Returns, not burns: how to ensure successful health IT investments

Healthcare Financial Management, Jan, 2005 by Ben Melson, Randy Thomas, Lynn Harold Vogel

When it comes to investing in health IT, one rule is paramount: never proceed without clearly articulating the types of financial and nonfinancial returns you expect to achieve.

in*vest

Function: verb

1: to commit (money) in order to earn a financial return

2: to make use of for future benefits or advantages

Merriam-Webster Online Dictionary

Whenever you make an investment, whether it's constructing a building, purchasing an MRI, building a new cath lab, or selecting a new information system, you should expect some type of return. Indeed, most hospital leaders regard the size of the potential return as one of the primary considerations in setting investment priorities.

Investments in health IT pose a particular challenge, however, because it's hard to know exactly what kind of returns to expect, how extensive they might be, and how long it will take to achieve them. The uncertainties surrounding the potential returns on any major investment in health IT are enough to make hospital leaders hesitate to take the plunge.

Still, the reasons for investing in health IT are compelling. The technology can improve healthcare effectiveness and efficiency by enhancing the workflow of physicians, nurses, and other clinicians. And because of its ability to enhance patient safety and reduce costs, health IT has been hailed by the president. Congress, and industry leaders as a critical element in the formula to "save" the U.S. healthcare system.

The problem is negotiating the right path to achieve such results. Implementing an advanced clinical computing solution, such as computerized physician order entry or a nursing documentation system, in a way that actually promotes more effective and efficient health care, requires a structured, disciplined approach. And it typically requires that most of a hospital's staff members, including physicians and nurses, fundamentally change the way they perform their work.

What Kind of Return Should You Expect?

In general, the returns you should expect from a health IT investment should be measurable and achievable. Such returns might include improved patient safety and throughput, increased labor productivity, enhanced revenue, and improved workflow processes. Identifying the specific returns to expect from a given project can be challenging, however, because not all health IT investments are alike--even if the purpose is simply to automate manual processes.

For example, measuring the returns on an investment in a patient accounting system capable of processing large volumes of structured transactions may seem relatively straightforward--bring in the computers, and you reduce staff working in the patient accounting area. The financial effect of the staff reductions can be measured directly and easily.

But what about measuring the financial effects of generating a more accurate bill, or of sending it more quickly? How do you measure the financial benefits of improved patient satisfaction resulting from a better managed billing process?

Measuring the financial benefits of IT systems that automate work processes in clinical departments such as radiology, clinical laboratory, and pharmacy poses a different challenge. Here, too, you can anticipate the effect of staff reductions. But it's not so easy to measure the financial effects of improved inventory management and tracking the flow of products, such as films, specimens, or medications. Also difficult to measure are the benefits of improved satisfaction of physicians who are able to view clinical data much more quickly and easily, and of patients who receive faster responses from their physicians because the data are more readily available.

Moving up the ladder of IT investment complexity, many providers are investing in enterprisewide clinical systems, such as computerized physician order entry or bar coding at the point of care, which focus on improving quality and patient safety--an important, but even more difficult, return to measure.

Other types of IT investments, such as clinical documentation systems, may enable nursing staff to be more productive. But the new system may only free nurses to perform important tasks that had previously been left undone. So instead of nursing staff reductions, the financial benefit may be higher quality nursing care. Such returns are indirect, accrue over time, and involve multiple interdependencies. Installing a clinical system that enables staff to better document their activities on behalf of patients, for example, may reduce costs of malpractice insurance premiums, but the actual premium reduction may be five years out.

Improved employee satisfaction as a result of a health IT investment can also result in cost avoidance--a kind of return. The University of Texas M.D. Anderson Cancer Center in Houston, for example, estimates the cost of bringing a new employee "up to speed"--including orientation, training, and the time required for the new employee to become fully productive--is about $20,000. But how do you track and record the $20,000 "savings" for each employee who decides to stay? It's difficult, if not impossible, to measure the degree to which improved job satisfaction due to an IT investment will determine an employee's decision to stay.