It takes a long time for healthcare organisations to see a return from IT investments, according to a recent report. This may explain why the industry has long been seen as a laggard in technology spending.
The PricewaterhouseCoopers report, titled The Economics of IT and Hospital Performance, is based on an analysis of performance data from nearly 2,000 US hospitals. It concludes that IT investment must reach a tipping point before it can lead to cost reduction. Until that point is reached, hospitals incur operating costs with little near-term financial benefit, according to the report.
Six out of 10 hospitals analysed in the report are at or nearing the tipping point, and industry-wide cost reductions and quality improvements associated with IT investment may soon begin to become more apparent.
However, even hospitals that have reached the tipping point are experiencing less dramatic returns on investment than other industries have achieved, the report notes.
“The business case for increased IT spending has been a foregone conclusion, but it is based largely on untested claims and the experience of other industries,” says David Levy, principal at PricewaterhouseCoopers’ health IT practice.
“The lack of reliable, industry-specific empirical evidence has left hospital executives wondering whether IT investments will ever really pay off and unclear about the extent to which a transformation will occur,” Levy says. “We can now retire this question and definitively say: ‘Invest in IT; it works, but have patience.’”
The study also found that over the long term, hospitals investing in IT can reduce mortality rates without a corresponding increase in operating costs.
The report also found that hospitals making a high level of IT investment perform at a higher level of efficiency than hospitals with low levels of IT investment. IT investment at some point pays for itself by displacing costs elsewhere in the organisation, such as quality improvement. But to fully realise the value from IT investments, organisations must redesign clinical and business processes.
The report was researched by PricewaterhouseCoopers’ Technology Centre and by Lorin Hitt, a professor at the University of Pennsylvania’s Wharton School of Business.