25 things to know about hospitals, health systems' investments in IT

 

Over the past few years, hospitals and health systems have been acquiring IT products at unprecedented rates. Below are 25 things to know about trends in IT investments.

 

  1. Nearly half (49 percent) of hospital executives say their largest capital investment over the coming year will be in health IT, according to a new survey from Premier. Sharing data across the continuum of care was cited as the main reason for increasing capital expenditures on health IT.

 

  1. Health IT adoption among hospitals really took off in 2012, according to a new retrospective report from HIMSS Analytics and the Dorenfest Institute for Health Information, reflected in increasing IT budgets. At the average facility, 2.74 percent of the total operating expenses came from the IT department in 2012, up from 2.39 percent in 2011 and 2.40 percent in 2010.

 

  1. In 2013, hospitals spent about 3.08 percent of their overall budget on IT, according to HIMSS. According to Kevin Holloran, a director in Standard & Poor's nonprofit healthcare group, said health IT used to encompass 5 to 10 percent of a hospital's capital project budget, but now that range is anywhere from 25 to 35 percent.

 

  1. In a HIMSS survey, the most-cited reasons for increasing budgets were an increase in the number and complexity of IT systems in the organization, followed by a need to comply with regulatory changes and an overall budget increase.

 

  1. Because budget increases are often due to overall growth of IT systems in the organizations and the costs of meeting regulatory requirements, there's little room for hospital CIOs to invest in every technology that may be beneficial to their organization. Stephen Stewart, CIO of Henry County Health Center in Mt. Pleasant, Iowa, recently told Becker's there are "higher standards of justification" for new technology.

 

  1. There is a difference in the percent of total budget for-profit hospitals and nonprofit and government-owned hospitals dedicate to IT, according to the Dorenfest/HIMSS report. Nonprofits and government-owned hospitals have had relatively consistent budgets over the past four years, while for-profits' IT budgets have both varied widely and increased significantly. According to the report, this suggests for-profit organizations' IT budgets are more vulnerable to "disruptive events," such as the implementation of the healthcare reform law.

 

  1. According to the Dorenfest/HIMSS report, nonprofit hospitals are buying health IT products in the largest quantities. In 2013, 15.5 percent of these hospitals bought 10 or more products, compared with 12.6 percent of government-owned hospitals and 6.5 percent of for-profits.
  1. According to Moody's, hospitals that invest in IT, along with those that invest in outpatient services, are most likely to survive challenging operating conditions.

 

  1. According to a survey from electronic health record consultancy Software Advice, patient portal software is the most popular IT investment right now with 35 percent of respondents reporting plans to purchase it. EHRs were the second-most popular at 27 percent, followed by e-prescribing, lab integration and health information exchange solutions at 26 percent each.

 

  1. About half of all healthcare providers dedicate 3 percent or less of their IT budgets to information security and related systems, according to the 2013 HIMSS Security Survey.

 

  1. Basically, hospitals are focused right now on implementing and optimizing EHRs, and then using the system to drive value. In a recent survey commissioned by Philips Healthcare, the top consideration for hospitals when purchasing new IT is whether it will help further EHR adoption. Three types of apps poised for major market growth because of their ability to further EHR adoption and support meaningful use are infection surveillance, outreach services and patient acuity apps, according to a new report from HIMSS Analytics.

 

  1. Despite a heavy investment, many hospital leaders are not satisfied with their IT systems, particularly EHRs, according to a new survey from Premier. In the industry generally, about 40 percent of EHR buyers are replacing a current system.

 

  1. Almost 50 percent of hospitals with 200 or more beds will purchase a new EHR system by 2016, according to a KLAS report. For many hospitals, these systems were either bought quickly under meaningful use deadlines and no longer fit the organization's needs, a merger or acquisition has necessitated one of the parties switch EHRs or other providers in the community use another EHR and the hospital decides changing EHRs would help data exchange efforts.

 

  1. According to the ONC, the total cost of purchasing and installing an EHR ranges from $15,000 to $75,000 per provider. This estimate varies significantly depending on whether the organization selects an in-office EHR or a cloud-based EHR. Upfront costs for in-office systems are more, but after five years the total cost of ownership tends to be less than for a cloud-based system, for which providers usually pay a monthly fee, according to the ONC.

 

  1. The federal EHR incentive programs, including meaningful use, are designed to offset these costs by issuing payments to providers that successfully implement EHRs and meet pre-set usage requirements. So far, CMS has paid out about $25 billion in incentive payments.

 

  1. However, the meaningful use program often involves additional expenditures on top of the EHR system. To meet meaningful use stage 1, many healthcare organizations made significant investments beyond the initial cost of the EHR. A quarter of hospitals and health systems spent less than $2 million, 18 percent spent between $2 million and $3 million and 11 percent spent between $4 million and $5 million.

 

  1. To meet meaningful use stage 2, organizations are spending more. Fifteen percent are spending an additional amount less than $250,000, 15 percent are spending between $250,000 and $499,000, 9 percent are spending between $500,000 and $999,999 and 8 percent are spending between $1 million and $2 million.

 

  1. About half of healthcare organizations are spending less than $1 million to upgrade IT systems for the ICD-10 conversion. Just four percent are spending more than $5 million.

 

  1. The federal government has several special avenues of support for small and rural hospitals in purchasing health IT products, including regional extension centers and grants from the Health Resource and Services Administration and other agencies.

 

  1. To improve care coordination and meet meaningful use stage 2 requirements, it is very helpful for nearby and affiliated physicians to use the same EHR system as a hospital. However, the high costs of installing an EHR can keep small practices from adopting the technology. To foster adoption among small practices, there are exceptions to the Stark Law and Anti-Kickback Statute, recently extended, that allows hospitals to subsidize a physician practice's EHR.

 

  1. Several larger health systems have begun offering versions of their own EHR systems in a software-as-a-service model to help smaller organizations avoid the upfront costs of implementation. Notable examples include Cleveland Clinic and Springfield, Mo.-based Mercy.

  2. CIOs are often the ones who make IT purchasing decisions. However, as IT becomes more integral, both IT purchasing decisions and CIOs have been brought further into hospitals' C-suites. About half of CIOs say the IT strategic plan is now a component of their organizations' overall strategic operating, clinical and capital plan, according to the most recent HIMSS Leadership Survey.

  3. CEOs often have big plans for IT investments, but few have been implemented, according to a survey from PricewaterhouseCoopers. The survey found 93 percent plan to change their organizations' technology investments, but just 33 percent have.
  1. The vast majority — 85 percent — of CIOs reported it is their responsibility to drive value from IT investments, according to the most recent HIMSS Leadership Survey. While return on investment of health IT is often hard to calculate, several recent studies have shown health IT to have an overall positive effect on the hospital or health system.

  2. One of the next big investment areas for hospitals and health systems will be in big data analytics solutions that can help use data collected in EHRs to fuel accountable care measures or improve hospital efficiency. Part of the investment in big data is investing in additional staffers to manage and analyze data. About half of healthcare organizations have plans to hire at least one person into a big data role, according to a survey from the Society of Actuaries.

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