Premier C-Suite Survey Says CAPEX Spending Down, Product Standardization Up

Hospitals and health systems nationwide are projecting their capital expenditure budgets (CAPEX) will drop below 2010 levels in anticipation of  patient admission reductions and in response to reimbursement rate cuts. Although those two factors (i.e. patient admission rates and reimbursement metrics) are bad enough when taken separately, when Congress passed the Affordable Care Act, it included a provision titled the Hospital Re-admissions Reduction Program that is laced with additional and stinging prospective-payment cuts that tie the two together.

In any event, the news, according to the Premier healthcare alliance’s fall 2012 Economic Outlook, is based on a survey of member C-Suite executives throughout the U.S. When respondents were asked about the areas in which they expect to make the largest capital investments over the next year, here what they had to say:

  • 43% cited healthcare information technology (HIT) and telecommunications, up from 34% in spring 2011;
  • 34% cited capital investments in infrastructure and construction, up from 28% in fall 2011, but still well below 2010 levels;
  • Investments in imaging, lab, and surgical and clinical equipment are forecast to drop by more than 23% compared to just six months ago;
  • 33% indicated they would increase their efforts to standardize products/rationalize suppliers; 27% said they saw a viable path to reducing costs by going after physician preference items (PPI);

Not surprisingly, reducing waste is weighing heavily on the minds of healthcare providers. When asked what they consider to be the two biggest drivers of healthcare costs, a full one third of respondents cited over utilization of products and services, up 32% over just the past six months. For example, Premier’s waste report identified an opportunity for 464 hospitals to save $165 million annually in blood purchasing costs alone by reducing blood usage by 802,716 units, while maintaining positive patient outcomes.” Inefficient use of products, services and labor is a major issue health systems are facing that requires active engagement from a variety of internal stakeholders,” said Mike Alkire, Premier chief operating officer. “Matching utilization data with outcomes, as our blood product analysis shows, can identify tremendous savings without compromising quality, even when looking at just one product or service.”

Obviously, Mr. Alkire’s statement could not be more correct. And in selecting the blood purchasing example, he was also nicely diplomatic. Eliminating variance in all of its forms, driven by the kind of medical evidence that is readily available these days, should not be such a tough sell. If district attorneys had to prosecute their cases to the same standard as say SCM professionals (e.g. when they’re trying to convince physicians to allow them to reduce the number of total joint suppliers from 6 to 3), no one would ever get convicted.

Source: MarketWatch

—Tom Finn

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