I recently interviewed Alan Kravitz, Founder and CEO of Medsys, and he offered an insight into the challenges hospitals face that I hadn’t heard before. Here’s what he said:
Expense growth is expanding faster than revenue growth for the first time in healthcare.
This is really interesting to consider when you think about the billions of dollars that are being spent on EHR software. Although, I don’t think it’s the EHR expense that’s the issue. Sure, it’s now a part of the cost of running every hospital. Plus, we could certainly argue over whether it’s worth the cost and whether the EHR is overpriced. However, there’s something much more challenging at play.
When you think about the political landscape for healthcare, all you hear about is the rising costs of healthcare. You also hear other things like the huge percentage of GDP that come from healthcare and how we spend so much more money than other nations around the world. With all of these things, there’s a huge drive to stop paying so much for healthcare.
When you look at this trend from a hospital perspective, all you hear is that they’re going to be paying us less for doing the same thing (and some might argue for doing more). With this in mind, Alan’s quote above makes more sense. A hospital’s revenue growth is declining and that’s by design. I’m not sure most organizations are ready for this change.
We’ve long heard about the potential of EHR to lower costs. Considering the pressures hospitals face today, we could really benefit from EHR living up to its potential. If not, I’m not sure where hospitals are going to cut.
How about executive salaries, for starters?
Good point David.
[…] I noted in my post Expense Growth vs Revenue Growth in hospitals, we’re entering a new era in healthcare where a hospitals revenue is decreasing. There are […]