Study confirms that health IT can boost hospital performance

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A new report confirms the long held belief that health IT can improve hospital business performance and can eventually pay for itself, according to PricewaterhouseCoopers (PwC). The study, analyzed performance data from nearly 2,000 hospitals, found that currently over 60 percent of hospitals in the U.S. have invested enough in IT to start seeing reductions in operating costs.

The model used to evaluate business performance was also applied to quality metrics to understand health IT’s impact on hospital mortality rates, and revealed a statistically relevant correlation between hospital IT investment and mortality rates. The findings suggest that hospitals investing in IT can reduce mortality rates without a corresponding increase in operating costs.

These outcomes come with caveats, however, because investment must reach a tipping point before cost-reducing performance improvements occur, and until then hospitals experience increased operating costs with little near-term financial benefit.

The numbers showed that six in 10 hospitals are at or nearing the tipping point. However, PwC also found that hospitals are experiencing less dramatic return on IT investments than other industries and some hospitals may not experience productivity increases at all, especially if they are starting from a low point of IT investment.

"Healthcare is typically described as lagging other industries in IT investments whereas the real culprit might be that hospitals have failed to take full advantage of IT by making more significant clinical and operational process changes," said David Levy, MD, principal, PricewaterhouseCoopers LLP and Health Information Technology practice leader. "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. 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. We can now retire this question and definitively say, 'Invest in IT; it works, but have patience.'"

PwC created an economic model that accounts for 90 percent of these variances and interrelated key factors in health IT investment. Highlights of the analysis include:

  • Overall, hospitals making high levels of IT investments perform at higher level of efficiency than hospitals with low levels of IT investments;
  • Hospitals that are low on the IT Capital Index scale experience increases in total operating expenses as they bring more IT online and until they reach a threshold; and
  • As hospitals move up the IT Capital Index scale, they showed costs eventually leveled off.

The full report "The Economics of IT & Hospital Performance" and additional information can be found here