FI­NANCE:

Modern Healthcare - - Front Page - Me­lanie Evans

Largest sys­tems in­vest­ing more in IT, physi­cians

Some of the largest U.S. health sys­tems with the strong­est bal­ance sheets are spend­ing less on op­er­a­tions and in­vest­ing more in in­forma- tion tech­nol­ogy and doc­tors.

Ex­ec­u­tives from 29 sys­tems met in New York last week with bankers, in­vestors and credit an­a­lysts at an an­nual con­fer­ence to re­view sys­tem fi­nances, op­er­a­tions and strate­gic plans. The event, in its 12th year, is spon­sored by Cit­i­group, the Amer­i­can Hos­pi­tal As­so­ci­a­tion and the Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion.

Catholic Health­care West will seek to squeeze $200 mil­lion from its ex­penses in the next two years. In En­gle­wood, Colo., Catholic Health Ini­tia­tives plans to boost IT spend­ing to 21% of its cap­i­tal bud­get next year from 5% in 2010. And As­cen­sion Health, the nation’s largest not-for-profit health sys­tem, said physi­cian deals now ac­count for 9% of its cap­i­tal bud­get com­pared with 3% his­tor­i­cally.

“Ob­vi­ously, where they put their cap­i­tal is where they think the fu­ture is,” said HFMA Pres­i­dent and CEO Richard Clarke.

Ef­forts to curb hos­pi­tal ex­penses, al­ready un­der way af­ter the credit cri­sis and re­ces­sion drained cash, un­der­scores a be­lief that rates from in­sur­ers will grow more slowly than in re­cent years, at­ten­dees said. Re­porters are not al­lowed to at­tend con­fer­ence ses­sions but are al­lowed in the event hall­ways.

Richard Umb­den­stock, AHA pres­i­dent and CEO, de­scribed a “huge shift” to­ward cost man­age­ment and avoid­ance. “It’s al­ready un­der way,” he said.

Mean­while, pres­sure to lower costs and boost care has helped shift cap­i­tal away from hos­pi­tal de­vel­op­ment to­ward in­vest­ments con­sid­ered nec­es­sary to keep pa­tients from grow­ing acutely ill: doc­tors and tech­nol­ogy. “I can en­vi­sion a time that ev­ery hos­pi­tal­iza­tion is a fail­ure of care,” said Robert Henkel, chief op­er­at­ing of­fi­cer and pres­i­dent of health­care op­er­a­tions at St. Louis-based As­cen­sion.

Henkel said that work­ing more closely with doc­tors does not mean hir­ing ev­ery doc­tor through its hos­pi­tals—a strat­egy he de­scribed as un­af­ford­able. The ob­jec­tive, he said, is to break even and iden­tify how to ef­fi­ciently man­age prac­tices’ ad­min­is­tra­tive over­head. As­cen­sion also re­ported that IT ac­counts for slightly more than one-fourth of its $1.2 bil­lion 2011 cap­i­tal bud­get com­pared with 9% his­tor­i­cally.

Richard Roth­berger, ex­ec­u­tive vice pres­i­dent and chief fi­nan­cial of­fi­cer for Scripps Health, de­scribed the sys­tem as a late en­trant to IT. Ex­ec­u­tives chose to wait for more ma­ture tech­nol­ogy and now plan to spend $103.4 mil­lion through 2014 on elec­tronic health records and other IT in­vest­ments, in­clud­ing $4 mil­lion in sub­si­dies for af­fil­i­ated doc­tors. Scripps ex­pects to re­coup $45 mil­lion from fed­eral in­cen­tives, he said.

Catholic Health Part­ners now em­ploys 200 doc­tors in Cincin­nati com­pared with 10 two years ago, said James Grav­ell Jr., se­nior vice pres­i­dent and CFO for the sys­tem. Ex­ec­u­tives be­lieve de­mand for hos­pi­tal care will de­cline, and the sys­tem is “bet­ting on doc­tors.”

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