Originally published June 1996
Market Trends According to two recent surveys, hospital financial managers are increasing their investments in information technologies. Many are purchasing nonmedical equipment such as data processing and telecommunications technologies at a higher rate than they are diagnostic and therapeutic equipment.
The results of the seventh annual health-care capital survey conducted by LINC Anthem Corp. (Chicago) indicate that hospital managers are seeking business systems and capital improvements that reduce costs by streamlining operations. Another survey, sponsored by the Healthcare Information and Management Systems Society (HIMSS; Chicago) and Hewlett-Packard Co. (HP; Andover, MA), suggests that pressures to control costs in managed-care environments are compelling many purchasers to implement computerization in their organizations.
"The trend of health-care purchasers reallocating capital expenditure for information technology instead of for medical equipment has to do with the evolution of managed care," states Jane Sarasohn-Kahn, a health-care consultant affiliated with Institute for the Future (Menlo Park, CA), a long-term forecasting and research organization. "Managed care frequently requires patient information to be delivered in real time to clinicians, nurses, and managers at a variety of sites. Such timely delivery can be accomplished by systems that integrate information obtained from physician offices, hospitals, ambulatory surgery units, and patient homes," she explains.
The current shift away from medical equipment purchases isn't all bad news for device manufacturers. Sarasohn-Kahn points out that applications are being developed that will marry information technologies to medical devices. For example, Lifestream Technologies, Inc., and Interactive Health Evaluation Systems, Inc., have jointly developed an uplink system that permits data captured by Lifestream's Cholestron cholesterol/HDL test unit to be uploaded onto a computer for processing. The partners' IntraNet uplink system gives physicians access to information related to their patients' conditions, including historical analysis, comparison studies, and lifestyle change recommendations. The American Heart Association recently signed a letter of intent for U.S. licensing and branding of the system.
In order to compete effectively, Sarasohn-Kahn suggests that device manufacturers "ally themselves with information technology companies that can help them add value to their products."
Because hospitals are increasingly interested in acquiring equipment that employs information technologies, the trend suggests that manufacturers of high-cost capital equipment may experience reduced sales growth in 1996. "The need for systems integration is taking money away from traditional purchases such as MRI and CT scanners," Sarasohn-Kahn says. Instead, many purchasers are turning to leasing agreements for such expensive devices. The LINC Anthem survey reveals that more than 50% of the respondents would rather lease equipment than purchase it. Sixty percent of hospital representatives surveyed also said they would consider obtaining refurbished rather than new equipment in order to cut costs.
"Hospitals are under incredible financial stress, and leasing equipment can lower the out-of-pocket costs," explains Casey McGlynn, chairman of the Life Sciences Group of the law firm Wilson Sonsini Goodrich & Rosati (Palo Alto, CA).
The LINC Anthem survey was based on responses from 443 respondents, including chief executive officers, chief financial officers, and other top hospital administrators. All together, the survey represents approximately 8% of the nation's 5300 short-term general hospitals. For more information, contact Pam Welsch, LINC Anthem Corp., 312/ 946-7300. The HIMSS/HP survey polled more than 1200 attendees at the HIMSS annual conference and exhibition in March. For more information, contact Robert Minicucci at 508/468-1155; E-mail address [email protected].--Daphne Allen