This appeared a few days ago.
HIT's Rising Cost and Dubious ROI
Edward Prewitt, for HealthLeaders Media , February 25, 2013
Our latest monthly Intelligence Report, which draws on the 6,000-plus healthcare executives who are members of the HealthLeaders Media Council, is titled "Healthcare IT: Tackling Regulatory, Clinical, and Business Needs." Why, then, is it mentioned in our weekly finance column?
Because healthcare IT is expensive. And the report reveals that it's becoming an ever bigger drain on hospital and health system bottom lines. And that an ROI from healthcare IT will be hard to find, despite the fervent hopes of healthcare executives.
Today, 40% of the 250 respondents say the operating IT budget takes up 2-3% of their organizations' overall operating revenue. But the respondents—who represent a range of C-suite leaders and VPs, including CEOs, CFOs, COOs, and CIOs—expect an upward shift in the near future. More than half (56%) say the operating IT budget will account for 4% or more of overall operating revenue, and a fifth expect IT spending to take 6% or more.
Because healthcare IT is expensive. And the report reveals that it's becoming an ever bigger drain on hospital and health system bottom lines. And that an ROI from healthcare IT will be hard to find, despite the fervent hopes of healthcare executives.
Today, 40% of the 250 respondents say the operating IT budget takes up 2-3% of their organizations' overall operating revenue. But the respondents—who represent a range of C-suite leaders and VPs, including CEOs, CFOs, COOs, and CIOs—expect an upward shift in the near future. More than half (56%) say the operating IT budget will account for 4% or more of overall operating revenue, and a fifth expect IT spending to take 6% or more.
Those percentages are historically high for healthcare, but not necessarily for other industries. You could argue that healthcare is simply catching up.
But what is that extra spending going toward? The top driver, ticked off by 52% of respondents, was regulatory reporting requirements, most notably ICD-10. The American Health Information Management Association (AHIM) has long argued that ICD-10 codes will lead to better patient care, and it's certainly true that better coding can lead improve reimbursements, but in the end that's a lot of money to pay for more coders.
Still, a majority of survey respondents (58%) say their organizations invest in IT, meaning they expect a financial return, rather than simply spend on IT (indicated by 42%).
But while the survey indicates overall trends and expectations, the comments by individual executives reveal how they view healthcare IT. "IT will always disappoint if you expect a return," says the president of a large physician organization. "Most CFOs will say they haven't seen a ROI on the investments made in IT as an industry compared to industries like banking," says Donna Abney, executive vice president of Methodist Le Bonheur Healthcare, whose organization helped shaped the Intelligence Report.
Still, a majority of survey respondents (58%) say their organizations invest in IT, meaning they expect a financial return, rather than simply spend on IT (indicated by 42%).
But while the survey indicates overall trends and expectations, the comments by individual executives reveal how they view healthcare IT. "IT will always disappoint if you expect a return," says the president of a large physician organization. "Most CFOs will say they haven't seen a ROI on the investments made in IT as an industry compared to industries like banking," says Donna Abney, executive vice president of Methodist Le Bonheur Healthcare, whose organization helped shaped the Intelligence Report.
…..
(Editor's note: Many of the figures cited here draw from the paid Premium version of our February Intelligence Report. A free version, containing HealthLeaders analysis but less data, is also available for download.)
(Editor's note: Many of the figures cited here draw from the paid Premium version of our February Intelligence Report. A free version, containing HealthLeaders analysis but less data, is also available for download.)
Full article here:
Well it is interesting to see just how hard people are finding it to obtain a Return On Investment (ROI) for their Health IT investment.
Support for this view is found here:
The unfulfilled promises of health information technology
February 27, 2013 6:00 AM EST
A 2005 RAND report predicted that widespread use of electronic health records technology would save the US healthcare system at least $81 billion per year. At the time, the vendor-funded report helped drive substantial growth in the electronic health records industry and probably contributed to the federal government making billions of dollars of incentive payments available to physicians and hospitals to adopt and meaningfully use electronic health record (EHR) systems via the Health Information Technology for Economic and Clinical Health (HITECH) Act.
Realizing that the cost savings and improvements in healthcare delivery are nowhere near what was optimistically predicted in 2005, RAND recently commissioned a new study to take a fresh new look at the state of health information technology. The new study paints a very different picture and received broad coverage by mainstream news outlets, including “In Second Look, Few Savings From Digital Health Records” by the New York Times in January.
To put it bluntly, the authors of the new report essentially admit that the original RAND study was dead wrong. Healthcare spending has risen by $800 billion since the first report was published, and while much of that is due to an aging population and the increase in overall medical services, there is scant evidence of cost savings due to electronic health records. In addition, there is increasing concern that electronic records have actually made it easier for providers to over-bill for certain services.
Lots more here:
This story is one that has a long way to go in my view!
David.
"the vendor-funded report"
ReplyDeletesays it all really.
As I blogged in January:
Be careful listening to vendors, they do not have your best interests at heart
http://www.problemsfirst.com/blog/?p=42
My apologies for some blatant self promotion, but at least it's relevant.
@Bernard...I agree entirely, for the TRADITIONAL vendors. They charge like wounded bulls, seem to insist on using dubiously qualified System Integrators (read large accounting firms)and show consistently that they can't deliver what is promised. Is there any wonder that the ROI is not present? Smaller vendors with modern, cloud based technologies who offer good value for money, real results (because clients stop paying if we don't!) are in the market place. Unfortunately, we often don't get a look in as we don't have the "name" and because we are invariably less expensive (often significantly) we are viewed as "not understanding the needs..." (real words after a tender knock back!) The big traditional vendors have conditioned the market to believe you need to spend hundreds of millions of dollars. Off my soapbox now! :-)
ReplyDeleteBig Vendors - Failure, Failure, Failure, Failure, Failure, oops something may be not right.
ReplyDeleteWhen do people that make these decisions as Paul F stated realise there may be other solutions in the market that can be deployed at a fraction of the price, meet the business case requirements and not be all things to all men... get a look in??
But I think that this is how it plays out, select a big player, easy to sue and I wont get the sack if I make a bad choice...
Role play time -- after one Failure maybe acceptable, two failures warning sign, three failures, we'll give em another go, fourth one, if it fails, I'll become a consultant.. fith one, new people new government, lets start back at one....
Apologies for being cynical but from a small vendors perspective this is how we see things and why we steer clear of health.. to limited and to conditioned as Paul F stated
Thus may be the problems with radical Solutionism...
ReplyDelete"Big Vendors - Failure, Failure, Failure, Failure, Failure, oops something may be not right."
ReplyDeleteThat depends on what your measures of success are. It is not a failure to the government, because their measures of success are not what you would expect. - Success!!! it was delivered on-time (never mind the quality or scope)
-Success!!!! there are registrations (never mind that they may never actually use the system and we have had to pay and cajole them into it).
- Success!!! the vendors have all made their systems compliant (never mind that they are having difficulty implementing the additional functionality).
- Success!!! The Senate Estimates committee asked questions and we gave them answers (never mind that everyone is confused, even us).
With these measures, failure is not an option.
What doesn't get measured doesn't get done.
Edward Tenner has been writing about this stuff for years.
ReplyDeleteHe wrote Why Things Bite Back: Technology and the Revenge of Unintended Consequences in 1996.
More recently (2011) he gave an interview on Unintended Consequences in Medicine, published on the website of the Agency for Healthcare Research and Quality, part of the US Department of Health and Human Services.
http://webmm.ahrq.gov/perspective.aspx?perspectiveID=103
It is known and has been much discussed for years that IT projects will probably fail, that there will be unintended consequences of technology.
IMHO, the big problem is that people who end up in positions of authority in the public sector do not like being told that some things are very difficult and need to be thought about very carefully. Their arrogance and ignorance (they are very rarely trained in science or engineering) and attitude to risk (i.e. I can deal with any problem that come up) lead to behaviours that almost always lead to failed projects.
Those projects that do appear to succeed are usually the result of luck. It's like surfing a wave all the way to the beach. It's the wave, not the surfer, that does all the work.
Unfortunately, luck, like a good wave, is not repeatable on demand.
So who was the Vendor of the ED system in Canberra that went down this week. Does anybody know?
ReplyDeleteOther projects may have difficulty demonstrating a positive ROI, but the PCEHR/NEHRS will show a magnificent return, don't you worry about that! The esteemed firm of Deloittes have calculated that there will be a net benefit of $11,545M over 15 years. How they get a result with 5-digit precision when the inputs are not known to better than one or two digits is impressive, but the result must be right - it has been confirmed by no less than two Ministers of Health and a Prime Minister.
ReplyDeleteEDIS. That would be a CSC application (formerly an iSOFT app, prior to the 2011 acquisition).
ReplyDeleteFormally part of the expensive Big End of town!
I think we should not jump to conclusions that it is the software product that failed .It may have been the network or the server...that is not in control of the vendor.
ReplyDelete"I think we should not jump to conclusions that it is the software product that failed .It may have been the network or the server...that is not in control of the vendor."
ReplyDeleteMaybe the "vendor" would like to state for the record exactly what did occur in the ACT with the EDIS application and not indulge in further obfuscation or veiled defensiveness?
That contributed comment (anonymous or not) would add value...and be entirely in control of the "vendor".