I recently attended a conference and spoke in front of an audience of CFOs from healthcare systems across the country. I had a chance to exchange views and test a few hypotheses that we have at Iron Mountain. The first thing I learned was that the job of a Healthcare CFO is harder than that of, well, you could fill in just about any other job here. I also came to fully appreciate just how unsustainable our healthcare economy really is. Our healthcare system is the most costly in the world on a per person basis, and 50% more costly than the second most expensive delivery system in the world - Norway. Apparently, we spend about $650 billion more than we should to deliver healthcare to Americans. Half of all hospitals have negative margins and the average margin is less than 2%. Yet Medicare reimbursements are declining 2% and Medicare patients represent about 40% of the patient mix. At the same time, operating expenses are increasing 6% on average. The quadruple whammy of lower revenue, a changing patient mix, higher expenses and increased compliance burdens is torturing our healthcare systems and forcing our unprecedented transformation to Accountable Care and Population Management.
Traditional, entrenched thinking needs to go out the window. Business as usual is tantamount to failure. And incremental improvements simply won't cut it. The survivors will be those who challenge the status quo, take bold steps and innovate. Unfortunately, many of the best ideas are already known by middle management they're just unwilling to make career threatening recommendations. A preserve yesterday climate permeates many organizations at a time when fresh thinking is so desperately needed. Senior management is excavating their organizations trying to uncover savings opportunities when they don't really have the best vantage point to do so.
There's some low hanging fruit out there that hospitals can pick. These opportunities are often not sexy, but can result in savings and improvements. An easy target is to go after the medical records file rooms. Medical records file rooms have historically served an invaluable purpose. Clinical staff constantly used this central file repository to understand patient histories and to commemorate patient treatments. The medical records staff dutifully picked and pulled files, coded records and managed their transaction flow.
The emergence of the EMR is making the physical medical records function an anachronism. Nearly 90% of the retrieval activity for medical records applies to records that are less than two years old. Therefore, two years after an EMR deployment, the medical records file room could become a graveyard occupying prime real estate and likely overstaffed with previously busy file clerks. Yet, very few hospitals have an explicit plan to shut down the file room and recapture the real estate, and either repurpose or reduce staff. Why? Because the opportunity is not visible to senior management, and only the most progressive HIM departments will initiate their transformation, preferring to protect yesterday's world and today's jobs.
I'd argue that every hospital that has implemented an EMR should either be planning or completing a file room shutdown. They should declare their records as archival and send them off-site, where they can be stored inexpensively and made available when needed. At Iron Mountain, we scan these requested files into the EMR, so they become reconnected with the electronic records and doctors can operate with a single work flow - electronically. Absent this process, doctors will be stuck in a prolonged hybrid world where some of their records are paper and some electronic. This phenomenon stunts the adoption of the EMR and prevents the savings and efficiencies assumed in the EMR investment.
There are numerous examples of this low hanging fruit within hospitals. We routinely find 25% savings for hospitals in various areas, but too often the best ideas never get to the decision makers. These times require fresh thinking and a new openness to challenging the status quo. It's a matter of life and death - for the hospital.
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I recently attended a conference and spoke in front of an audience of CFOs from healthcare systems across the country. I had a chance to exchange views and test a few hypotheses that we have at Iron Mountain. The first thing I learned was that the job of a Healthcare CFO is harder than that of, well, you could fill in just about any other job here. I also came to fully appreciate just how unsustainable our healthcare economy really is. Our healthcare system is the most costly in the world on a per person basis, and 50% more costly than the second most expensive delivery system in the world - Norway. Apparently, we spend about $650 billion more than we should to deliver healthcare to Americans. Half of all hospitals have negative margins and the average margin is less than 2%. Yet Medicare reimbursements are declining 2% and Medicare patients represent about 40% of the patient mix. At the same time, operating expenses are increasing 6% on average. The quadruple whammy of lower revenue, a changing patient mix, higher expenses and increased compliance burdens is torturing our healthcare systems and forcing our unprecedented transformation to Accountable Care and Population Management.
