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Healthcare IT Budgets
By Mary Anne Gates

IT budget data collected by HIMSS Analytics offers insight on anticipated healthcare advances. In part, projections are based on how much money HIT departments receive and how they spend it. Present data suggest that many hospitals are refocusing IT allocations while trying to meet ever-evolving patient and clinician needs, says Michael W. Davis, the organization’s executive vice president. The changes he cites affecting HIT include the following:

• steady progress implementing an electronic medical record (EMR), improving patient safety and treatment outcomes;

• executing new financial and clinical applications, meeting new hospital data reporting requirements;

• renewed focus on supply chain management as the cost of materials increases;

• increasing facilities’ Web presence; and

• absorbing impact of more government regulations for additional and standardized electronic data transactions.

The Economy, EMRs, and IT Budgets
Today’s economy is a factor in assessing HIT. Essentials of the US Hospital IT Market, published by HIMSS Analytics, states that if a recession “lasts longer than two years it could have a significant impact on healthcare IT spending … implementing electronic medical records could be slowed or stopped.”

Currently, Davis says many hospitals do not apportion enough money for IT compared with other industries. Few hospitals spend more than 10% of their total budget on IT, which is low compared with the banking, insurance, and retail industries. Further, he says, today’s budget allocations depend on the hospital’s current level of IT sophistication. He says the belief is that IT allocation should be approximately 10% to 12% of a hospital’s total budget until it reaches full or nearly full EMR implementation. Additionally, as more hospitals achieve full EMR status, other issues such as HIPAA Claims Attachment, pay for performance, and government quality reporting programs—all expected within the decade—can be better addressed.

Digital Hospitals
A PricewaterhouseCoopers report, “Reactive to Adaptive: Transforming Hospitals With Digital Technology,” cites significant integration between information and medical technologies. Hospitals going digital efficiently achieve a higher standard of patient care while remaining competitive. Whether newly constructed, a specialty facility, or an existing general hospital, a digital hospital “relies on technology as an integral and fundamental part of its business strategy.”       

Digital hospitals are compressing processes, adapting to market forces, generating the quality data payers demand, updating clinical information patients and physicians need, and preparing for reimbursement changes expected to occur. Partnering with HIMSS Analytics, PricewaterhouseCoopers investigated the impact of digital hospitals. According to the report, positives included “reduced length of stay, increased quality of care and increased revenues,” while negatives included that “benefits may take years to realize and usually require significant investment.”

A Closer Look
Another PricewaterhouseCoopers report, “The Economics of IT & Hospital Performance,” examined the relationship between IT investment and organizational performance in U.S. hospitals. Findings include the following:

• Higher IT investment improves hospital business performance.

• Until IT investment reaches a (certain) threshold, total operating expenses increase in hospitals that have little IT implementation.

• For-profit and not-for-profit hospitals show consistent cost differences.

• IT capital investment has the potential to pay for itself.

• The effect of IT capital investment has been proven in other industries.

• Higher levels of IT investment create a cost-reducing effect.

The Future of IT Healthcare
Keeping pace with healthcare developments requires that both hospital and IT management look closely at the services provided and the communities served, says Davis. “IT applications that extend services to consumers, security, and business continuity/disaster recovery are moving to the top of the priority lists for more IT-advanced hospitals,” he says.

— Mary Anne Gates is a medical writer based in the Chicago area.