Study: Hospital budgets expanding due to IT reform

Hospital executives are planning for budget increases during the next five years and are prioritizing strategic initiatives that had previously been on hold due to economic constraints. Healthcare insurance reform is also causing hospital management to re-evaluate how they select and purchase medical devices and other services, according to a survey from L.E.K. Consulting.

Nearly 60 percent of 196 surveyed hospital executives expected budget increases in 2011. During the next five years, 70 percent of respondents predicted larger budgets and are planning to increase purchasing in multiple areas, including IT (58 percent), facilities (38 percent), large medical devices (37 percent), small medical devices (21 percent) and disposables (28 percent), according to the Boston-based consulting firm’s survey.

Supplier negotiations will be central to controlling costs, which has hospitals increasingly turning to group purchasing organizations (GPOs) to help negotiate the best rates possible, L.E.K. stated. According to the L.E.K. survey, more than half of respondents expect to use GPOs more by 2015. Some hospitals have also started to approach GPOs to procure high-priced capital equipment in addition to low-price, high-volume items.

Hospitals plan to address the new federal pricing reimbursement models by enhancing their ability to demonstrate the efficacy and support the monitoring required to track improvements in quality and patient safety, while also reducing medical errors, the report noted. “Most of the executives surveyed are willing to pay a 10-15 percent premium on average for disposables that demonstrate an ability to reduce medical errors and infection rates.”
Survey respondents were asked to assess how well global medical technology providers scored on selection criteria across 11 categories. Providers received high marks for product quality and innovation, as well as providing clinical data. However, companies fell short in several areas that hospital executives believe will be critical during the next five years, including reimbursement, full product partnerships and the ability to share risk.

Medical technology companies that deliver good clinical data will help insurers set advantageous rates for hospitals, and will also help sway hospitals’ medical technology purchasing decisions, the report concluded. “Additionally, sharing risk and providing a full suite will play an increasing role in determining which [medical technology] suppliers hospitals use. Products with demonstrated support for improved treatment quality, patient safety and reduction of medical errors will also continue to stand out in the market.”

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