues.
The conference's focus on IT was appropriate, industry executives said. Attendees and speakers said the growing use of IT for clinical operations is a major issue that will affect most aspects of a hospital's operation.
"There is a healthcare IT imperative now," said Gary Mecklenburg, president and chief executive officer of Northwestern Memorial Healthcare, Chicago. There's a need for better clinical information technology systems to improve the quality and efficiency of care, Mecklenburg said.
Other attendees said IT improvement is a major goal for healthcare providers, and it appears both healthcare providers and the clinical IT companies that serve them are finally ready to get moving after years of lagging behind other industries. "Certainly it is at the forefront more than ever," said Lisa Goldstein, senior vice president and team manager for rating agency Moody's Investors Service. Previously there was a concern that the systems and software being offered weren't up to the task, while the hospitals themselves were having trouble getting clinicians to use them, she said.
But for now, the IT issue isn't big enough to directly affect an issuer's rating, Goldstein said.
SSM Healthcare, St. Louis, is moving forward into clinical IT after taking a pass a few years back, said Kris Zimmer, chief financial officer and senior vice president of finance at SSM, and a speaker at the conference. SSM expects to spend $100 million over the next five years on clinical IT initiatives such as electronic health records and digital storage, Zimmer said.
Meanwhile, Trinity Health, with 45 owned or managed hospitals, estimated that roughly 20% of its expenses are tied to IT spending, most of which is in clinical settings, CEO Joseph Swedish said. The system's executives hope to go live with an extensive integrated IT project by October for seven of its hospitals, he said.