More on Reimbursement

Tech ROI concerns holding hospitals back from upgrades, study finds

Seventy-two percent of respondents cited reimbursements and payments as the biggest challenge for healthcare service company management teams.

Jeff Lagasse, Associate Editor

Healthcare service providers are confronting significant challenges with reimbursement and payments, staffing shortages, and the cost and complexity of technology implementation as the industry heads into 2019, according to a new survey by investment bank Carl Marks Advisors.

In particular, reimbursements and payments were cited by 72 percent of respondents as the biggest challenge for middle market healthcare service company management teams.


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Meanwhile, more than 61 percent cited staffing shortages as a significant and continuing problem, while 56 percent said the cost and complexity of technology implementation remains a source of pain for these organizations.

The need to upgrade technology has been felt most acutely in limitations around billing and less-than-optimal conversion of receivables to cash, the survey showed.

Healthcare services organizations may be delaying or shelving needed technology investments in part because of concerns about return on investment. More than 76 percent of survey respondents said that the ROI from these upgrades is not commensurate with the associated cost and disruption.


Mergers and acquisitions activity and price increases are two methods providers will employ to drive revenues in 2019, but restricted access to capital is likely forcing many to adopt more risk-averse growth strategies.

On the technology side, nearly 70 percent of respondents say less than half of healthcare services companies are operating today with sophisticated, integrated IT systems.

About 65 percent said that, while they recognize the need to upgrade technology infrastructure for the digital age, costly and inefficient fixes pose a major threat. Many respondents are concerned that overspending on upgrades is rampant (50 percent) and 73 percent say this problem ultimately affects billing and revenue cycles.

While geographic expansion and the opening of new facilities are generally not seen as potential revenue drivers for healthcare services in 2019, respondents cited outpatient surgical centers and walk-in health clinics as exceptions that are expected to continue to expand.


Physicians and other healthcare providers will always face professional challenges, but in the past few years those have extended to the revenue cycle, with billing becoming a complex endeavor as the industry shifts from fee-for-service to value-based payment models. Increasingly, a focus on revenue cycle processes is crucial to maximizing collections.


"The efforts to gain efficiency in order to offset reimbursement and other pressure are proving to be risky and disruptive, and that often means the bias is to the status quo even though over time that drains the company of necessary resources and competitive insights," said Jonathan Killion, managing director of Carl Marks Advisors. "The trade-off is a return-on-investment horizon that doesn't justify the incremental capital expenditures and potential disruption risk."

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