It’s not news to most that with increasing regulations, an aging population, rising healthcare costs and dwindling numbers of nurses and certain medical specialists, U.S. hospitals are finding themselves scrambling to do more with less. Most hospitals today are focused on trying to meet Meaningful Use requirements, to avoid penalties and secure financial incentives. But many are missing the bigger, longer term picture of this country’s financial situation: how half a trillion (or more) in Medicare cuts over the next 10 years will impact the industry.

In  a recent article on, analyst Fareed Zakaria mentioned the impact these healthcare changes could have on the federal deficit, stating that “in the long run, the vast majority of this fiscal gap is accounted for by spiraling healthcare costs … as medical costs increase and as people get older that pressure is going to get even stronger.”  Senate Budget Committee Chairman of The National Commission on Fiscal Responsibility and Reform Kent Conrad, who is charged with these federal budget recommendations, adds that “the alternative of doing nothing is far more severe.” In an article in BusinessWeek, he states that the current proposed plan would cut the annual deficit to $400 billion by 2015, but wouldn’t produce a balanced budget until 2037. They’re right – the lines between healthcare costs and government spending will collide – and it will be hospitals and providers who will bear the brunt. The cost cutting has already begun. Unless Congress passes another expensive delay, a huge cut in Medicare reimbursements to physicians is scheduled to start on January 1, 2011.

Hospitals and providers are looking to technology more than ever to help make the most of government incentives. But they need to look beyond the million dollar payback Meaningful Use may offer today to install systems that will help them become more efficient and promote better patient care well into the future. Consider a full-function, comprehensive, cross-department, hospital IT system that costs tens of millions of dollars in initial investment. That system may garner $5-10 million in incentives over the next few years, but that’s just a down payment. The long-term payback is in implementing the right technology in the right way; improving things like the healthcare supply chain and patient throughput to become a lean, mean, efficient healthcare machine – now and 10 years from now.

The Meaningful Use incentive payments may help defray the short-term costs of HIT adoption, but that investment in information technology must lead to long-term, sustained improvements in efficiency and quality. When the cost cutting hits full stride, many hospitals may find that they were well prepared to check a few Meaningful Use boxes, but ill prepared to survive the realities of modern American healthcare, in the shadow of a growing fiscal crisis.

-Carlos Nunez, M.D