As avid followers of the HCIT space, TripleTree noted a piece published earlier this year commenting on near and medium term growth opportunities within the HCIT marketplace. Frost & Sullivan estimates that non-clinical information system expenditures are expected to be the fastest-growing market segment with a CAGR of ~10.4% through 2020, as compared to forecasted growth of just 0.6% CAGR for clinical spend. Hospitals are beginning to realize that, in a post-ACA, consumer-directed healthcare world, there are real revenue and reputational impacts to mismanaging administrative processes. Accordingly, this has led to a unique opportunity for HCIT vendors catering to this formerly sleepy area of the market.
Management of the hospital accreditation process is a great example of one administrative area that has become increasingly important to providers. For over 50 years, hospitals within the United States have sought third-party accreditation of their safety and quality through independent bodies such as The Joint Commission (TJC), Healthcare Facilities Accreditation Program (HFAP), and Center for Improvement in Healthcare Quality (CIHQ). Although each organization’s mission is slightly unique, all aim to provide greater accountability to providers and consumers in the quality, consistency, and safety of patient care. Accredited hospitals pay an annual fee, and in the case of TJC, are subject to unannounced, onsite audits once every three years. This process is designed to track a given patient’s end-to-end hospital experience, and identify potential gaps or risk areas in care quality or delivery standards such as instrument sterilization, handwashing, or incident reporting. Consumers have access to survey results through each body’s public data repository (such as TJC’s Quality Check).
Achieving and maintaining accreditation has always been important for providers, as it is required for CMS reimbursement and state licensure, but in recent years has begun to be viewed as more than a ‘tick the box’ compliance function due to newly created financial and non-financial implications. Financially, accredited organizations see a benefit on two fronts: a decrease in risk-based costs, and an increase in reimbursement opportunities. From a risk standpoint, many liability carriers will offer a credit or discount in premium costs for accredited facilities, given TJC’s requirement for and testing of robust risk management processes. Secondly, eligibility for Medicare and Medicaid reimbursement has become more closely correlated to attaining accreditation and maintain high standards of quality and patient satisfaction. In a January 2015 press release, HHS explicitly stated a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016. Given the traction seen in other alternative payment markets, this is a trend only likely to accelerate in future years.
In addition, the reputational costs from failing to adopt are high – the recent failure of Fairbanks Memorial Hospital to recertify under a TJC survey exposed the facility to high-profile negative media attention. This impact of this headline risk is no different than in any other industry – when given the choice, consumers will tend to avoid businesses perceived as poor quality. One Chief Nursing Officer recently noted that patients “are asking a lot more question about their care and…are much more savvy…” Recognizing and adequately responding to this savviness will require providers to manage both non-clinical and clinical functions to ensure a consistent level of patient satisfaction and quality. Balancing these processes is no small task, as the thorough nature of the accreditation process puts a considerable resource drain on already overburdened hospital staff.
Complexities associated with this balancing act (coupled with the ever-changing reimbursement mandates under the ACA) are expected to be the main catalyst in driving this newfound selling opportunity for HCIT vendors. Provider executives, from the CEO to the Chief Nursing Officer, are now waking up and viewing these non-clinical functions more as profit maximizers and less as a cost of compliance. The result is a greater willingness to spend additional resources on innovative technology solutions that can optimize these processes, mitigate risk, and reduce internal resource burden. With the pressures from cost containment and new reimbursement mechanisms becoming more permanent, providers are assuming more financial risk in the care delivery setting (especially tied to quality and value) which is driving up the ROI associated with successfully optimizing multiple clinical and non-clinical processes.
The coalescence of these factors has resulted in a unique market opportunity for non-clinical HCIT vendors to redefine their value proposition and become more relevant to a ‘newly awoken’ cadre of customers. We are watching a number of vendors in this space and fully expect to see increasing M&A interest in the coming years. Let us know what you think.