IT Spending Priorities

In our February Intelligence Report, three-quarters of leaders indicate that their organization's IT operating budget will increase over the next three years. What is the outlook at your organization, and how are you prioritizing your IT spend?

This article first appeared in the July/August 2014 issue of HealthLeaders magazine.

Vernita E. Todd, MBA
CEO
Heart City Health Center
Elkhart, IN

We spent a little more than $800,000 on IT hardware, software, and support since 2009. The budget probably will be adjusted to reflect additional interfaces with our health information exchange and local hospitals.

The support and maintenance of it is really the most exorbitant cost. ICD-10 is a perfect example. We implemented our EMR and within four months, the ICD-10 rules came out and our EMR didn't fit that; then meaningful use came out and our EMR didn't fit that. The need for e-prescribing came out and our EMR didn't fit that. It seems like every year and a half or so we have a change in regulations that requires an adaptation to the EMR. It's not a plug-and-play thing.

You have to make the decisions about the data you are trying to capture way before you build it. Building it and then finding out that these things have changed sometimes takes you all the way back to the beginning of the drawing board. Sometimes it's an easy tweak. But the maintenance and support of that is a significant cost.

Roger Seaver
President and CEO
Henry Mayo Newhall
Memorial Hospital
Valencia, CA

Our spending should be flat as it relates to the percentage of the budget, but it has been consuming up to 40% of our capital budget for the past five years. In the hospital we're 85% installed and using electronic medical records. There is a lot of work to be done on the full benefits of EMR, of course, and connecting devices, and so on. We are still in the process of doing that, interfacing devices. And the opportunity to do more continues. There is some growth in there, but it is not in the most expensive parts of IT.

Spending is still a significant issue when you combine infrastructure hardware and software. The end of license of Windows software, for example, is almost a $2 million expenditure for this single hospital.

The scariest part right now for me is we are at the beginning of a second infrastructure review that is going to identify all of the areas of infrastructure that we have to bolster, particularly for traffic, the use of much more data flowing through our pipes, which probably aren't big enough, and things like that. So I could get a surprise here on the upside as the assessments come in. We are doing a lot of assessment marrying it up with our business strategic plan to make sure we get the right priorities.

Jeff Thompson, MD
CEO
Gundersen Health System
La Crosse, Wisconsin

On HIT spending over the long haul: Our budget will be flat compared to previous years because we have been very aggressive over the past several years. Might we need to shift some things around? Sure. But we believe we are probably in a spot where we need to be.

On the rewards of early adopters: We felt there was an advantage being out on the edge. Sometimes you bleed a little out on the edge, but in this case it helped us quite a bit. We built our own electronic record more than 20 years ago. That was very successful, and only in the past four or five years did we convert that over to an outside-sourced electronic record. Being an early adopter helped us a lot. It helped differentiate us from other competitors when it came to recruiting.

On the challenges of early adopters: We were all on track to be there exactly on the numbers for ICD-10 and meaningful use when it was going to switch. The delays have cost us money already. We're not big fans of increased complexity in healthcare, but since the rest of the world has long since gone to ICD-10, we felt that was something that was going to happen and we needed to do it.

On the next wave of IT spending: There will be a steady spend in healthcare IT because the upgrades keep coming. The systems need to be improved. We are not as efficient as we need to be. The electronic record is not completely an improver of flow right now. There will be continued investment.

William Lewkowski, CHCIO
Chief Information Officer,
Executive Vice President
Metro Health Corporation
Wyoming, MI

As early as 2005, Metro Health started increasing our IT budget, and we had already invested significantly in clinical systems. We already had growth in our IT spend and our operating budget over the past several years. It still has increases. It would be more in the category of minor increases, but we already are doing near 6.5% operating budget for IT, which is pretty high for healthcare.

We are investing in business intelligence and analytics and population management and a lot of other things, but the overarching thing is our clinicians. We are a digital organization, and that is a core backbone of how we do things.

Our strategies aren't driven by ICD-10 or meaningful use. Those things are by-products of using these systems in a very integrated way that is all about our patients. We start with our patients. We then group our populations, and out of that we make sure that we comply and we know where things are going. The industry is going through a transformation. A lot of that is going to be reimbursements starting to be based on value and not on volume. We are positioning and doing a lot of that not knowing exactly how things are going to lie. You have to have that agility to do that, and that is how we try to organize ourselves.