Where is One-Third Of Our Healthcare Spending Going?

Public Market Update: Average Sector Performance of All HealthTech Companies

Let’s first take a look at the HealthTech market.

Overall, we’re looking much better compared to last month’s review of the market, with the exceptions of 💻️ Access to Care, 📋️ Decision Support and 🏥 Hospital Operations all sinking a little more into the red.

🩸 Clinical Trials decided to do something different and skyrocket its YTD returns. Perhaps the recent news regarding skin cancer vaccines and other promising medications in the pipeline has bolstered investors' confidence in this space.

At the other end of the spectrum, with our subsectors in the red, we may be dealing with the aftermath related to the cybersecurity risks of HealthTech. The data breach at Change Healthcare (of UnitedHealth Group) in February is a prime example of how careful we need to be in the HealthTech era of healthcare.

As a result of the hack, billing and payments have been disrupted for doctors, and hospitals and patients are also affected. The downstream results?

At the end of the day, healthcare is a massive business practice, and as with any business, cash flows are important. Disruptions affects care, and depletes resources. In the case of smaller practices, they may not survive such disruptions.

Now, going forward, it appears we need to have policies and procedures in place to ensure that clinical and non clinical operations don’t come to a grinding halt whenever there is an issue.

Articles Worth Reading

Hospital Operations, Defined

At Langar, we define, and categorize 🏥 Hospital Operations companies as:

“Companies that improve the efficiency of hospital workflows that are required to provide care.”

The team at Langar analyzed the 🏥 Hospital Operations subsector in an effort to better understand hospital pain points and where funding is going within the space.

The top 4 areas within Hospital Operations, by funding, from January 2021-June 2023:

📊Hospital Analytics

💵 Revenue Cycle Management (RCM)

💻️ Practice Management(PM)

👩‍⚕️ Staffing

Given the $200+ billion in losses that hospitals accrued in 2020, funding to these areas make sense. Data analysis can identify problems and help monitor operations, providing continued guidance for decision-making; RCM can boost billing and payments; PM and staffing can ensure proper administrative support and clinical care for patients and staff.

The second part of the analysis involved calculating how much could be saved in different areas of Hospital Operations if HealthTech was used to solve for inefficiencies. Of the different clinical and non-clinical areas reviewed, Patient-to-Provider Communication had the highest potential to reduce wasteful expenditures at $456 billion! 

Read about the rest of our analysis, including future predictions, within the subsector in our latest article!

Related content: Healthcare Staffing Shortages: What is Happening Behind the Scenes & How HealthTech is Helping

Opinion

An Expert’s Perspective

If you stop and consider a hospital as a business, you may wonder exactly how a hospital earns income. The obvious answer is through treatment of patients by physicians and surgeons.

However, the actual answer is more nuanced. Hospital revenues largely stem from the operating rooms (ORs) and procedural areas. Why? Because doing a procedure allows the hospital to bill the most, and brings in maximum reimbursement from insurance companies.

This isn’t to say that your primary care doc isn’t generating revenue, they are. But by comparison, the amount that they bring in per patient is nominal compared to what one operation can bring in.

As an example, the average cost of one minute in the operating room, nationally, is $62. One minute. That does not include fees for an anesthesiologist.

So, it stands to reason that when you consider improving hospital operations, it’s also vital to optimize operating room workflows.

Factors that affect operating room workflows:

🍶 Bottlenecks - full recovery rooms, intensive care units, or inpatient wards, or a lack of staffing in any area can prevent a patient from leaving the OR in a timely manner.

🧑‍⚕️ Lack of staffing - including OR nurses, surgical techs, and support staff that help to ensure proper preparation of surgery and turnover after the fact.

❌Last minute schedule changes - unanticipated case cancellations (could be due to medical, insurance, or personal reasons), and emergency surgeries can disrupt a daily schedule and alter the number of cases completed that day.

🦾 Equipment issues - if equipment is not cleaned and processed correctly, it can’t be used. Dirty equipment can lead to delays, or even cancellations. On the other hand, cases are sometimes incorrectly booked and two surgeons may need the same equipment simultaneously - a no go.

As you can see, a lot of things must go right in order for an operating room suite to run smoothly. However, real life rarely ever follows the directions that we set forth.

So instead we’re stuck with figuring out how to prevent issues from arising, or at the very least, mitigate our losses. HealthTech applications within hospital operations are definitely one way to improve communication, staffing, scheduling, & billing, to name a few.

Let’s hope that these efforts to save money and improve care with HealthTech will prove sustainable, because the alternative that some hospitals undertook by selling to private equity is definitely not going to work in the long term (that’s a whole other topic that I could write 5 newsletters on).

—Sanjana Vig MD/MBA (Anesthesiologist)

Langar Funds

In Case You Missed It: Our ETF is Still Alive!

Check us out on the fund website, where you can also access the offering prospectus.

If you have specific questions about the fund, feel free to reach out at [email protected].