Healthcare`s dilemma

In many ways, the SA healthcare industry closely identifies with its US counterparts. Both countries are among the very few who deliver healthcare services based primarily on private funding. iWeek set out to learn the intricacies of the local sector in light of this, and to find out how they will avoid similar pitfalls.

COST MANAGEMENT

The Hospitals Associations of South Africa (HASA) represents the interests of private healthcare institutions across the country, with more than 90% of these of the opinion that IT investments are a necessity for local providers to continue operating without incurring massive losses. He suggests that in certain crucial areas, IT providers could be more active in assisting with this vertical`s unique challenges.

HASA represents 214 private hospitals. Dotted across SA, they cater for the needs of seven million insured patients and an increasing number of `uninsureds` (2 million) who pay cash. And according to government figures, private hospitals earn more than half of the R85 billion health industry - approximately R45 billion during 2005.

Worrall-Clare believes that although the SA economy remains relatively isolated, globally felt financial difficulties in the industry will no doubt show up here, so cost management is critical to avoiding strain. And to this end, IT systems are crucial for SA healthcare operations to remain financially viable.

BURY MISTAKES

"To properly manage costs, reduce shrinkage and eliminate duplication of efforts, it is critical for providers to have an IT infrastructure that will assist them with the most efficient recording, storing and processing of vast volumes of information.

"From when the patient arrives at the hospital, right through his or her treatment to the issuing of the final invoice, every detail must be correctly captured and processed.

"Not only can this help the hospital financially, but mistakes could have fatal consequences, so information systems also affect the quality of the care received by the patient," states Worrall-Clare.

A Gartner report on IT in healthcare, published this year, confirms this view: "Information is the common point for all [our] proposed changes.

"IT must be seen as a core-enabler for [providers] trying to simplify processes and create economies of scale. Also, IT must play an ever-increasing role in redesigned organisations. IT investments no longer stem from just one sector or one department of the organisation; increasingly, individual business processes will form a part of the organisation`s strategic IT initiatives."

Gartner also released a study on ERP in healthcare in January, predicting a CAGR of ERP in this sector of 8.8% through 2009.

In SA, healthcare giant Netcare is staying ahead of the curve with a R120 million investment in an end-to-end SAP solution, to be deployed throughout the organisation over two to three years.

"We believe it is important for organisations to decide strategically on an IT platform moving forward, and thereafter [to] standardise on this platform throughout the group. Accordingly I expect this investment, significant in any terms, to save the group IT spend on wastage in the future," comments Netcare CFO Peter Nelson.

NETCARE`S LARGEST EVER

The Netcare group is made up of approximately 120 points of care, including 44 hospitals and a number of clinics and pharmacies.

Until now the group operated in an entirely decentralised environment. Its implementation of SAP will create a single, centralised platform in which information is shared across all satellite locations, allowing for a single view of patients and enabling the move to a real-time transactional model.

Kris Tokarzowski, Netcare CIO, expects to realise significant savings in the form of tighter stock control, freeing hospitals up from the need to hold large amounts of high-value medical goods.

He also anticipates much shorter financial cycle turnaround times. Patient care is also expected to be improved by the integration of clinical systems into the SAP core system.

"It`s a very innovative project, we are the first healthcare provider in SA to actually deploy a seamlessly integrated environment for the whole group.

"Our peers are still running independent systems at different clinics and hospitals. We`re also expanding the SAP system into clinical governance, and will be pioneering this arena in SA. This is the largest business project with IT implications that Netcare has ever undertaken," states Tokarzowski.

Netcare has historically grown acquisitively and organically. A SAP backend system will help the group continue to grow in these ways, as acquired entities can be integrated into the group far more quickly with SAP encompassing the entire breadth of operations.

STORE AND RETRIEVE AD INFINITUM

HASA believes that the field of data archiving should be a prime focus for healthcare this year.

Worrall-Clare calls on the IT industry to deliver a solution capable of minimising storage costs of long-term archiving of critical patient records.

In the healthcare funding market, SA developer and supplier of managed healthcare software, Neil Harvey & Associates (NHA), partnered with QlikView in January this year to provide clients with rapid data mining capabilities.

"2006 will be a tough year for hospitals. Health spend is a crucial aspect of an economy on the whole, so I think in SA we`ll have added pressure to really perform in the year ahead to meet the country`s economic growth targets."

Despite rapidly escalating investment in WLAN technology by healthcare providers in the US, the top priorities for IT investments in 2006 remain centred around improving financial performance and cost reduction.

Possibly, the industry is waiting for a mobile device standard before committing to rollouts.

Source: Gartner/DataquestWorrall-Clare, HASAreal expenditure on private hospitals in SA (per beneficiary per month in 204 prices)Source: Council for Medical Schemes