Technology infusion will heal health care productivity, but risks linger

Outlook | September 6, 2024

Technology investments are ramping up in the health care ecosystem as organizations adapt to economic regime changes and rising productivity. Artificial intelligence, in particular, is gaining traction, with 78% of middle market companies—which includes health care organizations—indicating they are using AI, according to the RSM Middle Market AI Survey 2024: U.S. and Canada. In addition, according to the survey, nine out of 10 respondents expect to increase their generative AI budget next year.

But while AI and other digital tools promise to streamline operations, they’re also exacerbating existing challenges. A surge in administrative tasks, fueled in part by payer adoption of new technologies, has led to a spike in claim denials, adding to the industry’s already heavy workload.

In a recent study by the U.S. Department of Health and Human Services (HHS) Office of Inspector General, some health care organizations reported a 41% denial rate in prior authorizations; meanwhile, organizations ultimately experienced a 75% success overturn rate. Overturning requires additional time and manual effort from an already beleaguered workforce. These challenges create waste in the health care ecosystem, which already accounts for a bloated 17% of the U.S.’s gross domestic product.

By leveraging automation and AI, health care providers can use technology to reduce denial rates and manual mundane tasks, as well as allow the workforce to focus on meaningful activities to enhance productivity and improve outcomes that could contribute to GDP in a meaningful way.

Risks emerge as technology investments increase

Looking forward, organizations should focus on operational resilience when making technology enhancements. Operational resilience for hospitals is the capacity to adapt and respond to disruptions or unexpected events while maintaining continuous delivery of critical health care services to patients. Areas such as cybersecurity breaches, fragility in vendor management and shifting climate risks should be top of mind for health care executives going into the second half of 2024.

Recent data from the HHS Office for Civil Rights highlights cybersecurity breaches as a growing risk, showing that 2024 has been a record year so far. In the first six months, 387 corporate incidents were reported, more than in any other first half of the year since the Office for Civil Rights started tracking cases in 2010, with many of these cases resulting from a lapse in third-party vendor management best practices.

This has led to a surge in bolstering cybersecurity defense efforts. The health care sector expects to spend over $531 billion globally on such solutions between 2024 and 2033, and the market in the United States is projected to reach $28.95 billion by 2033, according to Precedence Research.

And while a staunch dedication to cybersecurity is at the core of risk management and business resilience, additional strategies should focus on recovery responses to a variety of threats. One crucial strategy is emergency response planning, which involves an immediate, systematic response to an unexpected or dangerous occurrence. Adopting recovery strategies not only enhances an organization’s operational resilience, but also aligns with the governance pillar in an organization’s strategy around ESG, or environmental, social and governance.

Climate issues are creating headwinds: ESG strategies needed

ESG factors are increasingly playing a critical role in shaping business resilience in health care. From an environmental perspective, climate issues are becoming more apparent—in summer 2024, Beryl was the earliest hurricane on record ahead of the usual hurricane season and elevated to a devastating Category 5 storm. In light of growing environmental challenges for the remainder of 2024 and beyond, hospitals should have a playbook to ensure adequate surge capacity, outlining training, communication protocols and other critical planning elements. And, while technological advancements offer potential solutions, human resources remain indispensable in emergency situations.

The takeaway

The health care ecosystem is betting big on technology to transform the industry from a cost-driven model to one focused on patient outcomes. While this shift promises to boost productivity and GDP, it also exposes organizations to new risks that demand a robust resilience strategy. To navigate these challenges, health care leaders must prioritize cybersecurity spend, operational resilience, workforce adaptability and disaster preparedness. By investing in these areas, providers can mitigate risks, protect patient care and ensure long-term sustainability.

This article was written by Danny Schmidt and originally appeared on 2024-09-06. Reprinted with permission from RSM US LLP.
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