Health systems spent millions on digital innovation in 2018, according to Project Japan’s most recent Power Panel survey of top CEOs.
More than a third of the 26 CEOs responding to the survey said they spent between $5 million and $19.9 million on digital innovation last year. About 30% spent up to $4.9 million on those types of projects. Only two CEOs said their health systems had spent $100 million or more.
Digital innovation is undoubtedly expensive. Electronic health record systems alone—which many systems treat as the foundation to new technology programs, given the hefty amount of data they hold—can cost millions of dollars, when taking into account all of the expenses, such as purchasing the software and training personnel.
“To move toward digital technology at our healthcare system, we had to spend close to $500 million just on our electronic health record and that kind of technology to build the foundation for digital technologies of the future,” said Chris Van Gorder, CEO of Scripps Health.
That puts health systems in a difficult position. Although innovation can offer cost savings, there’s a huge initial investment—and if the research and development side of a project doesn’t pan out, that can feel like wasted money. “Taking dollars away from clinical care or other areas to invest in innovation for some organizations is a very, very tough thing to do,” said Randy Oostra, CEO of ProMedica. “Investing in that is a major decision.”
In the Power Panel survey, health system CEOs indicated that the best way for the federal government to encourage digital innovation is through financial measures—such as by creating greater financial incentives to develop and adopt digital solutions (53.9%) or by using payment to force widespread adoption of standards (26.9%).
Historically, financial incentives have proven successful in encouraging technology adoption. The high level of EHR adoption among acute-care hospitals is often attributed to programs like the Medicare and Medicaid EHR Incentive Programs. To date, the federal government has spent more than $35 billion under these two programs.
There are funding opportunities for some innovative projects today. Allina Health, for example, was able to build its program to screen patients for social determinants of health by participating in a payment and service delivery model that the Center for Medicare & Medicaid Innovation launched in 2017.
Innovation, CEOs emphasized, must be treated as an investment in lower costs and better outcomes down the line. That’s why the move toward value-based payment models will likely encourage systems to look toward new ideas, said Catherine Jacobson, CEO of Froedtert Health.
“The more we can get support for value-based reimbursement, I think that’ll drive the industry in this way,” she said. “It’s a future-based investment today, because we all expect to be in an environment of more value-based care in the future.”