Bridging the investment gap: Considering innovative investment solutions to maintain digital health’s momentum

Canada’s move to digital health has yielded impressive gains, as evidenced by the impact in areas such as improved patient safety, a host of efficiencies for clinicians and the health system alike, delivering care closer to home and billions of dollars in efficiencies. As impressive as these gains are, one might wonder how much more value is waiting to be uncovered by capitalizing on investments made in the infrastructure for sharing core health information and in tools to be used at the point of care. It all boils down to leveraging these foundational systems to get key information to the point of care. Canadians have identified this as a priority opportunity for action to improve the patient experience. It is also one of Infoway’s four key strategic objectives for the 2013-2014 fiscal year, as identified in our corporate plan.

While there is widespread agreement that equipping clinicians with the information they need at the point of care is a critical component of the transformation of Canada’s health care system, investing in this necessary change is challenging in an era of economic restraint.
So it leaves those of us in the health IT industry to ask the question: “How will we be able to make the significant capital investments required in our foundation systems to support better quality and efficiency, if that money is not readily available from government today?”

During our strategic planning consultations last year, it became very apparent from those managing digital health information systems at a hospital and health authority level that a major gap has emerged. Using the HIMSS EMR Adoption Model as a measure, the statistics show that less than five per cent of Canadian hospitals have reached Stage 4 or higher in the 7 Stage model. This means, for example, that less than five per cent of our hospitals have the capability for Computerized Provider Order Entry (CPOE), Clinical Decision Support and Closed Loop Medication Administration. These functions and others have been identified as key enablers to support new models of care, improve patient safety and enable a high performing health care system.

On our current investment trajectory, it will take 22 years to have all Canadian hospitals at Stage 4 or better. And while there are a handful of successful advanced Hospital Information System (HIS) implementations in Canada that we rightfully celebrate, there are other implementations that have stalled for a variety of reasons. The fact is that without these foundational systems in place, the health care transformation agenda will be much harder to achieve.

There are a number of reasons that new investment is getting harder to come by. I’ve already noted the fiscal challenges facing all of our governments. We also have to acknowledge that there is a history of time and budget overruns that make governments nervous about putting new money into health IT projects. There is also a historical under investment in IT in health care that seems to perpetuate. If we compare ourselves to the U.S., we invest only about two-thirds the amount per worker in IT on a historical basis. And finally, there is a complex cost/benefit business case when dealing with health IT.

Over the past several months, Infoway was asked to do some background work to address the business case and to understand how various financing models we see in other sectors could potentially be applied to accelerate investment in advanced HIS implementation. While still at an early stage, the findings are quite interesting.

In terms of operational benefits, there is limited data available from Canadian implementations. This is partly because there are not many advanced HIS implementations to look at, but also because our health care IT projects tend not to do a very good job of doing baseline measurements and then evaluating the monetary impact of improvements. However, in looking at data from some U.S. sites and taking a conservative view, our research shows that a hospital moving from basic HIS capabilities to advanced capabilities can realize annual quantifiable benefits of approximately $29,000 per bed. These benefits can be put into three categories – patient safety (cost avoidance), improved clinical efficiencies (improved capacity) and administrative savings. Most importantly, this benefit amount per bed outstrips the operating cost per bed by a factor of three, leading to a substantial benefit.

So we’ve established a dollars and cents operational business case, but we still have the question of the significant upfront capital investment. Based on current procurement data, for a 1,000 bed implementation we could expect to see a total implementation cost in excess of $110 million. On a cash basis, this is a huge commitment for any organization. However, using the numbers mentioned above, we have worked with a third party consultancy to model the financing of an HIS design-build-implement-operate-maintain project over a multi-year contract period. The modeling shows that there is a financial business case with a payback after about seven years of operations of the new system, for a traditional public sector financed project.

But we have already said there are limited public funds readily available. What about other sources? Private sector vendors? Financiers? Ten to 15 years ago the public sector infrastructure sector found itself lacking funds and began looking at new ways of financing major capital expenditures. We have seen this industry mature to the point where in several provinces public-private partnerships (P3s) are not only readily accepted, but a preferred way to do business. Could such a model work in the health IT space?
The consultants applied the financial model using the higher financing rates and transaction costs typically seen in a P3 initiative, and found that the payback was pushed out by only one year. Furthermore, if designed correctly, such a P3 model could bring greater cost certainty over the life cycle of a system than most organizations can manage internally, and could also share or transfer certain risks to the private sector.

But would anyone – hospital executives, software vendors, private financiers, others – actually be willing to look at this model in the health IT space? Again, the consultants did some testing through market sounding interviews amongst a wide variety of potential participants. The response was very positive. There were numerous public sector CIOs who said this is an option they would like to see developed further. Private sector interviewees see an opportunity here, with a properly conditioned market, similar to the maturity process we have seen in the infrastructure sector.

While I am not advocating a mad rush to a raft of P3 health IT procurements, I am convinced that we need to look at financing options from different angles in today’s fiscal environment. If we truly believe that modernizing our foundational hospital systems is a key to transformation, we need leaders to step forward as champions for accelerating investment, and we need to look at innovative investment options.

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