Private health in Australia is rapidly approaching a critical boiling point. Not only has the industry been targeted by the Labor government for potential reforms, but a growing number of Australians are turning away from private health entirely–cancelling their cover due to a low perceived value.
Despite these market forces, the opportunities for growth in the sector are real, as evidenced by private equity investors grouping smaller practices and leveraging economies of scale to fuel their growth. To succeed with these initiatives, firms will need to utilise every advantage possible–including market insights from those with ‘boots on the ground’ in the industry.
Daraco works closely with private health professionals on their strategic business IT roadmaps across clinics, practices, hospitals, and private equity firms. The following are a few of the themes we’ve observed recently through hands-on interactions with our private health clients:
- Theme #1: Private Equity in Public Health Private equity is becoming increasingly involved in some practice areas, driving demand for flexible, scalable systems and business processes, whilst also increasing risk and compliance requirements.
- Theme #2: A Lack of Centralised Data, Systems & Reporting Access A lack of centralised access to data, systems, and reporting capabilities limits organisations’ ability to understand their costs and improve their profitability.
- Theme #3: Underutilisation of Existing IT Investments Practices often underutilise their existing IT investments, preventing them from maximising profits by streamlining scheduling, increasing efficiency, and improving asset utilisation.
- Theme #4: Prioritising the Patient Experience A strong patient experience is not just a ‘nice-to-have’, but a potential revenue stream and competitive differentiator.
Theme #1: Private Equity in Private Health
According to a report by Citywire Australia, “Funds are cashed up and there’s a rush to beat the infrastructure funds, who are getting pretty aggressive in this sector”. KKR’s $20B recent bid for Ramsay Health Care is just one example of this trend, while the Australian Association of Practice Management (AAPM) notes that, “External forces and changes in practitioner preferences are resulting in a shift away from smaller practitioner-owned practices to larger corporately run practices.”
As more private equity firms get involved in the healthcare sector and bundle smaller practices into larger organisations, they gain access to new economies of scale. In particular, optimising their IT infrastructure across a larger user base may make it possible to bring down per-user costs, while improving security controls, reducing risk, and enabling additional productivity at the same time.
For a real-life example of this, one of our private health clients had no centralisation of its infrastructure or security designs, despite grouping multiple practices together during a period of rapid growth. By planning and running migration projects, our team was able to enhance their security and implement new features–all while bringing costs down by almost half.
Theme #2: A Lack of Centralised Data, Systems & Reporting Access
Generally speaking, having the right IT solutions in place increases visibility into data, systems, and reporting. This, in turn, enables practices, clinics, and hospitals to make better, more educated decisions that improve profitability.
Unfortunately, we aren’t always seeing the fulfilment of this promise in practice. “Almost all specialty medical practices and smaller groups are guessing, based on what they think and feel is happening,” explains Matthew Jarvis, National Sales AUS/NZ.
Improving access is the first step to fixing this challenge. But not only does that mean implementing technologies that can centralise data and improve reporting capabilities–it also requires practices, clinics, and hospitals to address related change management and user adoption challenges.
As an example, take a private hospital our team recently worked with. After replacing the surgical department’s manual, whiteboard-based scheduling with a digital SharePoint system, we found that the hospital’s surgical theatres were in use just 30% of the time. By improving scheduling efficiency, the hospital could increase patients per day–and, consequently, the potential profitability of the facility’s assets.
However, this also revealed a new challenge. For care team members to support this additional surgical workload, the hospital would need to increase staffing levels correspondingly. In this case, maximising profitability would require both the enhanced visibility IT provided and the appropriate, underlying change management initiatives.
Theme #3: Underutilisation of Existing IT Investments
Overall, we’ve found that it isn’t uncommon for private health companies to have existing IT investments that aren’t being fully utilised. By identifying these instances and more fully leveraging the technology they already own, practices can increase profits by streamlining scheduling, maximising efficiency, and improving asset utilisation.
Security features, for instance, are some of the most underutilised capabilities within private health IT infrastructures. In the earlier example, enabling SharePoint not only had the potential to increase profitability. It also could have helped protect patients’ personal information, as Microsoft’s in-built compliance and controls could have limited who could access patient data and how it could be shared.
The combination of the themes creates a unique challenge to align target business outcomes with the strategic vision for how technology will be used within practices. If both perspectives aren’t brought to the table and given equal weight in planning and decision-making, private health will continue to struggle to ensure the maximum, profitable usage of its investments.
Theme #4: Prioritising the Patient Experience
Pitcher Partners reports that, among private health patients, “There’s increasing demand for more sophisticated, convenient, transparent, affordable and personalised healthcare services. As a result, healthcare organisations must deliver more patient-centric business models.”
But despite this compelling argument, private healthcare in Australia appears to be falling short. Research by Finder shows that “1 in 7 Australians (15%)–some 2.9 million people–will let their private health insurance expire this year as they no longer see it as value for money.”
Understanding what constitutes a good patient experience is as simple as contrasting the traditional, corded pillow speaker and television remote found in most hospital beds with the modern streaming services offered by upscale hotels.
Yes, there are security considerations at play, as hospital entertainment solutions must have the ability to log patients out automatically upon checkout (something you can’t do with baseline TVs). But sorting out these implementation details is especially important when you consider how much public reviews matter for private health.
Too many practices, clinics, and hospitals wait until they get negative reviews to invest in technology upgrades and enhancements, but you can–and should–be more proactive. Enterprise s, but keep in mind that they aren’t a ‘plug-in and done’ solution. Considerations such as infrastructure and remote access are required for the longevity of the solution.
Additional Pressures on the Private Health Sector
Contending with even one of these themes represents a major challenge to private health. Yet we would be remiss if we failed to note that all four are occurring at a time when political initiatives to reform the sector are gaining traction.
Proposed reforms of the private health sector by the government include everything from modifying which treatments can be covered to evaluating the use of incentives and default benefit arrangements. While these changes are intended to improve patient care and practice efficiency, complying with them could substantially alter the financial models on which private health organisations operate.
Maintaining profitability within this pressurised atmosphere will require the support of partners who can address not just your IT platforms, but your people and business processes as well. At Daraco, we go beyond technology, showing you how to transform challenges like these into opportunities for new profits and revenue streams.
Reach out to learn more about our Health Solutions.