An­other boost for bud­gets

IT tak­ing a big­ger bite out of cap­i­tal spend­ing

Modern Healthcare - - SPECIAL FEATURE -

Ama­jor­ity of health­care lead­ers say that health in­for­ma­tion tech­nol­ogy is claim­ing a big­ger slice of the spend­ing pie in their or­ga­ni­za­tions, ac­cord­ing to this year’s Mod­ern Health­care/mod­ern Physi­cian Sur­vey of Ex­ec­u­tive Opin­ions on Key In­for­ma­tion Tech­nol­ogy Is­sues.

For ex­am­ple, more than four in five sur­vey re­spon­dents in­di­cate they ex­pect IT op­er­at­ing ex­penses at their or­ga­ni­za­tion to rise dur­ing the next three years. Spend­ing on IT as a share of over­all bud­get items is ex­pected to grow as well, sur­vey re­sults show.

This year, as in the past, a sig­nif­i­cant por­tion of the sur­vey was de­voted to ask­ing re­spon­dents about how much money they have spent on health­care IT and how much they in­tend to spend in the fu­ture.

To that end, the sur­vey sought to mea­sure how well IT spend­ing com­petes in the on­go­ing scram­ble within or­ga­ni­za­tions for its share of scarce fi­nan­cial re­sources and also to de­ter­mine the bal­ance of spend­ing within IT de­part­ments be­tween out­lays for cap­i­tal vs. op­er­a­tions.

To learn about trends of IT spend­ing over time, re­spon­dents also were asked to com­pare their IT spend­ing his­to­ries dur­ing the past three years with their IT spend­ing ex­pec­ta­tions in the com­ing three years.

Op­er­at­ing ex­penses for health IT most com­monly fall in the range of 2.1% to 2.5%, ac­cord­ing to our sur­vey (See chart be­low).

With bet­ter than half of sur­vey re­spon­dents this year re­port­ing they want to in­crease their IT staffs by 10% or more in the next 12 months (See story, p. 24), it fol­lows that IT op­er­at­ing ex­penses should be go­ing up. So it’s no sur­prise that 81% of sur­vey re­spon­dents ex­pect IT op­er­at­ing ex­penses at their or­ga­ni­za­tion to rise in the next three years.

Not quite half (46%) of those lead­ers who are ex­pect­ing an in­crease in IT op­er­at­ing ex­penses in­di­cate those ex­penses will go up in the range of 6% to 10%. An­other 21% think ex­penses will rise by a more mod­est 5% or less. But nearly one-third (32%) fore­see sig­nif­i­cant in­creases of 11% or more, in­clud­ing one in 10 lead­ers who think their in­creases will be larger than 20%.

To as­cer­tain where IT spend­ing ranks within the over­all peck­ing or­der of their or­ga­ni­za­tions, the sur­vey asked health­care lead­ers what per­cent­age of their or­ga­ni­za­tions’ over­all cap­i­tal bud­gets was spent on IT as­sets dur­ing the past three years, and, look­ing for­ward, to es­ti­mate the per­cent­age to be spent in the next three years. Par­tic­i­pants were given bud­get ranges to choose from.

In this year’s sur­vey, the most com­monly se­lected bud­get range of IT cap­i­tal spend­ing to over­all cap­i­tal bud­gets—both past and fu­ture— was 11% to 20%.

Some 35% of sur­vey re­spon­dents in­di­cated their or­ga­ni­za­tions had bud­geted in the 11%to-20% range over the past three years, while 37% in­di­cated they thought their IT bud­gets would be in that range in the next three years.

Sim­i­lar slight in­creases were ex­pected by re­spon­dents whose or­ga­ni­za­tions had cap­i­tal bud­gets al­lo­cated to IT as­sets in the 21%-to40% range. Some 24% of re­spon­dents in­di­cated their or­ga­ni­za­tions had bud­geted in that range dur­ing the past three years, while 25% in­di­cated they plan to spend in that range in the next three years.

So if IT is ben­e­fit­ing from a rel­a­tively larger slice of the over­all or­ga­ni­za­tional cap­i­tal spend­ing pie, what’s hap­pen­ing to IT cap­i­tal spend­ing within or­ga­ni­za­tions in real terms? (Af­ter all, if the over­all cap­i­tal pie were shrink­ing, even big­ger slices for IT could mean less pie.) The an­swer, how­ever, ac­cord­ing to health lead­ers sur­veyed, is that cap­i­tal spend­ing on health IT also is on the rise. A siz­able ma­jor­ity of re­spon­dents, 62%, in­di­cated over­all IT cap­i­tal spend­ing at their or­ga­ni­za­tions would in­crease over the next three years. An­other 23% of re­spon­dents in­di­cated there would be no change, and only 15% pro­jected a de­crease.

But the sky is not the limit on IT spend­ing. Of those who ex­pect an in­crease in cap­i­tal spend­ing on IT over the next three years, a solid ma­jor­ity—63% of re­spon­dents—en­vi­sioned in­creases of 10% or less. Specif­i­cally, 41% of re­spon­dents fore­see IT cap­i­tal ex­penses ris­ing dur­ing the next three years in the range of 6% to 10% and an­other 22% of re­spon­dents think the in­creases will be smaller, 5% or less.

Of the mi­nor­ity of or­ga­ni­za­tions pro­ject­ing a de­crease in IT cap­i­tal spend­ing over the next three years (15%), 57% of those re­spon­dents ex­pected the cuts to be in the ranges of 10% or less.

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