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2009 APAC Healthcare Information Technology Outlook

Agenda

1. Introduction 2. Overview of Global Economy

3. Economic Crises Impact on Healthcare Information Technology Industry 4. Healthcare Information Technology Trends 5. APAC Healthcare Information Technology Outlook 6. CIO & CFO Healthcare Information Technology Survey

Introduction

The adoption of Information and Communication Technologies (ICT) is essential for modern healthcare delivery systems if they are to gain greater efficiency, reduce overall healthcare costs and improve patient safety. In recent years, the acquisition of computer technologies by healthcare organizations has increased substantially with the spending showing upward tendency placing the industry as one of the major consumer of ICT products and services.

In 2007, spending on Healthcare information system in Asia Pacific was valued at $15.50 billion. This accounted for 1.5 to 2.3 percent of total healthcare expenditure. By 2012, it is estimated that healthcare spending will almost double.

The HIT adoption trend by healthcare organisations is unstoppable, however there is expected to be a backlash in view of the current financial crisis. We are already seeing negative impact on the growth of the HIT industry as hospitals and health systems are taking measured but deliberate action by delaying capital projects, cutting capital and operating budgets, and laying off workers.

Agenda

Overview of Global Economy

Global Economic Crisis What? When? How?


10 8 6 4 2 0 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 ASEAN-5 World Major advanced economies (G7) United States -2 -4 -6 -8 -10

The NBER (US) has declared December 2007 as the beginning of recession in US. Soon the rest of the world followed. Unlike the 1997 1998 recession, which was mostly confined to Asia, the current slowdown has global implications. The global pull stems from the failing of the worlds largest economy engine the US with weakening USD and decreased demand for imports being the main factors. Although the signs of recession are not so pronounced in APAC region, the early hints are already visible as the regions is predominantly dependant on exports to US. This has been cushioned, to a certain degree, by redirection of trade to China. The effect, however is temporary as Chinas economy is likewise an export oriented and the local demand is already stagnating. Considerable uncertainty about likely duration & depth of current economic crises makes any predictions difficult as most economies/corporations correct their forecasts on a monthly basis
December 2007 - ????; External to APAC Credit crunch - shortage of finance High Interest Rates resulting from underestimation of property sector Initially, overvalued property sector followed by sharp drop in house prices - related to shortage of mortgages and credit crunch Cost push inflation squeezing incomes and reducing disposable income Secondary fall in demand and industrial output, deflation, and unemployment.

July 1997 March 1999; Internal to APAC Excessive Growth with Asset's price inflation and imbalanced BOP. Vulnerable Banking System due to rapid credit growth, large capital inflows and over-valued exchange rate.

March 2001 November 2001; External to APAC Dot.Com bubble burst overvaluation of technology companies. High interest rates. 9/11 terrorist attack High fuel prices

Economic Crises: Impact on Different Industry Sectors

The effects of the downturn has disproportionately affected different segments of the economy The healthcare sector has outperformed the broader market This implies that investors expect that, while the healthcare sector will be affected by the downturn, it will still out-perform the general economy

US Market Indices
16,000 14,000

Indices value (units)

12,000 10,000 8,000 6,000 4,000 Dec-07


Healthcare Indices, while declining, have still outperformed the broader market

Feb-08
NasDaq Financials

Mar-08

May-08

Jul-08

Aug-08
NasDaq Biotech

Oct-08

Nov-08

Dow Jones Industrial Average S&P HEALTHCARE INDEX

NASDAQ Transportation PHLX SEMICONDUCTOR SECTOR INDEX

Global Response: Massive Government Stimulus


Japan: Interest rate cuts; $51 billion stimulus package South Korea: Interest rate cuts and efforts to keep currency stable; $11 billion stimulus package

China: Interest rate cuts; $586 billion stimulus (infrastructure, rural) India: Interest rate cuts; $4 billion stimulus package (infrastructure, exports, textiles)

Taiwan: $31 billion stimulus package (subsidies, tax cuts) Malaysia: $2 billion stimulus package

Global Response Governments infusing capital into financial institutions Globally coordinated interest rate cuts IMF offers bridge loan to meet foreign exchange requirements Discussions, coordinated efforts (G20 summit)

Agenda

Global Economy Crises


Impact on Healthcare Information Technology

Impact on the Healthcare Sector


Symptoms of the Downturn Downturn in capital markets Increased cost and reduced availability of debt Decrease in govt revenues and sharp rise in expenditure Sharp fall in discretionary spending

Impact on Healthcare Companies in 2009 Development Stage Pharma/Biotech Companies Pharmaceutical and Biotechnology Companies Medical Technology Companies Healthcare Services Providers

Common Factor: Reduced Access to Capital and Higher Interest Costs


Operational decline Reduced corporate deals Reimbursement pressures Decline in consumer spending Reduced corporate deals Reimbursement pressures Decline in consumer spending Working capital constraints Reimbursement pressures Decline in consumer spending

The economic downturn will impact the various segments of the healthcare sector differently in 2009

Impact on Healthcare Information Technology Industry


Decline in revenues - the economic downturn will affect the discretionary spending of patients. Although the lifesaving procedures will feel lees impact the elective and complementary services will decline due to lower demand as patients will have less disposable income to spend with tendencies to increase their savings. Constrains in procuring debt for financing operational activities will have negative impact on capital expenditure. Healthcare providers will look for means to reduce spending on HIS components by extending the timeline of ongoing projects, negotiations with vendors commercial arrangements and delaying new projects. Budgetary shortage will result in cutting non-essential, non-revenue generating spending . HIT expenditure will be affected. In most optimistic scenario it will remain the same but in majority will experience cut backs. HIT vendors will be affected by a mixture of the above and factors originating from capital market : Loss of revenue due to decline in demand Defaults of payment on ongoing projects Assets write-offs Reduced access to debt

D e m a n d

HIT vendors corrective actions: Lay-offs Virtualisation of activities Outsourcing Price Reduction (probably deflation)

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Warding Off The Troubles


Governments can play crucial role by promoting the adoption of HIT, setting standards and providing financial help example USs USD 20 billion healthcare IT package. Healthcare providers should not take on conservative approaches in implementing HIT but rather leverage on its inherent ability in reducing costs and promoting efficiency Insurance industry will benefit from EDI, which could reduce paper workload , streamline processes and speed up processing times. Vendors should look into providing affordable commercial arrangements and reducing price.

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Agenda

Healthcare Information Technology Trends

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Healthcare Applications Hype Cycle (2007)

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Shift in Healthcare Information Technologies

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Major EHR Trends: Global View

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Shift Towards Integrated and Patient Centered Healthcare Delivery APAC

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Top Ten Trends in Healthcare Information Systems: APAC

Healthcare Information Systems: Top Ten Trends in APAC (2007)

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Highest Growth Potential in APAC: Clinical Information Systems and EMR

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Agenda

APAC Healthcare Information Technology Market Outlook

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The Asian Healthcare Sector


Healthcare Market Revenue (Asia Pacific), 2008 Total: US$ 239.9 billion HIT 2.1% Medical Imaging 1.5% Biotechnology 6.7% Clinical Diagnostics 2.1%

Medical Devices 21.2%

Pharmaceuticals 66.2%

In 2009 we anticipate the healthcare sector in Asia will grow by 5-10%


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Opportunity Assessment on Emerging Market Segments


Key Focused Market Segments & Geographies
High Least Worthy
Centralized/Traditional Healthcare Management

Competitive
Singapore , Malaysia, India

Non-applicable to all 8 Countries Traditional Healthcare management lacks patient care effectiveness, operational efficiency and market attractiveness

India, Australia, Malaysia

PHI TPA

Australia, China, Taiwan, India

Market Penetration Rate

Challenging

Taiwan, Thailan d
PHI

High Priority
PHI

HCIT

Indonesia

Taiwan, Thailan d

Singapore , Indonesia, China


HCIT TPA

Thailand, Malaysia, Singapore

HCIT

Australia, China

Low Low

TPA

High Growth Potential

The paradigm shift of healthcare from provider to patient centric, centralized to decentralized, have pushed the standards of healthcare in terms of quality and efficiency to a higher level. Hence, value added components, such Health Information Technology, Health BPO and private health insurance are likely to play significant roles in the transition process.
PHI = Private Health Insurance, TPA = Third Party Administration, HCIT = Healthcare Information Technology

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HIT Market Assessment - Malaysia


Percentage of ICT Spending / Total Healthcare Expenditure

Malaysian HIT Background Malaysia implemented its national plan for the development of ICT in health in 1995. In 2000, the country has embarked on Telehealth implementation that aimed at providing uniform HIT infrastructure across the entire nation for creating single EMR and providing Subsequently in 2007, the government increased its emphasis on E-Health with its strategy and vision to 2020 of the Multi-Media Super Corridor initiative and the Telemedicine Act 1997. The Multi-Media Super Corridor initiative was aimed to establish a health-care system which could leverage advanced information and multimedia technologies to significantly enhance its healthcare standards with telemedicine and medical informatics as the crucial components. Government funds were also allocated to expand Tele-Health and Tele-consultation services, to share health records and plans, to set up the National Health Informatics Centers and to implement hospital information systems in selected hospitals and clinics, which provides a positive outlook for the E-Health industry. Malaysia is planning to introduce National Health Insurance Scheme, which will include developing Casemix System to facilitate reimbursements.

2003 2005 2007

US$ 23m 0.6% US$ 113m

2.2% 2.6%

US$ 171m

Key E-Health Players in Malaysia


Company SPK Technology IBA Health Group Kompakar Worldcare Health Profdoc (under CompuGroup) Peransang Jati AHIS Country of Origin Malaysia Key Expertise THIS, Electronic Medical Record, Patient Management, Physician Order Management Electronic Health Record, Patient Management, Electronic Health Claims THIS TeleRadiology, Patient Management, TeleCardiology, TeleDermatology, TelePathology Patient Administration, Electronic Medical Record, Care Planning, Hospital & Laboratory Management Personal Health Management, THIS THIS penetrated KPJ Healthcare

Australia Malaysia Malaysia

Sweden Malaysia Austria

Source : The Association of Computer & Multimedia Industry of Malaysia (PIKOM), National Information Technology Council Malaysia, Frost & Sullivan estimates

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HIT Market Assessment - Singapore


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Singapores HIS Market: Revenue Forecast (2003-09)


CAGR % (2005-2009): 12.7%

Overview of Singapores Healthcare IT


US$ Million

Hospitals in Singapore are taking full advantage of technological advances in Healthcare IT to improve efficiency and speed up patient care Some examples of information technology playing a major role in revolutionizing healthcare delivery in Singapore include: Hospital Information Systems (HIS), Picture Archiving and Communications Systems (PACS), Electronic Medical Records (EMR), E-Health, wireless technology, radio frequency identification (RFID) Healthcare service providers in Singapore can boast of being the leaders in technology adoption in the Asia Pacific healthcare space Healthcare delivery in Singapore is made up of both public and private systems. In 1999, there was a reorganization of the public healthcare delivery system into two vertically integrated networks, the NHG and SingHealth - to enable a greater degree of integration, cooperation, and collaboration among the public sector healthcare providers Major private healthcare providers in Singapore are: The Parkway Group and Raffles Medical Group

20 15

21.8 19.3 17.1

15.2 13.5 11.0 12.0

10 5 0

2003

2004

2005

2006

2007

2008

2009

Healthcare IT Systems Market: Market Life Cycle for Selected APAC Countries (2004)

Source : Frost & Sullivan; E-Health in Asia and the Pacific, United Nations ESCAP

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HIT Market Assessment - Thailand


Percentage of Establishments with Internet Usage
100%
Total

Establishment Coverage % by size (number of persons engaged) & Economic Activity

80% 60% 40% 20% 0% 2004 2005 2006 2007

Manufacturing Other Land Transport etc Business Trade Services Construction Hospital

Modernization of Thailand through ICT Globalization effect has triggered Thailands emphasis on E-Health, and subsequently, the Modernization of Thailand project further reinforce the governments aim in utilizing technology for its key sectors, including healthcare and medical insurance. In a recent survey conducted by the National Statistical Office, Thailand, the hospital segment accounted for about 0.2% ICT coverage in terms of the number of establishments, out of the total 820,137 establishments in 2007 (a majority 82.67% of the total hospital population. Furthermore, in contrast with the other industries, the hospital segment creates more ICT job opportunities, whereby 55.2% of the establishments employ 51 to 200 persons for their ICT activities, and is highly active in terms of internet usage (95%).
Source : National Health Statistical Office, Thailand: Information and Communication Technology Survey 2007, United Nations: E-Health in Asia and the Pacific

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HIT Market Assessment - Australia


Health IT Market Size by Expenditure US$ Bn (2001-07)
Growing Importance of Health IT
Expenditure (US$ Bn) 3.5 3 2.5 2 1.5 1 0.5 0 2001-02 2002-03 2003-04 2004-05 2005-06E 2006-07E 2007-08E 1.15 1.32 1.44 1.82
CAGR % (2001-2007) E-Health Expenditure: 16.6%

It is estimated that the healthcare IT market in Australia is worth US$2.89 billion in 2007-08, growing by CAGR of 16.6% since 2001. In an effort to resolve the implications caused by the Privacy Act on the development of Healthcare information, the Australia government amended the legislation in 2004 to allow for legitimate operations of health IT. The nationwide implementation of HealthConnect National Information Network was also announced by the Australian government in the same year, demonstrating Australias commitment to expanding the health IT industry. The Health IT industry gained further momentum with the creation of the National E-Health Transition Authority (NEHTA) in 2005, in which the government committed US$85 million funding in 2006. The extent of health operating budget invested in IT varies greatly amongst different health organizations, ranging from 1% to over 10% - with public hospitals spending an average of 1.5% of their total budget on IT. In 2008, approximately 90% of the General Practitioners in the country are computerized.

2.89 2.48 2.12

Key Australian Health IT Players


Company IBA Health Group Limited Health Communication Network Meditech Global Limited ICSGlobal Limited Revenue (US$ Mil) 235.6 Key Expertise Electronic Health Record, Medication Management, Patient Management, Electronic Health Claims Practice Management, Patient Management, Clinical Information Sharing, Health fund management Electronic Health Management, Personal Patient Monitoring, Clinical Information Sharing Transaction Health Exchange Linking Multiple Applications (Thelma)

19.58

5.46 1.19

Source : Fujitsu Australia: Achieving Benefits from Investments in Health IT, Frost & Sullivan analysis & estimates

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HIT Market Assessment - Taiwan


Overview of Taiwans Healthcare IT Leaders in Taiwan acknowledge that HCIT not only helps to provide efficient and safe medical care but will also play a significant role in sustaining the economys national health insurance system Currently, all hospitals and most clinics are connected to the Bureau of National Health Insurance through (BNHI) a Virtue Private Network (VPN) for e-claim purposes

Hospital Usage of Information Technologies in Taiwan (%) (2002-06)


2002 89.8%

2006

98.7%

Key Drivers The government is the key driver of an integrated island-wide health information system in Taiwan, and is responsible for the creation (and funding) of Taiwans successful health smart card Hospitals, too, have played an important role in integrating IT into the health sector and generally cover the costs of their individual HCIT systems

HIT Adoption in Taiwan

1989

Government-initiated decision to establish a National Health Information Network (HIN)

1991-1993

Pilot HIN tested in Hsinchu medical care region

Challenges Interoperability Some hospitals treat health and medical data as their exclusive property and are unwilling to share patient data with other hospitals Privacy Medical data is sensitive and proprietary. Many are concerned that de-identification is not sufficient to protect privacy as practice patterns, medication use, and outcome variations are all sensitive information

1994-1996

HIN plan extended to other regions in Taiwan Phase II of HIN begun with: bandwidth and VPN upgrades, local resources analysis, web-based application and standards development

1999

BNHI introduced smart cards

Source : Health Information Technology and Policy Lab

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HIT Market Assessment - India


India HCIT Framework

Implication on India HCIT market by US Service Providing Penetration (2003-2010) Revenue (US$ Mil)
Revenue 4000 3000 2000 1000 0 2003 2004 2005 2006 2007 2008
Key Contributors of Telemedicine
Company/ Institution ISRO Sector Public Public Key Involvements GRAMSAT project Develop telemedicine application through aerospace technologies Facilitator for development of technology, pilot scheme initialization, and co-ordination Pioneer in-house developer from the hospital segment with more than 45 telemedicine centers set up in the country Co-development, whereby SGPGIMS is responsible for R&D and educational initiatives; Lucknow provides the platform for trial implementation. CAGR % (20032008) Revenue : 82.10% Workforce: 70.00%

Workforce

700 600 500 400 300 200 100 0

The Ministry of Health, of Family Welfare, of Communication and Information Technology, state government, and the Indian Space Research Organization (ISRO) are those who have played significant roles in the development e-Health in India The major fields of e-Health more rapidly developing in India involves 2 main aspects: (1) Total Hospital Information System and (2) Telemedicine To date, majority of e-Health development in India are outsourced from US service providers.

Total Hospital Information System (THIS) & Telemedicine


DIT

The hospital segment is undergoing an evolution since the early 1990s, with the rising requirement for automation. Although a large number of HIS services providers are available in the market, the major players in the field include CDAC, Wipro, TCS, and Siemens Information System Ltd. The government-led CDAC, in particular, was the pioneer for the development of the first HIS solution in collaboration with SGPGIMS and Lucknow in 1997.

Apollo Hospital SGPGIMS, Lucknow

Private

Public Private

ISRO = Indian Space Research Organization, DIT = Department of Information Technology, SHPGIMS = Sanjay Ghandi Postgraduate Institute of Medical Science Source : WHO: Mode 1 GATS Report India Cross Border Trade in Health Services (E-Health), United Nations: e-HEALTH in Asia and the Pacific, SGPGIMS

Workforce required in HCIT Industry ('000)


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The rapid increasing and aging of population, gradual increase in disease burden, rural-urban healthcare coverage disparity, and manpower constraints in the healthcare sector, have magnified the importance of e-Health intervention on healthcare in both the public and private sectors.

5000

800

HIT Market Assessment - China


Growing Importance of Health IT Due to the Health Informatization Development Plan, all hospitals are required to increase investment in building digitized hospitals. This requirement is expected to accelerate the growth of Chinas HIT market by about 25-30% a year during 2006-2010 By the end of 2006, Chinas investment in its healthcare information systems (HIS) had increased by nearly 16% to RMB 5.8 million, yearon-year. This amount accounts for approximately 0.5% of the countrys total healthcare expenditures of RMB 866 billion during the same period The market size is expected to expand to approximately RMB 15 billion in 2010. The development of Chinas HIT industry is generally considered to be at a preliminary stage, resembling that of western countries 20 years ago. Nevertheless, as they learn more about available and emerging technologies, they now have the opportunity to leapfrog ahead In 2007, 380 domestic companies in China have developed HIS solutions in response to the healthcare industrys rapid growth and government policy
Government Policy Driving Demand of Healthcare IT in China HC Reform Elimination of inefficient paper processes Entry into WTO Modernized IS of Chinese hospitals in order to compete with the market entry of foreign competitors 2001 Hospital IS Policy Standardized HIS development
Complete 27%

700

Health IT Market Size by Expenditure US$ Million (2001-06)

Expenditure (US$ Million)

600 500 400 300 200 100 0 2001 2002 2003 2004 2005 2006

Hospital Management Information SystemHospital Clilnic Information System (HCIS Implementation Level (2006) (HMIS) Implementation Level (2006)
Partial 41% None 32%

None 99%

Complete Partial None

Partial None Partial 1%

2000

2002
Source : CCID Consulting; China Ministry of Health; US Commercial Service

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HIT Market Assessment - Indonesia


National Health Information Systems (NHIS) The NHIS Policy and Strategy has been developed in support of the decentralization on health to achieve Healthy Indonesia by the year 2010. The presence of reliable and valid information is hoped to accelerate the achievement the national program Mission of NHIS include development of data management , which includes data collection, storage, retrieval and analysis, development of data bank, health profiles and presentation of information for different purpose, development of network and information sharing among information users as well as development of methods for the use of health information

Drivers
NHIS Policy and Strategies and a decree on Hospital Information System (Oct, 2003) have been developed and adequate health centers has been set up by the government Cooperation and assistance from both public and private sectors as well as from international bodies like the World Bank, UNDP and JICA to support NHIS initiatives Rapid development of IT in the region

Restraints
Financial support for HIS maintenance is considered the least priority in the national budgetary Lack of Health Information Technology personnel in Indonesia to manage the HIS network. Currently almost all HIS centers are staffed with medical personnel with limited IT/IS background HIS spending in Indonesia is primarily done by the private sector, most of the times focusing on private healthcare centers in cities like Jakarta, Bandung and Denpasar, Bali. Fragmented health IT and IS infrastructures

Percentage of IndonesianHealth Providers Utilizing HIS for Daily Operations (2007)


5% 3%

Not utilizing HIS Utilizing HIS to some extent Fully utilizing HIS

No comprehensive data exist that covers the entire nation, except for certain diseases like Tuberculosis and AIDS/HIV

Challenges
The geographical outlook of Indonesia and its population distribution The current state of decentralized health services and administration makes HIS implementation much more complex. The decentralization and lack of central authority help to further breaking down of the routine HIS

92%
Source : WHO Indonesia Country Health Profile (2008), Biskom Indonesia (2008)

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CIO & CFO Healthcare Information Technology Survey


Conducted in US in November 2008 by

College of Healthcare Information Management Executives (CHIME), The National Alliance for Health Information Technology (NAHIT) AHA Solutions, Inc.

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Key Findings

Over half of the CFOs/VPs Finance (55%) report experiencing slight or significant delays in accessing
capital and expect the financial crisis to last another 12 to 24 months.

For now, CFOs/VPs Finance are dealing with budgetary pressures by delaying or lengthening
timeframes for completing new facilities or facility upgrades, (74%), deferring IT equipment purchases (57%) and delaying or lengthening timeframes for implementing health IT initiatives (52%).

CIOs are responding by implementing longer timeframes for application projects (63%) and reducing
spending on outsourced IT services (34%).

One-third (33%) of CFOs/VPs Finance plan to or have cut budgets while one in four (26%) plan or
have laid off staff or instituted a hiring freeze.

Almost all respondents (94%) have cut IT budgets by extending implementation time of existing
projects and delaying or reducing the slate of new projects.

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Tighter Access To Capital Is Forcing Project Delays


CFOs/VPs Finance: Response to Financial Crisis

More than half (52%) report slight or significant delays in accessing capital and expect the financial crisis to last another one to two years. 74% CFOs/VPs Finance are dealing with budgetary pressures by delaying or lengthening development of new facilities, facility renovations and health IT initiatives. 33% reported cutting budgets, 26% are planning or implementing staff layoffs or have instituted hiring freezes. Those who reported an increase in their IT capital budgets (11%) are finding ways to reduce costs by more aggressively negotiating with payers or providing increased oversight on charity/uncompensated care. 52% of CFOs/VPs Finance reported delaying or cutting EMR rollouts and 43% pushing back or reducing CPOE implementations. However, an equal or larger number plan to move fullspeed ahead with these strategic clinical IT application projects.

More oversight on charity/uncompensated care More aggressive negotiations with payers Increases in charges Selective layoffs due to utilization reductions Delaying health IT initiatives or lengthening timeframes for completion Delaying equipment purchases Delaying facility/facility upgrade investments or lengthening timeframes for completion Reductions in specific departments budgets Across the board cuts

0%

10% 20% 30% 40% 50% 60% 70% 80%

CFO/VPs Finance: Impact on 2009 Projects

Tapping into foundation, endowment and other funds to meet capital expenses 8% Making other budget adjustments to keep capital projects on track 4%

No organizational strategy has been outlined. 34%

Capital projects will be delayed or dropped 39%

Investigating other approaches to funding capital expenses 15%

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Decreases In 2009 IT Capital Spending Will Affect Hospital IT Vendors


CIOs: 2009 Organization Overall Capital Budgets
Don't know 10% Increase 2%

CIOs: 2009 IT Department Capital Budgets


Don't know 10% Increase 5%

Decrease 36%

Stay the same 36%

Decrease 49%

Stay the same 52%

CFOs/VPs Finance: 2009 IT Capital Budgets

More than half (52%) of CIOs reported that their organizations capital budget will remain the same in 2009 while 36% said it would decrease. Just 2% expected their organizations capital budgets to rise. Nearly half (49%) of CIOs and 44% of CFOs/VPs Finance report that their organizations IT capital budgets will be lower in 2009. 36% of CIOs and 33% of CFOs/VPs Finance said they expect IT capital spending will remain the same. Both CFOs/VPs Finance and CIOs expecting capital IT budget cuts said reductions will impact applications, software and outsourced IT services such as consultants. Some also pointed to cuts in spending on servers, networking and storage.

Don't know Increase 11% 12%

Stay the same 33%

Decrease 44%

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2009 Operating Budgets Target Outsourced Services For Cutbacks


CIOs: Decrease in IT Capital Budget, Areas with the Biggest Cuts CIOs: IT Operating Budget, Areas with the Biggest Cuts

Across the board cuts Networking IT services (Outsourced e.g. consultants) Applications/Software Storage Servers

6% 12% 34% 63% 11% 21%


0% 10% 20% 30% 40% 50% 60% 70%

Across the board Applications/software Networking Hardware IT services (Outsourced e.g. consultants) IT staff 0%

2% 27% 3% 8% 59% 30%


10% 20% 30% 40% 50% 60%

CFOs/VPs Finance: IT Operating Budget, Areas with the Biggest Cuts

67% of CFOs/VPs Finance say their organizations operating budgets will increase or stay the same vs. 26% of CFOs/VPs Finance reporting a decrease. 54% of CIOs report that their organizations operating budgets will increase or stay the same vs. 39% of CIOs reporting a decrease. 49% of CIOs and 44% of CFOs/VPs Finance report that their organizations IT capital budgets will be lower in 2009. 65% say the annual budgets for running their departments will increase or stay the same in 2009 . 31% say their budgets will decrease. Of the CIOs who are cutting their 2009 operating budgets, 59% plan to reduce IT services, 30% will cut staff, and 27% will decrease new applications and other software. Applications, software and outsourced IT services to see the biggest cuts, followed by staff layoffs. 64% are delaying or reducing new projects. Outsourced IT services are the most common area targeted for cuts, and many also are looking at staffing reductions and decreased training and professional development to manage the operating budget constraints.

time of existing projects

26% 4% 13%

30%

Delay or reduce slate of new projects Reduce staff/implement hiring freeze Across the board

26%

64%
Re-negotiate service contracts

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Health IT Initiatives Are Strategic Imperatives But Delays In Funding Support Is Anticipated

CIOs: Clinical Initiatives with Planned Reduction or Delay in Funding Support

CFOs/VPs Finance: Clinical Initiatives with Planned Reduction or Delay in Funding Support

32% 52% EHR/EMR CPOE Medication Management

21%
EHR/EMR CPOE Medication Management Other

14%

50%

43%

36%

Major clinical IT initiatives show the biggest dichotomy among respondents. Half (50%) of CFOs/VPs Finance and 52% of CIOs report reductions or delays in funding for EMRs. Slightly fewer - 43% of CIOs and 36% of CFOs/VPs Finance - expect cuts or delays in funding for CPOE systems. Many of their counterparts, however, are moving head with these types of efforts.

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Conclusion

Going into 2009 and possibly some or all of 2010 will be challenging years for hospitals. Before economic turmoil hit, hospitals had shown important progress in health IT adoption, and for now, many of these initiatives are funded and moving forward. But a prolonged or deeper economic slowdown will inevitably be met by further reductions in IT capital and operating budgets, so even those health IT initiatives that have a demonstrated return on investment could become difficult to fund. Health IT is no longer a nice to have.. It is a strategic priority for hospitals to deliver safer, higher quality and more cost-effective care, thus enabling hospitals to stay competitive. Some hospitals executives surveyed see this as the time to invest in IT initiatives that will deliver direct and quantifiable savings to their organizations. ...hard times are time to invest in the future

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We Accelerate Growth

Thank You

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