Clinical Technology Under C-Suite Scrutiny

This article appears in the November 2012 issue of HealthLeaders magazine.

In our annual Industry Survey, 21% of CEOs said their organization is cutting back on high-level, high-price technology for at least some service lines. How can leaders effectively make decisions regarding the right mix of clinical technology and products to offer, considering cost, quality, and competition, among other factors?

Gary Muller President and CEO
Marquette (Mich.) General Health System

We, in the past, have not had the capital to invest in clinical technology. The new partnership we have with Duke LifePoint is going to help us. They have a whole process that is really good about business planning and return on investment and improving quality. We would work through the Duke LifePoint process to vet the clinical technology from a quality standpoint, a service standpoint, and return on investment.

We know there are going to be Medicare cuts and cuts with readmissions. If you don't decrease them, you lose. The accountable care organizations carry a big risk. The uncertainty is huge. With our new capital partner, it will help us determine some of that and then we can invest. But for the freestanding hospital, with all this uncertainty, I'd say probably not. You need the scale to give you the comfort and security to make those decisions.

Alison Page CEO
Baldwin (Wis.) Area Medical Center

We are not cutting back on high-level technology.  We look at it by the services we offer and what equipment we need to offer that service. We roll them up and we have a magic number that we set for how much we can spend—which in our case is the equivalent of our last year's depreciation. We are a small hospital, less than $50 million in revenues. So it's about $880,000 in capital each year that we are spending now. We look at what we have to do and what we'd like to do to offer more and better services or to upgrade the standards. We put it in the capital budget and see if it will fit.

We are part of a larger imaging co-op that buys the equipment and leases it back to us. Then you transfer those costs to the operating budget versus the capital budget. That saves money in the capital budget. If you have more capital appetite than you have dollars, we look at what we can transfer off the capital budget into the operating budget through some sort of lease arrangement.

Dennis Vonderfecht President and CEO
Mountain States Health Alliance, Johnson City, Tenn.

On capital constraints:  We aren't cutting back but we have had to delay some of our purchases of some of the higher-end technology, and it's mainly because of capital constraints. We have had a number of replacement hospitals we have built over the past four years and so a lot of our capital budget has gone toward that.

On delays and reassessments:  We have done a lot of analyses on robotics and the return on investment, and it's kind of a mixed bag. We have the da Vinci robot here—the first in the region. We had a good return on it, but there are other areas of robotics where the big question mark is the financial return on the investment. The fact that we have had to delay some of these purchases does give us a little bit more time to see what some other organizations are experiencing, maybe not being on the leading edge but being timely.

On investment in a time of uncertainty: I don't want to say the uncertainty is giving us pause, but it is one of those factors that we are taking into account a little more. Even though this equipment might be nice to have, if we have to, we can wait another year to see how it goes as far as the reimbursement picture on some of them. But we have a capital plan here that we stick to and it has served us well over the years and there is no reason to think that it won't in the future.

Stephen L. Moore, MDSenior Vice President and CMO
Catholic Health Initiatives, Englewood, Colo.

A couple of things are driving the challenges. Whether economically related to the recession or related more to the changing of health benefits by employers, the entire industry is seeing a significant decrease in volume and patient revenue related to volume, which then starts to call into question the ability to fund your capital needs. The second is more reflective of what we are doing at CHI: a complete reorientation of our capital investments (that used to be going toward new hospitals and putting new technology into our hospitals), which is now moving more toward what we call strategic capital. We are investing more in data analytics to prepare ourselves for population health and clinical IT infrastructure foundations including health information exchanges, EHR, and then strategic joint ventures where we are spending money to strengthen our regional presence either with out-and-out mergers and acquisitions or less so with the technology and products to offer.

We have solidified more of our discussions around a capital review committee process in our organization. A current decision was bringing in the TAVR [trans-aortic valve replacement], which you can do with a non-cardiac surgery valve implant at the top of the heart. It makes little sense financially from a Medicare reimbursement perspective, but it is cutting-edge technology that will not only help bring recognition regionally to parts of the organization that are performing this, but also will add a lot of value to the clinical literature as well. That is an example of where we have taken a comprehensive look at a clinical improvement technology that we have decided to go ahead with, even though it may not have had the best financial outcomes. 

Reprint HLR1112-1

This article appears in the November 2012 issue of HealthLeaders magazine.