Most healthcare IT vendors say they’ve had ongoing procurements paused as hospitals facing cashflow issues due to the shutdown reconsider their spending, Black Book Market Research recently reported.
Citing a poll of 107 business development leaders offering IT and services to healthcare organizations, which was fielded in the final week of October, the market research group outlined signs that buyers are shifting their spend to “must-haves” and other offerings with near-immediate return on investment. Some respondents told Black Book they’ve already shifted their sales strategies to address their customers’ tightened budgets and new priorities.
"The shutdown's cash uncertainty has moved many decisions into board finance committees," Doug Brown, of Black Book, said in a statement on the findings that also referenced another ad hoc provider poll. "Boards are literally putting hold stamps on non‑essential IT platform upgrades, data lake builds, big‑bang cutovers, while green‑lighting revenue cycle and cybersecurity modules that protect cash now."
Seventy-one percent of the polled vendors told Black Book they had at least one in-flight procurement paused by their healthcare buyer.
Sixty-eight percent said new requests for proposals are being held or bumped; 58% said they were seeing buyers shifting focus to 12-month-or-less return on investment. Just over half said they were seeing increased demand for revenue-generating tools and services (revenue cycle/denials prevention and patient access) and 39% an uptick in cybersecurity or compliance offerings, whereas 41% reported deferrals from customers purchasing longer-term items like platform upgrades or data initiatives.
More than 3 in 5 vendors said their sales cycles have been increased. Here, most pointed to length increases of 30 to 60 days, though 12% outlined extensions of more than 90 days.
Forty-four percent of respondents said they’d fielded requests for extended payment terms or financing. Just over a third said their purchasers were shifting from capital expenditure spending to operating expense pricings.
As a result, several of the vendor executives said their companies were adjusting their strategies in response to healthcare customers’ shifting priorities. Forty-seven percent said they are offering proofs of value or pilots with staged commitments to seal the deal. A third said they are resequencing their implementations to more quickly deliver modules with cash-impact functions, such as prior authorization automation, and 27% said they’ve put a pause on nonessential launches or reduced their field marketing in favor of a greater focus on late-stage deals or expansions with existing customers.
Still, the uncertain landscape has 41% of the healthcare IT vendors surveyed revising their near-term revenue expectations downward, most often in the range of 5% to 15%, and 22% said they’ve outright canceled some of their projects.
The government shutdown is soon to enter its sixth week with some bipartisan conversations but no concrete action toward a resolution.
Key hospital funding programs like the Medicare Dependent Hospital and Low Volume Adjustment programs were allowed to expire Oct. 1, and an oft-delayed $8 billion-per-year reduction in Medicaid Disproportionate Share Hospital funding went into effect. The stopper on these funds has placed hospitals with limited liquidity in a bind, with those in rural areas or with higher government-insured populations more heavily impacted.
Black Book’s survey responses suggest reduced or shifted IT spending is where many are looking to offset their funding gaps.