The Healthcare Innovation 2021 State of the Industry Survey: Complex Horizons Ahead

Jan. 21, 2021
Healthcare Innovation’s Second Annual State of the Industry Survey finds provider leaders moving forward to meet the challenges of the emerging U.S. healthcare system, one that will demand that providers demonstrate value

Even as hospitals, medical groups, and integrated health systems in the United States face unprecedented challenges emerging out of the COVID-19 pandemic, and a cost curve that industry experts, observers and provider leaders alike agree is becoming unsustainable, leaders of provider organizations are moving forward to meet the challenges and seek the opportunities of the future. That is clear in the results of the Healthcare Innovation Second Annual State of the Industry Survey.

Approximately 150 healthcare senior executives, including CEOs, COOs, CIOs, CMIOs, CNIOs, CTOs, CMOs, CNOs, and others, responded to Healthcare Innovation’s survey; they help to lead standalone hospitals, integrated health systems, medical groups, federally qualified health centers (FQHCs), and other provider organizations.

Not surprisingly, survey respondents see the challenges ahead of them, as they work to evolve forward value-based contracts, increasingly leverage data analytics—including artificial intelligence—to support their population health management and care management work, and also work to meet the cybersecurity threats facing them every day.

Following the compilation of the survey’s results, Healthcare Innovation interviewed a range of industry leaders to get their perspectives on the current moment in U.S. healthcare—and what comes next.

IT budgets seen increasing to meet needs

Among survey respondents, 31 percent said that 0-5 percent of organizational revenues are being expended on IT; 34 percent said that 5-10 percent of revenues are going to it; and fully 35 percent said that more than more than 10 percent of revenues are being spent on IT.

As for trends, fully 67 percent of respondents said that their IT budget has increased over the past two years, while 26 percent said it’s stayed the same. Only 7.5 percent reported that it’s decreased in that time.

What’s more, when asked what impact the COVID-19 pandemic has had on IT budgets, only 16 percent of respondents reported that the pandemic has decreased their IT budget, while 41 percent reported that the pandemic has increased it; a further 44 percent said their budget has stayed the same during the pandemic.

Referring to the fact that two-thirds of respondents reported that their budgets have increased, John Kravitz, CIO of the Danville, Pa.-based Geisinger Health System, and also the current chairman of the board of the Ann Arbor, Mich.-based CHIME (College of Healthcare Information Management Executives), said, “I think that’s very important, especially with regard to its impact on cybersecurity. At Geisinger,” he notes, “we’ve stayed the same; we’ve had neither a decrease nor an increase. But we’ve had solid cybersecurity applications in place. And we’re always, continuously surveilling for malware and intrusions. That’s one reason we didn’t change. And speaking from the CHIME Chair perspective now, COVID has proven a real financial strain for many hospitals, especially small and rural hospitals, so the fact it didn’t go down is a good sign.”

Still, Tim Zoph, client executive and strategist at the Naperville, Ill.-based Impact Advisors consulting firm, cautions, “Those results may not end up being reflective of what those budget needs are going to be in the coming year. Certainly, one of the ways the pandemic was mitigated was by putting additional money into virtualizing access to care, and that mitigated some impacts. But what you’ll see is continued margin pressure in healthcare, and I don’t think IT is going to be immune. They’ll need to operate their core systems very well. So, standardization, modernization, and automation of information systems will continue to need to happen. Those systems are still fragmented and not optimized, so we’re seeing clients now starting to cycle back from this implementation to optimization. The need is to create capacity. There’s no better time to be brilliant at the basics.”

Indeed, says John Klare, a vice president at Impact Advisors, “From my perspective, it’s an interesting result that budgets are increasing. It makes sense, because it’s a balance. No question that COVID has had a negative impact on health systems across the country. It’s been wildly different, though, from very serious impacts to less serious ones. But the net effect is that it’s been causing hospitals to have to reduce expenses. One of the saving graces or key initiatives health systems have engaged in to deal with COVID has been digitization and automation, to prevent infection spread while expanding care. The one other observation I’d offer is that it will be interesting to see the impact on capital versus operating budgets. You’re seeing people freezing capital budgets.”

And, Zoph adds, “It’s important to understand that every market is different. Some markets are mature and competitive; others are just emerging. So this is highly dependent on the nature of your market and where you are. Our view is that markets can change very quickly, because you can quickly speed elements to market as you go digital. Markets can shift very quickly, and your market share can be impacted if you’re behind.”

What about the pricing transparency regulations that will be fully implemented during 2021? Results are all over the map. In terms of what activities respondents say their organizations have participated in so far, 20 percent have assembled a task force to understand the regulatory requirements; 11 percent have conducted a comprehensive review of all payer contracts; 10 percent have revisited their pricing strategy; 21 percent have developed a plan to communicate more effectively with patients about their share of the cost; yet 37 percent have done “none of the above,” so far.

Per that, “We’re in the same boat with everyone else,” Geisinger’s Kravitz reports. “We’re determining how we’re going to demonstrate that transparency. We’re putting in a new revenue cycle management system that will help us; but it is a TBD item to be discussed in the industry.”

Value-based contracting moving forward

Respondents were asked a number of key questions around their participation in value-based contracting, and their data-facilitated population health management and care management work, including:

What kinds of value-based contracts are your organization currently involved in? (respondents named all that applied)

  • Medicare Shared Savings Program: 35 percent
  • Next Generation ACO Program: 22 percent
  • Medicaid ACO: 27 percent
  • Private health insurer ACO contract: 42 percent
  • None of the above: 38 percent

What percentage of your overall reimbursement involves two-sided/downside risk?

  • 0-5 percent: 22 percent
  • 5-10 percent: 12 percent
  • 10-15 percent: 18 percent
  • 15-20 percent: 4 percent
  • More than 20 percent: 4 percent
  • Don’t know/not applicable: 40 percent

Have you begun using analytics to support population health management and care management work?

  • Yes, we’re advanced in our analytics development: 37 percent
  • We are early on in our analytics journey: 38 percent
  • We have not used data analytics until now: 12 percent
  • We have no plans to use data analytics on any level of scale: 12 percent

Have you done health risk assessment across broad populations?

  • Yes: 44 percent
  • Not yet, but plan to do so soon: 23 percent
  • No: 33 percent

Have you implemented care management programs at the primary care level, in which physicians work with and are supported by mid-level practitioners (NPs, PAs, etc.)?

  • Yes: 59 percent
  • Not yet, but planning to do so soon: 15 percent
  • No plans to do so: 27 percent

Looking at these answers, it is significant that strong pluralities of patient care organizations are involved in value-based contracts; still, only one-quarter—26 percent—of respondents are receiving 10 percent or more of their overall reimbursement via two-sided risk.

That figure would be far higher among large multispecialty groups, of course. Indeed, in that regard, major industry-leading associations, such as the Arlington, Va.-based AMGA (American Medical Group Association), are pushing ahead to support value-based contracting, on the policy, strategic, and operational levels.

Asked what the next 24 months look like, in terms of policy around payment innovation, Jamie Miller, senior director of government relations at AMGA says, “From a value perspective, Congress and the administration spent over $3 trillion on COVID and will spend some more, and our members will be leading innovation. I think the medical group model is the way towards the future of medicine, and we’re just going to continue to promote the medical group model. And going forward, there’s obviously going to be a lot of discussion about how our system progresses.”

“There are two things going on,” says Darryl Drevna, AMGA’s senior director of regulatory affairs. “One, AMGA and its membership will continue to go towards value-based and population health-based models, because there’s really no alternative. That said, what HHS [the Department of Health and Human Services] is going to do will depending on who’s staffing HHS, and how we come out, post-pandemic, and what our capacity is. We’re going to keep moving ahead, and I’m going to be working to make sure that HHS and Congress see us.”

Chet Speed, AMGA’s chief policy officer, says that there’s no stopping the value train in U.S. healthcare. “For the next six months, it will all be about COVID-19 and survival; but in the next 24 months, it will be about value. “Fee-for-service payment is still the dominant payment system in the country; and though value-based delivery is something that all of our members embrace, it involves a significant clinical, financial, and operational redesign. Our members are all committed to it, but it’s not easy; it’s very complex, and takes time. And the payers have to follow suit as well.”

Will payers move ahead significantly to support the phenomenon? “They say they’re doing so,” Speed says. “Most of their statements indicate the desire to move more quickly towards value-based arrangements. Some payers truly are committed; Humana certainly is. And Aetna has an ACO program with Cleveland Clinic. So they’re moving there; I wouldn’t say it’s a full commitment yet. If you talk to the head of HR for a major employer, they’ll say that value sounds good, but our employees demand access.”

And will the shift mean more of an emphasis on the narrowing of provider networks, or on the forcing of value at the level of individual clinicians? “Finance drives behavior,” Speed emphasizes. “Some payers are developing incentive-based contracts with individual providers, so that the financial arrangement will drive value through that contract. And that does get down to the individual clinician level of performance. There are a lot of components to this.”

Data analytics a true critical success factor

One of the elements that will be absolutely critical to success in the new value-based healthcare system, as industry leaders agree, will be the successful leveraging of data analytics to support the population health management and care management work needed to make value-based care delivery and payment work.

With regard to where their organizations are on their journeys around analytics development, as the data showed, 37 percent of respondents described themselves as “advanced” in their analytics development, and 38 percent said they were “early on” in their analytics journey. But 12 percent indicated that they have not used data analytics until now, and a further 12 percent have no plans to use data analytics on any level of scale.

Looking at the intersection between fee-for-service payment-based care delivery and value-based care delivery, Jeff Bailet, M.D., president and CEO of the San Francisco-based Altais Clinical Services, sees a very strong correlation with analytics success. Altais Clinical Services, a division of the healthcare services company Altais—initially launched by Blue Shield of California—was created to help physician groups succeed under value-based contracts, precisely by helping them to master the use of data analytics tools. “COVID really exposed the lack of resilience in the medical system, and how fee-for-service payment really is not sustainable; it really exposed the underlying challenges with fee-for-service,” Bailet says. “And a lot of practices are no longer in business, because they lost 70 percent or more of the revenues early on. Even some sophisticated integrated health systems are really struggling right now. And that was an ‘aha’ moment, where physician leaders realized that had they had more value-based contracts, they would have done better during COVID. But you need the infrastructure, the analytics, including predictive, and clinical decision support, to be successful,” he emphasizes.

There is, in the industry, Bailet says, “an acknowledgement of how powerful technology can be if it’s deployed in the right way. And there’s an awareness among medical group leaders that they need to pursue value, and that they need technology to do that. I serve on the Physician-Focused Payment Model Technical Advisory Committee (PTAC) for HHS, and we review proposals with stakeholders across the country. We work with CMMI [the Center for Medicare & Medicaid Innovation, a division of the Centers for Medicare & Medicaid Services]. So designing a comprehensive model is really difficult, but I think the payers are wanting to get into this space more forcefully. But they need a high-performing group of physicians who are engaged, who want to take on the value contract, and have the support and the infrastructure to do well.”

Impact Advisors’ Zoph agrees, and says he sees hospital and health system leaders moving forward with alacrity in that area. “I’m seeing analytics being harnessed dramatically now,” he says. “One [way] is for performance and capacity management, just to understand how and where you’re providing services. You realize that being a data-driven organization is really important, when you’re trying to determine how you’ll operate tomorrow. Second, the pandemic has had a big impact. So, what’s going on with my stroke patients? And mortality is up across the board. So organizations, facing limitations on how they’ll care for their patients, are really having to examine what’s going on with their populations. And the third element is related to health screening,” where he also sees progress going forward.

Artificial intelligence breaks through

One key element in the data analytics revolution has been the rapid emergence of artificial intelligence (AI) and machine learning tools to turbocharge analytics processes in patient care organizations. As seen below, progress is being made now in the leveraging of AI and machine learning in the clinical, financial (including revenue cycle management), and operational/administrative spheres. Survey respondents were asked:

In what areas have you begun to adopt artificial intelligence and machine learning into your operations?

  • Clinical: 33 percent
  • Financial/RCM: 31 percent
  • Operational/administrative: 25 percent
  • No areas: 46 percent

Per all this, Impact Advisors’ Zoph says, “The chatbot and patient interactions in health screenings are great examples of the use of AI in care delivery, to help guide and navigate the initial contact with the healthcare system. That’s a big change. The other area is support for diagnosis in diagnostic image interpretation. Our diagnostic capability continues to grow. In terms of video capability, as we’ve extended the use of the eICU, you can actually monitor patients for fall risk, and you can monitor patients in the room. So creating ambient information around what’s going on with your patients is a really interesting area,” he says. Zoph adds that leveraging natural language processing for physician documentation support will need to continue to move forward. “We have to return physicians to the practice of medicine, and reducing their time in the record has to be part and parcel of how we improve the provider experience,” he says. And, he notes, AI will also be leveraged very significantly in clinical trials.

Looking at the social determinants of health

The discussions around the social determinants of health (SDOH) have intensified in the last few years, as providers and payers alike look to try to enhance health status much farther “upstream” and much more globally, meaning, influencing the lives of patients outside the sphere of pure patient care Asked whether they’re incorporating SDOH into their population health management and care management work, 44 percent said yes, while 34 percent said they’re planning to do so soon. Only 22 percent said they have no plans to do so.

With regard to that broad question, Kelly Robison, president and CEO of the 1,700-physician San Francisco-based Brown & Toland Physicians group, which last August affiliated directly with Altais Clinical Services specifically to enhance its ability to leverage data to enhance health status, including to address SDOH, says, “The social determinants of quality will pose both an opportunity and a challenge. There are a lot of factors that come into play in terms of how to better deliver care and achieve holistic outcomes—how to integrate mental health back into care as well as nutrition, transportation, etc. That’s something that the entire healthcare industry has to prioritize.”

And in that, Robison says, the forward evolution of physician culture will be an essential element to reengineering how physicians care for patients more holistically. “I think that physicians by nature tend to be entrepreneurial, and I’ve been in healthcare for nearly three decades,” she observes. “Over the years, the management of healthcare has become so complex, and there’s been such a squeeze on reimbursement, and on top of that, there’s been so much consolidation that now, a physician’s range of choices is so different. So for those physicians who want to remain entrepreneurial, and who want to remain independent and not have their destiny controlled by a hospital-based system, they need some kind of help. And that’s where organizations like ours can help: we can support physicians in their practices, while allowing physicians to retain an entrepreneurial spirit.”

“I’ve noticed an evolution” in that area, says Shannon Decker, Ph.D., Brown & Toland’s vice president of clinical performance. “It’s important to recognize that it’s a symbiotic relationship. And when we approach physicians, it’s not about telling them what to do; they already know what to do.” And in that regard, she says, “We need to consider the place where people are coming from, and the messaging, and the best practices for moving people forward. When you think about change theory, that involves finding out where they’re at, and showing them the data—maybe only one piece of the data rather than all of it. And it becomes a place of service” for physician group and other patient care organization leaders, she emphasizes.

Cybersecurity concerns seen ever-present—and intensifying

Even as the leaders of innovative patient care organizations move forward with alacrity to shift from involvement in payment for volume to involvement in payment for value, one area of huge concern for them, as data and information are shared increasingly widely, remains that of cybersecurity. So while provider organizations are sharing and analyzing more data than ever before, the threat vectors menacing provider organizations are only intensifying. Survey respondents were asked several questions in this area:

What has your recent experience of cyber threats and attacks been?

  • More challenging than a year ago: 52 percent
  • Less challenging than a year ago: 8 percent
  • About the same: 39 percent

Has your organization experienced a malware or ransomware attack that has led to a significant disruption of EHR and clinical systems usage?

  • Yes: 20 percent
  • No: 80 percent

Have you implemented significant network segmentation, including around your EHR, medical device, and other critical clinical information systems and computerized devices?

  • Yes: 52 percent
  • No, but plan to: 25 percent
  • No plans to do so: 23 percent

How often do you perform backups on your core information systems?

  • Daily: 59 percent
  • Between daily and once a week: 24 percent
  • Between once a week and once a month: 9 percent
  • Between once a month and once a year: 7 percent
  • Less often than once a year: 1 percent

Have you engaged the services of an external security operations center (SOC)?

  • Yes: 31 percent
  • Not yet, but plan to do so: 16 percent
  • No plans to do so: 53 percent

Does your organization have a CISO (chief information security officer)?

  • Yes: 41 percent
  • Not yet, but we plan to hire one: 12 percent
  • No plans to hire one: 47 percent

To whom does your CISO report?

  • CIO: 25 percent
  • CTO: 6 percent
  • CFO: 5 percent
  • COO: 8 percent
  • CEO: 27 percent
  • Other: 28 percent

When asked whether it surprised him that only 20 percent of respondents had reported a significant disruption to EHR or other critical information systems, Kravitz said, “It’s important that your survey had asked about attacks that have led to significant disruption of EHRs and other core information systems.” Most hospital-based organizations have experienced attacks, he notes, but at his organization and others, adequate cybersecurity processes have kept core information systems intact.

When it comes to network segmentation, Kravitz says, “Network segmentation is hard to do, especially if you become an integrated delivery network or system. And if you have very strong network segmentation, it’s hard to produce economies of scale. I know it’s a concern, I know it’s important. And you’ve got VLAN-ing [VLAN: virtual local area network] going on, and different segments of the network are connected differently. We do have all of our medical devices segmented, which is a challenge in terms of lots of proprietary OSes. And it can be tens of millions of dollars to do physical network segmentation. There are so many devices that may talk back and forth through the Internet. Cyber-walling those off is especially important. And it’s hard to do, because everybody gets busy and moves onto the next thing. You have to lock the devices down tight. And a majority of CHIME members have been trying to secure their networks as tightly as they can.”

Given, if a system has been corrupted and then continues to be backed up, that those backups could perpetuate the corruption, what about the question of audits of backups? “That’s absolutely right about corruptly backed-up EHRs,” Kravitz says. “One important element is that you have to do recovery in order to make sure your applications can come back. You have to be able to recover your EHR to a test level. Doing the recovery is critically important, and we do the recovery testing within Geisinger quite often. We take that very seriously, and as a whole in the industry, a whole lot of knowledge has to be shared around recovery and backup processes. People think they understand it, but it’s complex.

An evolving landscape

There is so much work that CIOs and other senior healthcare IT leaders need to do, in all of these areas, as the U.S. healthcare system moves forward into 2021 and beyond. What are the most important things for them to do right now? “I think there are a lot of shiny pennies out there right now; health IT leaders really need to be focusing on implementing tools that genuinely make it easier [for physicians] to practice,” Brown & Toland’s Robison says. “There are a lot of fun things, and nice-to-have things, but with physicians being so busy, it’s got to be about streamlining their work lives; they can’t be one-offs.”

  Impact Advisors’ Zoph, who spent years as CIO at Northwestern Medicine in Chicago, says, “I feel like this is really a formative time, but also a time of real transition in health. I think this notion of where we are with virtual and digital care, we’ll see a continuing acceleration of that, and we’ll see patients interacting more virtually with their providers and health systems. I’m bullish on what that represents for health IT; we got a real push on that in terms of the pandemic, and I think that won’t go away. Analytics will continue to drive care delivery advances, and I think process automation is coming. In terms of discovery and research, we’ll see AI helping to move those forward. I’m as excited as I’ve ever been about the future of healthcare. Culture may be the biggest thing holding us back; technology moves fast, but organizations move slowly. We need to be able to respond to this era of cultural change. Those that get out in front and respond to it, instead of leaning back, will be the winners in their markets.”

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