Digital Health Could Seal Fate of Small Hospitals

I am not a healthcare investment expert by any means, but two recent pieces of news make me wonder if the digital health movement will inadvertently result in the hurried demise of already struggling small and rural hospitals.

According to a recent CB Insights report covered by MedCity News, 362 digital health deals last year accounted for an all-time high of $1.5 billion. Of those deals, 55 were exits – smaller digital health companies bought up by larger players. CB Insights notes the majority of these acquired companies were those that provided products that make administrative health processes more efficient, such as EMRs and revenue cycle management systems. This is an assumption, but I’m inclined to think these EMR companies priced their products below their more corporate competitors. These companies may well have supplied their systems to the budget-conscious small and rural hospital market.

As most everyone knows, small and rural hospitals are facing an uphill battle these days when it comes to keeping their doors open. A recent Georgia Health News item noted that three rural hospitals in the state have closed in 2013, with some predicting an additional 20 facilities will close within the next two years. The article cites constant cash shortages, claims disputes with payers, lower projected payments to hospitals from Georgia’s new state employee benefit contract, and reduced indigent care funding as contributing factors to the poor financial health many small Georgia hospitals find themselves in.

While these may be specific to Georgia, they are almost surely indicative of similar problems seen by similar institutions in the U.S. At least 849 facilities across the country will soon face the common problem of increased scrutiny by Medicare as a result of the current “bloated and unwieldy” state of the critical access hospital program, which was designed to financially stabilize small hospitals by providing them with higher Medicare reimbursement rates.

It looks to me as if the digital health exits noted above are perhaps indicative of a broader industry trend. Small and rural hospitals are already under enormous pressure to care for underserved populations in a fiscally responsible way. As the healthcare vendor market consolidates and looks to digital health as the next best venture, will we see more affordable EMRs folded into those that are less so? Where will small healthcare facilities turn for their healthcare IT?

Where do you think these two trends will converge in the next year or two? Please share your comments below.

About the author

Jennifer Dennard

Jennifer Dennard

As Social Marketing Director at Billian, Jennifer Dennard is responsible for the continuing development and implementation of the company's social media strategies for Billian's HealthDATA and Porter Research. She is a regular contributor to a number of healthcare blogs and currently manages social marketing channels for the Health IT Leadership Summit and Technology Association of Georgia’s Health Society. You can find her on Twitter @JennDennard.