Technology Deep Dive: Enterprise Resource Planning
Technology adoption within the healthcare industry has blossomed over the past ten years, but the major branches of this trend have been reserved for clinical and financial solutions. For example, 99% percent of U.S. hospitals have patient billing software, which streamlines payments management and significantly improves the patient experience. Additionally, 98% percent of U.S. hospitals have adopted an EMR system, which has a number of benefits, including quick access to patient records and more effectively reducing medical errors.
However, healthcare organizations have been slower to adopt solutions that address operational efficiencies, such as workforce management and supply chain management solutions. For organizations transitioning to value-based care, these solutions are certainly beneficial, but they are often put on the back burner in favor of technology investments that directly impact clinical functions.
In HIMSS Analytics’ most recent Technology Snapshot, we dive deeper into the current state of the U.S. hospital market for one of these operational solutions in particular: Enterprise Resource Planning (ERP). Tracked as one of the 200+ technologies in the HIMSS Analytics Logic Platform, ERP is a business management system that integrates multiple business applications, including human resources, payroll, materials management, supply procurement, accounts payable, general ledger, and supply chain management, by providing an automated and integrated view of business information and reports of data from several operational areas of business.
Technology Deep Dive: Enterprise Resource Planning (ERP)
ERP adoption has seen a slow but steady climb over the past ten years, pushing from 18.8 percent adoption in 2008 to 38.4 percent adoption in 2018. More than 60 percent of U.S. hospitals have not installed an ERP solution, but there are nearly 200 U.S. hospitals currently contracting, installing or planning a purchase. In addition, 46 hospitals show a high likelihood to purchase an ERP solution in the near future.
Although hospitals of all sizes have adopted ERP solutions, half have over 100 beds. The majority of these — 1,692 hospitals of the 2,114 hospitals with installed solutions — are Not-for-Profit. Currently, the U.S. hospital ERP market is dominated by two vendors: Infor Healthcare (43 percent) and Oracle (33 percent).
So what do all of these numbers mean for vendors and, more broadly, what do they mean for the healthcare market as a whole?
The ERP Market: Opportunities Remain for Cost-Sensitive Healthcare Systems
In an effort to continuously improve the quality of care, it is no surprise that healthcare organizations have prioritized investments in clinical solutions over business management solutions like ERP. However, now that the majority of healthcare organizations have installed clinical solutions like EMR systems, it is time to think ahead about the next advancements healthcare organizations are likely to make.
ERP's ability to bring together human resources, payroll, materials and supply management means that it can have a significant impact on the cost-efficiency of various healthcare systems. This could explain the greater adoption rates in Not-for-Profit organizations, who are generally more cost-sensitive than For-Profit organizations. It could also explain the greater adoption rates in hospitals with over 100 beds, because larger hospitals have more moving parts that need to be managed as efficiently as possible to help ensure successful clinical, financial and operational processes. In contrast, smaller organizations may be strapped from a financial perspective and need to address clinical advancements first.
As clinical solutions like EMR have become the norm in most healthcare organizations, we would expect an increase in adoption rates for solutions like ERP that address back-office efficiencies and help manage operational costs. Everyone is fighting for IT dollars, and it will be important to maintain a close watch on market dynamics that may impact future adoption rates for solutions such as ERP. It's uncertain if or when ERP adoption rates will speed up or if any one thing might spark a huge shift in this market. However, one thing is for sure: The ERP market has plenty of room to grow.