What Do Mergers and Acquisitions Mean for Healthcare's Digital Transformation?

Jack Murtha
OCTOBER 09, 2018
health it market,health tech market,hospital m&a,hca news
Health systems and healthcare providers face uncertainty and great promise. Licensed from malija - Fotolia.

With the maturation of the U.S. electronic health record (EHR) market, health systems are approaching another crossroads, according to HIMSS Analytics: How will the market grow on top of this digital foundation? And what will come of efforts regarding patient engagement, prescriptive analytics and EHR integrations designed to achieve interoperability?

The answers to these questions aren’t obvious. That’s especially true given the shifting state of the healthcare business, which has recently resulted in many mergers and acquisitions. New entrants from Silicon Valley and even Wall Street, meanwhile, will bring further change to providers and health systems, said Blain Newton, executive vice president of HIMSS Analytics, in a conference call yesterday.

>> READ: Why Don’t Enough People Want to Work in Health IT?

What’s clear is that EHR adoption in American hospitals is almost universal, but connectivity remains deficient. HIMSS data suggest that healthcare executives want interoperability; the problem is a technical one, and mergers and acquisitions further complicate the issue.

“So, you may never get to a point where you can easily just put everyone on Cerner or Epic or whatever the case may be,” Newton said, describing the headaches of specialized EHRs and disparate systems from merging hospitals. “From a tech perspective, interoperability is always going to be a challenge.”

Although interoperability might be the most pressing challenge facing healthcare, it is not the only one.
 

Hospital Mergers and Acquisitions

Healthcare mergers have been on the rise for the past four or five years but have begun to accelerate even more, Newton said.

Just look at one of the largest unions from the past year: Dignity Health and Catholic Health Initiatives are joining forces, with a footprint that spans 28 states, 700 care facilities and 139 hospitals.

What’s the reason for the M&A trend? HIMSS Analytics found that midsized health systems, with five to 10 hospitals, are buying up competitors at the fastest rate. That’s because it’s difficult to succeed at smaller levels, meaning midsized health systems must grow to survive and thrive, Newton said.

About eight years ago, he knew a healthcare leader who claimed that health systems must have at least $1 billion in net patient revenue — maybe $2 billion — to innovate and expand. Nowadays, the benchmark is anywhere from $4 billion to $8 billion, Newton said. Throw in high-tech efforts to control the patient population, the move toward value-based care and declining reimbursement models, and the landscape is even more challenging.

So, what do more M&As mean for interoperability, the next goal of many healthcare organizations?

“We don’t yet know what this trend will do,” Newton said, “but it will certainly consolidate the EMR space.”

And it will make an already-daunting task even more challenging for providers.
 

Tech Tackles Healthcare

New entrants to the healthcare market also pose challenges for health systems and other providers.

For instance, Amazon, JPMorgan and Berkshire Hathaway rattled the industry earlier this year when they formed a powerhouse trio geared toward tackling a still-unclear corner of healthcare. What we know is that the companies want to use the partnership to somehow provide for their employees’ healthcare needs.

>> LISTEN: Amazon’s Path of Disruption

That idea prodded HIMSS Analytics to examine the locations of Amazon distribution centers and those communities’ healthcare delivery networks. Many are served by the Hospital Corporation of America and Mercy Health, though roughly half rely on one- to four-hospital health systems, Newton said.

The question is, then, how will powerful outside companies affect healthcare in such markets? The Amazon-JPMorgan-Berkshire move and others that come down the pike could apply pressure to small systems and spur even more acquisitions, Newton noted.

Their “move into the market could have a number of seemingly subtle impacts to the overall market, but [they are] meaningful and important just because of the simple scale they bring to the equation,” he said.

Possible mergers between CVS and Aetna and Walmart and Humana could force further disruption in provider networks.
 

Health Systems Must Embrace Technology

If you ask Newton (and just about every other health-tech insider and observer), it’s critical that health systems and other providers invest in information technology and tech. Telemedicine, wearable technology data, precision medicine, cybersecurity and operational efficiencies are already important, and going forward they will become more crucial to the financial and clinical missions of healthcare organizations.

>> READ: Wearable Technology Is the Future of Healthcare

But how are health systems navigating these mandatory innovations?


Telehealth Enters Health Systems.

It’s important to “engage the citizen,” as Newton put it, and many health systems are trying to do that. HIMSS Analytics found that telemedicine has an adoption rate of more than 50 percent in health systems. The average hospital has five telehealth systems, indicating these efforts are departmental, not enterprise. Nonprofit hospitals and those with 100 or fewer beds are paving the path, a surprise to Newton and his colleagues.

Healthcare organizations that haven’t yet invested in telehealth are moving ahead, but decision makers are still trying to understand the return on investment, clinical impact and patient uptake.


Wearable Technology Data Will Break into the Clinic.

If patients ask their physician to include wearable technology data in their EHR, can hospitals accommodate the request? Most organizations consider themselves “moderately prepared” for consumer data, with little more than 11 percent saying they are unprepared, according to HIMSS Analytics. What’s more, nearly 70 percent of organizations plan to invest in technologies to advance personal connected health.

The challenge is data governance policies. “I think that will continue to be a significant blocker here — or at least a complicating factor, if not a blocker — to how well this holistic view of patient care is taken up,” Newton said.


Precision Medicine Could Transform Hospitals.

Insufficient funds and clinical expertise are holding back many health systems from initiating precision medicine programs. Still, 45 percent of institutions surveyed by HIMSS Analytics said they plan to expand their existing programs, and precision medicine has a strong footprint across the country.


Cybersecurity Is Critical to Health IT.

In 2017, healthcare suffered 29 percent of all security breaches, with 400 incidents exposing more than 6 million records, according to HIMSS Analytics. In fact, 12 percent of all U.S. hospitals don’t have basic IT security systems such as spam filters or firewalls.

“That’s a little bit frightening because whether you’re the Mayo Clinic or a critical access hospital in South Dakota, you’re a target,” Newton said.

Cloud services, meanwhile, are gaining momentum in healthcare. Sixty-five percent of healthcare organizations leverage the cloud, and most EHR implementations are projected to use the technology by 2020.


What Is the Clinically Integrated Supply Chain?

This has nothing to do with unloading trucks. It’s all about analyzing and understanding consumption from clinical and cost perspectives, Newton said. If two surgeons use different quantities of different supplies for the same procedure, how do the outcomes differ? By answering these questions, health systems can reduce risk and improve outcomes and efficiencies.


Blockchain Hype Is Still Here. But Use Cases Could Be Coming.

More than 45 percent of healthcare organizations are still looking into blockchain, and more than 36 percent aren’t bothering to dig into the technology beneath the buzzword, according to HIMSS Analytics. Most providers are sitting back and waiting for software developers to carve a path forward, Newton added. But a number of healthcare providers said they think they will have a blockchain proof of concept or pilot in the next several years.

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