Dive Brief:
- Healthcare providers are continuing to invest heavily in software as the COVID-19 pandemic continues, despite a precarious operating environment, according to a new report by KLAS Research and Bain.
- About 45% of providers increased their software investments over the past year, the report found. Providers are focusing their investments mostly in revenue cycle management, patient intake and cybersecurity.
- Providers are also streamlining tech stacks and looking to their electronic health record providers and other existing vendors for new tools before turning to other offerings, the report found.
Dive Insight:
Macroeconomic uncertainty has led health tech companies to issue dismal projections for the remainder of the year, but the new report suggests providers are still spending big on software. Only 10% of providers decelerated their spending in the past year, according to KLAS and Bain.
Software is a top-five strategic priority for almost 80% of providers, and a top-three priority for almost 40%.
Over the next year, more than 95% of providers expect to make new investments in software, with one-third planning to spend more than usual.
The high level of spending comes despite ongoing cost pressures, especially for providers. The coronavirus pandemic, which kicked the digitization of healthcare into overdrive, has resulted in organizations regrouping and becoming more focused with their investments, KLAS and Bain said.
In addition, clinician shortages and wage inflation are actually driving demand for tools to improve productivity and ameliorate labor strains. Almost 80% of providers upping software spending cited those factors as top catalysts for doing so.
However, not all organizations are increasing IT investment. Roughly 30% or respondents said they’ll likely spend less over the next year than they would during a time of more favorable market conditions.
For those investing in software, revenue cycle management is often a top priority, as providers look to automate labor-intensive processes and bring more cash in the door, the report found. That’s especially the case for smaller providers.
Security and privacy are another top investment priority, as cyberattacks increase in frequency and severity. From 2018 to 2021, the number of data breaches reported to the HHS has roughly doubled, and data suggests the breaches are becoming costlier, too.
A recent high-profile attack on CommonSpirit has thrown the issue into the limelight. The health system — one of the largest in the U.S. — is still working to get its systems back online more than a week after it first disclosed it was grappling with an unspecified IT incident.
Competition in the provider IT space shows no sign of cooling down, with early-stage capital, big tech and large EHR players continuing to expand their software offerings, the report said. As a result, it’s critical for vendors to understand their customers’ investment postures and articulate software values in order to remain competitive, according to KLAS and Bain.
KLAS and Bain based their report on secondary market research, financial information and interviews with industry participants.
