Move over “value-based care.” Digital transformation—the adoption of technology to improve efficiency and outcomes—is the latest trend taking over US healthcare.

Health systems are increasingly adopting new software, digital tools, and strategies that aim to modernize everything from how patients book appointments to how facilities order and manage medical supplies while also improving outcomes and lowering costs.

The move toward more efficient 21st-century solutions may seem like a natural progression for an industry that relies heavily on technology and patient outcomes. But hospital executives overseeing these efforts (and the consultants they work with) argue that digital transformation is more than just digital portals and virtual appointments.

“It’s really finding the right balance of people and skills, and technology—whether that be applications and infrastructure—and data to really exceed the customer’s expectations and [...] enhance the business operations margins,” Glenn Landmesser, VP of digital transformation at RiseNow, a supply chain management consultancy firm, told Healthcare Brew.

Digital transformation explained. Digital transformation is not an entirely new concept in healthcare. Hospitals and health systems have slowly adopted new technology over the last decade to improve clinical (i.e., patient-facing) and administrative systems (think: finance, supply chain, and data management).

But that shift accelerated in recent years, as the Covid-19 pandemic forced health systems to embrace telehealth and sparked supply chain, workforce, and capacity challenges.

Landmesser, who consults with healthcare organizations, said it’s “critical right now that hospital organizations digitally transform their organizations” on both the clinical and administrative sides.

“That’s the only way they’re going to continue to put themselves in a more favorable operating position—and a competitive position,” he said.

Spending on digital transformation is projected to hit $3.4 trillion globally in 2026, according to a 2022 International Data Corporation analysis.

Keep reading here.—SY

Do you work in healthcare or have information about the industry that we should know? Email Shannon at [email protected]. For completely confidential conversations, ask Shannon for her number on Signal.

A new Medicare designation may save the most vulnerable rural hospitals from closing.

The Rural Emergency Hospital (REH) designation, which took effect in January, awards participating hospitals with an additional 5% reimbursement for Medicare outpatient care payments and a monthly facility payment. The Centers for Medicare and Medicaid Services (CMS) will pay participating hospitals more than $3 million a year through the new designation, according to a 2023 report from healthcare advisory firm Chartis.

The funding might help a facility retain their emergency departments, outpatient care, and clinics at a time when rural hospitals are facing existential crises.

The number of rural hospital closures is expected to rise as Covid-19 relief funds dry up, according to the report.

More than 40% of all US rural hospitals and 51% of those in states without Medicaid expansion are operating in the red, per the report. In 2020, there were 453 rural hospitals that were vulnerable to closure, Chartis found.

“For some hospitals, our data model suggests the REH designation will serve as a desperately needed relief valve to avoid closing and provide a significant reversal in fortune for the vulnerable communities they serve,” Michael Topchik, national leader of the Chartis Center for Rural Health, said in a statement. “But the decision to convert is highly nuanced, and as a result, we expect to see a relatively small number of hospitals embrace REH.”

Only 77 of the approximately 1,600 REH-eligible hospitals are ideal candidates for the conversion. These hospitals are smaller in revenue size, reported YoY negative operating margins, and lower average inpatient numbers, per the Chartis report.

Keep reading here.—KW

Do you work in healthcare or have information about the industry that we should know? Email Kristine at [email protected]. For completely confidential conversations, ask Kristine for her number on Signal.

Little discs of cardboardy dough smothered with unnervingly sweet pizza sauce via a tiny red stick, sprinkled with what is called “cheese”: Lunchables’s Extra Cheesy Pizza—as well as its Turkey and Cheese variety—will be on the menu at K-8 cafeterias across the US come fall as part of Kraft Heinz’s new deal with the National School Lunch Program (NSLP). NSLP provides free or low-cost lunches to nearly 30 million children.

’90s kids may already be salivating, but they should know that Kraft Heinz had to tweak its original recipes to hit some nutritional targets required for school meals—such as lower levels of fat and sodium and increased amounts of protein and whole grains.

Child nutrition experts aren’t satisfied with the new formulations. They argue that the reengineered Lunchables are a red flag that the US’s standards for school lunches are simply too low…and that they may be that way in part because schools are too underfunded to raise them.

• K-12 cafeteria budgets have been tightened by high food costs, supply chain snags, and labor shortages.
• One of the main selling points of Lunchables to the NSLP was that they’re refrigerated, not frozen, which costs less to ship and store.

“School nutrition programs need to be reimbursed at a rate that they can scratch-cook delicious, healthy meals and not just provide the students a Lunchable because they don’t have equipment or labor,” Donna Martin, the director of a school nutrition program, told the Washington Post.

Others are concerned that selling a healthier version in schools than in stores could confuse customers into thinking the for-school versions and the grocery originals are equally healthy. But Kellogg’s Pop-Tarts, General Mills cereals, and even Domino’s pizza already have healthified versions available at school cafeterias.

Speaking of marketing…getting in front of Gen Alpha (yeah, that’s what comes after Gen Z) is a Super Bowl-level win for Kraft Heinz. Lunchables accounted for 8.6% of the grocery-dominating food company’s sales last year, and this could boost sales even higher.—JW

Today’s top healthcare reads.

Stat: A county in Georgia spent over $1 million to avoid paying for an employee’s gender-affirming care. (ProPublica)

Quote: “Most hospitals around the country are over Covid. We’ve proven ourselves. Why aren’t we moving on?”—James Fiorica, Sarasota Memorial Hospital’s chief medical officer, on criticism from right-wing groups on alleged “egregious recklessness” relating to Covid-19 treatment protocols (the New York Times)

Read: Walgreens is the latest company to become entangled in “the corporate culture wars.” (the New York Times)

Time well spent: Demand for healthcare is rising, and patients and providers are feeling the pinch. WellSpan Health physicians using Nuance’s DAX improved the patient experience and saw 9 more patients per month. Get the full report.*

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