Does tech­nol­ogy pay?

Higher prof­its re­ported at IT-pro­fi­cient hos­pi­tals

Modern Healthcare - - Cover Story - Me­lanie Evans

Prof­its grew faster for hos­pi­tals and health sys­tems with so­phis­ti­cated in­for­ma­tion tech­nol­ogy than for those rec­og­nized for qual­ity but lack­ing in IT, a ma­jor credit rat­ings agency re­ported last week.

Fitch Rat­ings said profit gains for 291 not­for-profit hos­pi­tals and health sys­tems in its port­fo­lio were high­est among those with both highly de­vel­oped tech­nol­ogy sys­tems and qual­ity dis­tinc­tions.

They were closely fol­lowed by those with so­phis­ti­cated tech­nol­ogy but no qual­ity awards. But hos­pi­tals that lagged on tech­nol­ogy also trailed in profit gains, re­gard­less of qual­ity awards.

The re­port raises ques­tions about the re­la­tion­ship be­tween tech­nol­ogy, qual­ity and fi­nan­cial per­for­mance, a re­la­tion­ship un­der in­creas­ing scrutiny as pres­sure grows to curb U.S. health­care spend­ing.

Jim LeBuhn, se­nior di­rec­tor of not-for- profit health­care at Fitch Rat­ings, said it is dif­fi­cult to de­ter­mine cause and ef­fect from the anal­y­sis. Hos­pi­tals with the fi­nan­cial strength to pour cap­i­tal into IT may also have higher prof­its, he said, though find­ings sug­gest IT helped ac­cel­er­ate gains.

An­nual rev­enue growth ex­ceeded growth in costs by 1.8% for a dozen hos­pi­tals with tech­nol­ogy and qual­ity recog­ni­tion. An­a­lysts re­viewed per­for­mance be­tween 2005 and 2009.

At the 24 hos­pi­tals rec­og­nized as Health In­for­ma­tion and Man­age­ment Sys­tems So­ci­ety stages 6 or 7 (8% of the sam­ple), yearly rev­enue growth sur­passed the rise in costs by 1.3%. Un­re­stricted cash and in­vest­ments was 30% higher for hos­pi­tals con­sid­ered high qual­ity or high tech­nol­ogy than for the over­all port­fo­lio, the re­port said.

Mean­while, per­for­mance among the over­all port­fo­lio was largely sim­i­lar to the 75 hos­pi­tals with only qual­ity awards, with growth in rev­enues ex­ceed­ing growth ex­penses by 0.2% and 0.3% a year re­spec­tively. Recog­ni­tion from HealthGrades, the Leapfrog Group and the Mal­colm Baldrige Na­tional Qual­ity Award were con­sid­ered in the anal­y­sis.

LeBuhn said the agency un­der­took the anal­y­sis look­ing for an in­di­ca­tion that a largely un­proven ra­tio­nal be­hind IT cap­i­tal spend­ing—that tech­nol­ogy pays, even­tu­ally—could be right.

In Car­son City, Nev., the 172-bed Car­son Ta­hoe Re­gional Health­care is three years into its five-year plan to adopt elec­tronic health records. Ed Ep­per­son, pres­i­dent and CEO, said the in­vest­ment of “many mil­lions” was made on faith that in­for­ma­tion tech­nol­ogy would help elim­i­nate waste and im­prove care, but with­out much ev­i­dence to sup­port that con­vic­tion.

“I be­lieve it will,” said Ep­per­son, who flew to New York last week to at­tend a two-day not-for-profit health­care in­vestor con­fer­ence (see story, p. 14). “But it’s an in­vest­ment you’re mak­ing with­out a real clear” re­turn on in­vest­ment. The pub­lic, Ep­per­son said, un­der­es­ti­mates the in­vest­ment re­quired for hos­pi­tals and doc­tors, which hap­pens “painfully, ex­pen­sively, over a lot of years.”

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