Memo to tech companies: Hospitals are looking for ROI, ASAP

Nashville - Hospitals and health systems know they need help on some of their digital health efforts, and they say they are looking to work with tech companies.

However, health care leaders are increasingly saying they need to know they’re getting a return on their investment.

They also say they need to be able to see the partnership pay off fairly quickly.

At the ViVE conference in Nashville this week, hospital leaders said health systems can’t afford to wait too long to see if partnerships with tech companies are going to pay dividends.

B.J. Moore, chief information officer for the Providence health system, said the organization is going to need to see some positive gains from partnerships with other companies within a year.

“Clearly there needs to be a positive return on investment,” Moore said in a panel discussion.

He said if the system invests $1 million in a partnership and it isn’t showing positive revenues in 12 months, they may simply have no choice but to move on. They can’t continue partnerships that aren’t producing results.

“We’re just not in a position to do that,” Moore said. “We’re just too pinched for funds."

Ashis Barad, chief digital and information officer at Allegheny Health Network, said at the ViVE conference that the system considers the potential for earnings in its technology programs.

“We are struggling, and we do need to look at that digital solution … that’s financially sustainable,” Barad said.

Hospitals across the country continue to struggle financially, with many systems seeing negative margins over the past year. In its latest monthly report on hospital performance, Kaufman Hall, the healthcare consulting firm, said razor thin margins may be the new normal for the foreseeable future.

With most hospitals struggling to contain costs and find new revenue, they’re expecting results from partners more quickly. Leaders say they can’t afford as much patience as in the past.

Karen Murphy, chief innovation officer of Geisinger Health System, said there is focus seeing the return on investment in digital health.

In an interview at ViVE, Murphy told Chief Healthcare Executive® that with rapidly changing technology, Geisinger is regularly looking to see if its tech partner solutions need to be refined, or if other alternatives need to be considered.

“Just because we picked a solution, it doesn’t mean that’s going to be the solution for 10 years,” Murphy said. “We have to constantly evaluate, is there a better solution out there? It’s hard for me to imagine a world that we pick a solution, an innovative solution that truly is transformative, that doesn’t change … that doesn’t get disrupted.”

Other attendees and representatives of tech companies said that they heard similar messages at the ViVE Conference. While hospitals may have allowed for more time for partnerships to bear fruit a few years ago, they now are looking at a shorter timeline to achieve results.

Sara Vaezy, Providence’s chief strategy and digital officer, said at ViVE that health systems need to thoughtfully consider the concept of “RODI”: the return on digital investment. While saying she didn’t create the term, she said it’s increasingly important for health systems to examine their digital investments.

“You need to have some measure,” Vaezy said.

While companies have growing tech needs, many health systems who stocked up on a host of tech solutions are now refining their approach, industry analysts say.

Many providers are taking a closer look at some of their existing partners for tech solutions, including their electronic health record partners, before making deals with new companies, according to a report by Bain & Company and KLAS Research last fall. Some are also looking to streamline their roster of third-party tech solutions, the report stated.

At the ViVE conference, Moore mused about the vast number of people he’s meeting, but acknowledged the system will only work with a handful of partners.

“I’m a customer of everybody in this conference, but really it’s only 8-10 that we’ll have a strategic partnership,” Moore said.

Some partnerships emerge as win-wins for the hospital and the tech company, said Michelle Stansbury, vice president of innovation and IT applications at Houston Methodist.

During a panel at ViVE, Stansbury cited common elements of partnership with companies that aren’t successful, such as companies that overpromise, underdeliver and make excuses when there are problems.

She also noted another sign of trouble comes with frequent pricing changes. At that point, Moore quickly interjected, “And it never gets cheaper.”

Stansbury replied, “It never does.”

Tech companies have a better chance of building a lasting relationship if they understand what the health system is concerned about, she said.

“The vendors that do well, they sit down and try to understand us,” Stansbury said.

Health systems also need to clearly define their challenges and explain to potential partners what they need.

“We should be the ones that are defining what the problems are and seeking solutions,” Murphy said.

Health leaders acknowledged that they need digital partners in areas of patient care, and to automate some tasks so their staff can focus on issues that require human intervention.

Tech companies with innovative solutions can find partners with health systems, executives say. But health systems are going to be evaluating those partnerships more closely.