VHA predicts capital spending pressure is expected to ease as hospitals collaborate to drive down costs

Regardless of the outcomes of health care reform, hospitals and health systems, facing increased demands from the government, patients and industry are being forced to do more with less.

Supply chain and clinical thought leaders at VHA Inc., the national health care network, predict that in 2010 health care organizations must approach the marketplace with a new mindset, proactively manage and indentify potential issues within their organization and more closely collaborate internally and with other health systems to maintain, and even thrive, despite marketplace changes and new industry demands.

VHA's industry-specific predictions are:

Recovery Audit Contractor (RAC) Program Complexity Requires Proactive Response Plan

Due to the complexity of the reviews, some regional RAC rollouts have been delayed. VHA expects that future RACs will pose additional organizational, financial and manpower challenges for hospitals.

"If hospitals thought RAC was tortuous before, they may be surprised by how much more complex it will be in the future," said Ginny Balla, clinical performance director at VHA.

Hospitals should prepare now and executives must understand what's occurring within their organization to develop an efficient and effective RAC response plan. They should consider selecting an RAC chairperson or key contact to help accelerate the hospital's audit response time. In addition, hospitals may need a physician advisor to support the veracity of the hospital's claim. To improve preparedness, VHA recommends having a clinical documentation improvement program in place to look at initial issues and understand what events auditors are reviewing.

Capital Spending Pressure Expected to Ease as Hospitals Collaborate More to Drive Down Costs

VHA expects capital spending pressure to ease in early 2010 and that hospitals will begin to experience a resurgence of spending for new and replacement capital equipment. Unlike hospital spending for supplies, delaying or deferring new capital purchases does not eliminate the need to replace equipment. New technologies will be developed -- forcing hospitals to upgrade.

"Hospitals need to stop looking at equipment in the same vein as supplies and understand that in today's environment the difference between equipment and technology is narrowing," said Nik Fincher, vice president of purchased services sales and capital at VHA. "They should look at and manage equipment and technology in the context of being a part of the sum of total assets and the return their investment will have from clinical, operational and financial perspectives."

In a post-economic downturn, hospitals will spend their money carefully and will continue to ensure that they get the most value from every dollar spent. Organizations seek to maximize value through aggregation of purchases, or group buys, along with collaborating with other organizations individually and working more closely with GPOs to get the best value. In addition, VHA expects that more hospitals will experiment with standardization and leverage longer term commitment through these programs.

Health Care Organizations Need Greater Business Intelligence

Faced with increasing challenges and potential reform-related changes, health care providers must maximize their efficiency to keep up with, or stay one step ahead of, payers and suppliers to squeeze out enough profit to stay in business without sacrificing quality of care.

"The pressure to cut costs is growing exponentially, with or without health care reform," said Guillermo Ramos, senior director of supply chain analytics at VHA. "On average, hospital systems unnecessarily spend four million dollars annually in excess costs for supplies due to the lack of business intelligence within their supply chains."

The importance of solid business intelligence and the demand for powerful analytics tools will grow in health care over the next few years to feed the need to increase revenue, reduce costs and comply with industry regulations and standards. VHA continues to work closely with members to provide supply chain analytics and insights to improve and optimize supply chain management.