Welcome to another in an emerging series of Difficult Challenges in Healthcare brought to you today by demographic and economic realities – and the political nature of the US Healthcare Delivery System. According to an annual industry survey conducted by HealthLeaders Magazine, roughly 21% of hospital CEOs surveyed indicated, “their organizations are cutting back on high-level, high-price technology for at least some service lines.”
This from the article, Scrutiny for Clinical Technology, wherein segments from interviews with those CEOs tells a story within a story: not just about the planned reduction in investment – but the means and methods being employed to determine such reductions. As you might expect, capital investment decisions are being significantly impacted by exogenous considerations, such as the cost of capital (i.e., financing costs), uncertainty regarding future revenue streams and competing investment priorities driven by growing demand.
Free market advocates who believe the healthcare industry would produce greater access, quality and affordability if most of the current regulations could be taken away no doubt cringe at the prospect of investment decisions being made in reaction to conditions directly, or indirectly, caused by such regulations. Conversely, advocates of a universal/single payer system will object to the prospect of speculative investments with unproven clinical value being made on the collateral of the revenue base they provide the industry through taxation.
Where does the balance lie between investing in new technologies that has the proven potential to save lives, or at least make those lives more productive and less painful – and investing in the infrastructure required to increase delivery capacity in anticipation of higher demand? Demand that will be driven both by an aging population (natural), as well as implementation of the Affordable Care Act (through regulation).
Who should be making those decisions – and what are the criteria that should be used in weighing investment alternatives? Demand is going to grow substantially, so there must be investment in existing infrastructure. At the same time, free cash flow is going to be strained to subsidize increased operating deficits caused by continued downward pressure on care reimbursement. Caught there right in the middle will be thinner balance sheets forcing difficult tradeoffs for capital deployment.
According to the American Hospital Association, in 2010 approximately 56% of all care provided by hospitals was funded by Medicare and Medicaid. In the post-acute/long-term care world the proportion of Medicare/Medicaid’s share is significantly more because of the higher prevalence of retirement age patients. But the key takeaway is that a substantial amount of funding for healthcare delivery in the United States comes from public sources (i.e., society).
So shouldn’t society have a greater say in clinical technology investment decision making? If so, what would that look like? What do you think?