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Readers Write 10/1/08

October 1, 2008 Readers Write 3 Comments

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A Summary of Reader Predictions of How Economic Issues Will Affect Healthcare

Employment

  • White collar markets (including healthcare) will be flooded with hard working but ethically questionable employees displaced by the dismantling of the financial industry
  • HIT employment will drop slightly, but will increase in 2010-11
  • A big jump in unemployment will occur if the credit market seizes up
  • Consultants will do well because big system vendors will minimize headcount to keep P/E ratio looking good
  • Process redesign work increases as hospitals have to live off their own revenues instead of bond money
  • Sales reps will turn over because it will be hard to make the numbers and sales costs are easy to cut fast
  • Hospitals will reduce headcount before they reduce payments to vendors
  • Vendors will cut projects that haven’t gained market traction and those teams will be cut

Hospital Spending

  • No change
  • Slowdown in big capital projects due to funding problems
  • Ambulatory surgery center niche market dries up
  • Projects will shift from clinical improvements to operational improvements
  • Emphasis will be on throughput, staffing ratios, and cash flow
  • Projects that result in more referrals, lab orders, and radiology orders in the IDN’s big hospital will get focus

Physician EMRs

  • Physicians will buy only when affiliated hospitals insist
  • Downward pricing pressure
  • More interest in e-prescribing and disease registries, which cost little and provide benefits like CMS incentives
  • Less interest in EMR adoption because primary care providers will be squeezed even more
  • Physicians and physician groups will face tight credit and postpone big outlays

Healthcare Reform

  • Consumer-driven healthcare dies when consumers lose what little clout they had
  • Healthcare reform is moved back at least five years
  • High deductible health plans will increase, forcing employees to shop on price or defer treatment
  • Population health will decline as patients can’t afford chronic care
  • Employees will underfund health savings accounts
  • Emergent care will increase
  • Providers able to communicate value and patient relationships will compete for the fewer patients with enough healthcare savings account funds to afford care
  • Uninsured patients will rise in number
  • Only private pay will flourish
  • Patients will go overseas because of bad press about US healthcare
  • Providers will need to collect for the care they deliver since self-pay will increase due to uninsured patients and higher deductibles
  • Hospitals will struggle with how aggressive they should be in collecting payment and will be challenged on pricing

Provider IT Investments

  • A shift to those providing quick financial wins, probably at the expense of clinical and patient-centered systems
  • HIT will be pressed to prove the value of technology
  • Hospital EMR projects will be scaled back or not purchased because of long-term expense
  • No change in the short term because budget cycle is already underway
  • IT departments need to educate the executive team about their focus and value
  • Hospitals will scrutinize capital outlays more carefully since some will face liquidity crises because of their investments are in securities
  • Solutions with quick ROI and a cost that is not prohibitive will get purchased

Vendors

  • Consolidation due to credit constriction
  • Niche startups encouraged, other new entrants discouraged
  • R&D will be hard to fund for new companies trying to develop products with long cycles
  • Sales will keep dipping
  • Reductions in training and travel budgets, hiring freezes, salary freezes
  • Less presence at conferences
  • Foreign investment increases
  • Non-real estate investment companies will still look for companies at $20 million, but smaller will be too risky and not worth the trouble
  • Companies themselves will postpone IPOs, but mergers and acquisitions will pick up in hopes of finding synergies and cost savings
  • Increased push to outsource
  • Healthcare won’t be recession-proof this time
  • Small companies with an undifferentiated product will die more quickly
  • If the economic crisis lasts 2-3 years, mid-tier companies will be squeezed for operating capital and will be acquired
  • Large vendors will weather the storm if they monitor expenses
  • Middle tier companies will suffer, but more innovative companies will appear in 2-5 years
  • Lag of new technology development will create cheaper and better solutions in 4-10 years
  • Sales cycles will extend and some purchase decisions that are close to signing will be cancelled or postponed indefinitely
  • Small vendors will face more financial scrutiny from customers who fear being left holding the bag
  • Well capitalized vendors may use the uncertainty to push clients into term licenses or subscription models, which are less attractive than license payments, but require less cash and provide more flexibility
  • Minimal change in M&A activity because vendors will seek exits, but downward valuations will convince them to wait out the storm
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Currently there are "3 comments" on this Article:

  1. Here’s a thought. While we’re in the downturn, let’s take a page from Warren Buffet, be contrarian, invest in technology, clinical solutions, operational change and other workflow improvements known to provide long-term value instead of trying to prove we can beat out eight other vendors to a better bottomline or meet unattainable hospital revenue targets set when we thought the world was flat. My advice, jump on the opportunity now to invest in change rather than running with the pack and proving to the suits you too can manage expenses (that’s actually the easiest thing to do). After the markets turn, budgets will be flat, revenue expectations higher and expenses will need to be lower. It is not logical, it is not reasonable and it is cruel… you should take advantage of it.

  2. I agree with the comment about consulting. It will be more palatable to put someone on short term to meet organizational needs rather than hire people and provide a reasonable salary & benefits. Especially true with the hiring freezes that are already in place in many areas. I have recently moved into the consulting world from the vendor world. The vendor I came from was downsizing. Go figure. This financial crisis makes my recent move even a better choice.







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