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Healthcare Providers Accelerating Software Investments

Anne Zieger Tech Content Strategist
Photo by Accuray on Unsplash

Despite the bruising financial hits they took during the COVID-19 pandemic, healthcare providers have continued to make major software investments, according to a recent healthcare IT industry report. What's more, many expect to spend even more heavily on software in the coming year.

In research released in October, Bain & Co. and KLAS Research reported finding that 45% of healthcare providers sped up their software purchases over the last year—compared with just 10% who slowed down their software spending. Moving forward, more than 95% of providers expect to make new software investments over the coming year, and one-third expect to make "significant" new software investments.

Healthcare providers' "most strategically important" software-investment categories include security and privacy, patient intake/flow, clinical systems, telehealth services, and revenue-cycle management (RCM)—the latter a category of solutions that encompasses a broad range of tools designed to streamline and automate key steps in the process of collecting revenue.

Providers are spending because they absolutely must, even if they're barely solvent, according to Emily Paxman, vice president of insights services with KLAS Analytics.

"Spending is going to go up despite the economic pressures providers are facing," Paxman said. "It's become an existential necessity."

Recovery Period

The COVID-19 pandemic posed some of the biggest financial and operational challenges providers have ever faced. Providers struggled to manage exceptionally high patient volumes while confronting labor shortages made worse by inflation and a shaky economy.

Hospitals and health systems now find themselves in "the worst financial crisis" they've seen since the pandemic began, according to a report released by the American Hospital Association (AHA). The AHA expects these providers' expenses to increase by nearly $135 billion this year, with the rise mostly driven by an anticipated $86 billion increase in labor spending.

Nonetheless, many healthcare executives are prepared to invest their scant funds in software platforms that will help them emerge from the battles they've been fighting over the past few years. In the Bain-KLAS study, roughly 35% of providers told researchers that they expect to spend more than usual on software over the next year—which the report attributes to their needs to boost productivity and efficiency.

Providers' IT spending to date has differed depending on where the providers were located. Large, urban providers that are focused on IT innovation sped up the rate of their healthcare IT spending during the pandemic, according to the report—particularly in the areas of telehealth, clinical systems, and clinical decision support. On the other hand, smaller, rural healthcare organizations with smaller budgets slowed down their software spending.

Nontraditional Solutions

As they fought to keep up with the flow of COVID-19 patients, providers experimented with nontraditional approaches to solving their key problems. For example, some implemented hospital-at-home and remote patient monitoring solutions. These applications allow clinical staff to treat and track more stable patients offsite without having to bring them into overcrowded clinic offices or hospital emergency departments.

These pandemic-era innovations are part of a longer-term trend in which providers are rolling out broader digital-health models, said Spiros Liolis, CTO of Micro Focus' alliances advisory and consulting unit.


"Digital health takes the traditional 'doctor’s workshop' and transforms it into an efficient, interconnected, patient-centric health environment for the 21st century," Liolis said. "Providers will get there with the help of ISVs and systems integrators, which will support the emerging healthcare ecosystem from hardware, software, and services."


According to Liolis, the healthcare industry is using digital tools not only to make care more convenient or engaging, but ultimately to build a new holistic model for delivering services in the community. He predicts that providers will eventually invest in integrating health and social care to build virtual health communities. Such deployments will help patients remain at home during their course of treatmentwhich can be more efficient and more comfortable than inpatient care.

Innovation Inertia

That said, providers are likely to take advantage of the tools they came to rely on during the worst of the pandemic. That's especially the case when it comes to virtual care—the use of which shot up dramatically during the pandemic.

Generally speaking, providers are eager to reap the benefits of digital-health technologies. This is being driven in part by physicians, who have become fans of these models despite significant resistance to adopting them in prior years. According to a survey of physicians released by the American Medical Association earlier this year, 93% percent said that they felt digital-health solutions were an advantage for patient care.

It appears, however, that the hospitals and health systems responsible for building out enterprise architecture to support these emerging models aren't ready to jump in with both feet. The reality is that they will rely more on traditional bread-and-butter tools for quite some time.

This is in part because many providers aren't sure how to deal with the surge of new technologies vying for their attention. The KLAS and Bain & Co. survey found that more than half of healthcare providers are having trouble keeping up with "the flood of offerings" available in the marketplace. Moreover, healthcare IT leaders already have their hands full managing existing technologies. One-quarter of all respondents to the same survey said that their existing tech stacks kept them too busy to stay current with new options on the market.

Given these challenges, most healthcare leaders are choosing to work with technologies they've used before and to build on their existing infrastructure.

About 72% of providers said that they plan to first consider "existing vendors with proven solutions" before looking to new contenders. Meanwhile, 71% of healthcare organizations are looking at ways to enhance their electronic medical records (EMRs) before considering other options.

"We do see some positive signs around the digitization of healthcare, but we still have a ways to go," said Chad Hendricks, vice president of business development with health-IT vendor Medecision. "Healthcare is an industry that fights a great deal of inertia around innovation."

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