ROI in Health IT is More Than Just the Pricetag

On September 17, an op-ed piece discussing health IT was published in the Wall Street Journal. Written by Drs. Stephen Soumerai and Ross Koppel, “A Major Glitch in Digitized Health-Care Records” discusses the dearth of evidence to support that information technology reduces healthcare costs.  In particular, they reference a piece of research published in October, 2011 by a team at McMasters University in Hamilton Ontario.

That study – which focuses upon the use of health IT in the medication management process – touches upon a key challenge in the healthcare space: that many studies available today provide only data on the direct cost of health IT components purchased, without considering outcomes or other difficult-to-measure gains and losses.  As stated by the paper’s authors:

Discussion: Most studies merely provided cost data; however, useful economic data involves far more input. A full economic evaluation includes a full enumeration of the costs, synthesized with the outcomes of the intervention.  Conclusion: The quality of the economic literature in this area is poor. A few studies found that HIT may offer cost advantages despite their increased acquisition costs. However, given the uncertainty that surrounds the costs and outcomes data, and limited study designs, it is difficult to reach any definitive conclusion as to whether the additional costs and benefits represent value for money. Sophisticated concurrent prospective economic evaluations need to be conducted to address whether HIT interventions in the medication management process are cost-effective.”

The study’s authors articulate two realities that bedevil the health sector at this juncture: we don’t yet have enough Return On Investment (ROI) case studies available for review, research, and evaluation; and, typical economic models for assessing return on investment are inadequate for the health sector.

Within HIMSS, we’ve spent years gathering stories about the economic impact of IT in a health setting. In November 2011, HIMSS published a thought leader piece called “The Value Factor in Returns on Health IT Investment.” Based on HIMSS Analytics research, the traditional definition of ROI as used in other industries isn’t necessarily a good fit for the healthcare industry; successfully demonstrating ROI in healthcare involves more than simply looking at how much money is saved or earned.

A true measure of ROI must include the full spectrum of benefits that can result from a successful IT implementation: improved patient safety, improved quality of the care provided, improved relationships with patients, streamlined internal processes, innovation, and other qualitative factors.  HIMSS recommends that health providers use the following areas to evaluate ROI:

      • Efficiency Savings
      • Improved outcomes of care compared to pre-health IT implementation
      • Additional revenue generated as the result of an IT implementation
      • Non-financial gains such as, but not limited to, increased patient satisfaction with care encounters, decreased provider time at work, and higher levels of employee satisfaction
      • Increased knowledge of providers about the patient population they serve

Process and quality improvementsInvesting in health IT is an expensive proposition. One estimate suggests that an EHR system costs $33,000 for each physician in a medical practice, with an additional cost of $1,500 per doctor per month for maintenance. According to the HIMSS AnalyticsTM Database, in 2010 U.S. hospitals spent a median of $16,448 per licensed bed on IT operating expenses, and an average of $5,304 on IT capital expenses per licensed bed. For the average hospital with 164 licensed beds, that translates into $2.7 million in annual operating costs and $870,000 in capital expenses per year. However, costs will vary widely; organizations at the early stages of their journey will experience much higher “start-up” expenses.

Of course these systems need to make a difference. That is the mission of HIMSS – to transform healthcare through the best use of information technology and management systems. Take a look at our Davies award winners – to win, a health provider must demonstrate improved outcomes. And, our Stories of Success also provide case studies of how the best use of IT resulted in improvements to care.  Thanks to the HIMSS Analytics EMRAMTM, we have numerous Stage 7 case studies to share.  To achieve Stage 7, hospitals must demonstrate superior implementation and utilization of health IT systems.  All three of these programs offer care providers the opportunity to tell their story of true sharing, information exchange and immediate delivery of patient data to improve process performance, quality of care and safety.

We need more stories.  Our nation needs better examples of successes and failures.  And those stories need to include an assessment of the starting point, as well as the ending point.  So, until we have such evidence, should we stop? Heavens, no!  That’s nonsensical.  Of course the patient comes first.  Of course we need to be thought-filled in our strategic approach and implementation of IT.  Of course IT needs to be user-friendly and functional for clinicians and patients.  Of course health information needs to be interoperable and secure so that the right information is available at the right time in the right place for the right people.  

Are paper records going to accomplish that?  Of course not.  So, tell us your stories – the good, the bad, and the ugly.  We want to hear.

About Carla M Smith, MA, CNM, FHIMSS

Carla M Smith, MA, CNM, FHIMSS , is HIMSS Executive Vice President.
This entry was posted in Blogging, Business-Centered Systems, Health IT News and Developments, Patient-Centered Systems. Bookmark the permalink.

9 Responses to ROI in Health IT is More Than Just the Pricetag

  1. atomiclulu says:

    Reblogged this on AtomicLuLu and commented:
    I really wish we could get past the bicker battle – to realize just how MUCH Health IT is going to advance patient care and data protection. Great article!

  2. Willa says:

    Thanks, Carla, for an articulate, balanced presentation of the successes and challenges of Health IT. Health IT is making a difference. Buntin et al. published a systematic review of the health IT literature in Health Affairs in 2011, and concluded that 92 percent of published articles on health information technology reached positive conclusions. Does that mean all studies achieved positive results? No, but it does mean the far majority do have positive results. We need to learn from our experiences (positive and negative) and continue the forward progress in using health IT tools to improve patient care. It is a journey, a long journey, and we are starting to reap the benefits.

  3. Chris Riley says:

    What about FREE systems That allow Physcians to enter the digital heath world without capital outlay? We have 3000+ Physicians on our system who do not pay many have qualified for meaningful use payments tha they get to keep.

    • Carla M Smith, MA, CNM, FHIMSS says:

      Thanks for your question, Chris. On the Medicare side of the discussion the EHR incentive program includes an incentive for eligible professionals and eligible hospitals attesting the meaningful use, not the purchase, of certified EHRs. For Medicaid EHs and EPs, they can earn an incentive for the purchase, use, and upgrades of certified EHRs. I’ll also note that the final regulations for Stark and Anti-Kickback, approved in August of 2006 allow hospitals to donate EHRs to physician offices. For more information on the Stark & Anti-Kickback final rule, you can read an analysis at And, we’ve uploaded a CMS tip sheet on Stage 2 meaningful use that might be helpful: Thank you so much for your question. So glad that you’re part of the discussion.

  4. Your post is spot on.

    Return on investment for health I.T. should include improvement in quality, patient safety, patient satisfaction, efficiency, and effectiveness.

    That is not to say any of us think that EHR adoption in and of itself is enough. We’ve work yet to do.

    Jones et al have also argued: “Research suggests three lessons for physicians and health care leaders: invest in creating new measures of productivity that can reveal the quality and cost gains that arise from health IT, avoid impatience or overly optimistic expectations about return on investment and focus on the delivery reengineering needed to create a productivity payoff, and pay greater attention to measuring and improving IT usability.” Unraveling the IT Productivity Paradox — Lessons for Health Care. Spencer S. Jones, Ph.D., Paul S. Heaton, Ph.D., Robert S. Rudin, Ph.D., and Eric C. Schneider, M.D. n engl j med 366;24 june 14, 2012: 243-2245.

    We need better business intelligence to capture the value of health I.T. We must improve workflows to make the best use of this technology. EHR’s must be made more usable.

    As Willa shares, we’ve just started this journey but the evidence affirms this is the right path.

    Health I.T. will transform healthcare.

  5. J Weeks says:

    Good article. Measures are not always easy to capture immediately. The process of reviewing and learning as the process matures will get us better metrics. Health IT, hopefully will provide higher quality data faster enabling physicians to see more patients thus yielding more revenue. Additionally, better data faster will improve accuracy of first time diagnosis improving patient health and decreasing the number of times to see the same patient. This contributes to improving patient’s health, decreases cost, and frees up time to see additional patients. As data becomes available for those patients who require constant monitoring; reading trends and notifying patients in advance of changes (preventative care) in stats resulting in strokes, heart attacks and etc. will certainly decrease cost for the patient, Medicare or the Insurance Companies, and impact the quality of the patient’s life. The one thing that concerns me is many conversations focus only on cost. We cannot look at cost only. In almost every environment we need to look at accuracy, speed of delivery, cost and the overall satisfaction of the customer (patient or end user).

  6. Brian Nordberg says:

    To me the question has to be much better defined. What is Health IT? The VA has Vista which is great for single patient care. But is completely useless for managing a hospital. For example – tracking of MRSA is done in spreadsheets, not in Vista, because the data cannot be retrieved on a hospital wide basis. So do they really have Healthcare IT implemented? In my opinion Healthcare IT is larger than the single patient, so hospitals with systems like the VA’s don’t have healthcare IT. The have an electronic patient record – and nothing more. If we want to look at ROI in healthcare, we need to find systems that have more than just an electronic patient record. They need to have an EHR and healthcare BI. Tools that are well honed to spot problems and manage healthcare, not just manage a single patient. Just as Maslow’s hierarchy, we need hospitals that have reached a higher level of self actualization. Organizations that actually want change and have a dynamic system that allows them to better. Too frequently we assume that because the hospital has an expensive EHR, that can spit data into an operational data store (ODS) later the next day that they have healthcare IT. I propose that, these systems are not healthcare IT. If we cannot measure ROI, then it is evident, that they do not have the systems in place to achieve ROI (as determined by higher quality, lower costs…). And therefore there is no ROI – plain and simple. Its time we elevated our expectation of healthcare IT and stop simply looking at an EHR (particularly those that require an ODS) as the solution.

  7. mel stern says:

    I absolutely agree with the proposition that ROI of Health IT must be evaluated in terms of results obtained by the enterprise. The challenge is to adequately define the size and scope of the enterprise. The EHR can and will be a very effective management tool. The challenge remains to identify the precise components of the enterprise and understand that management requires serious attention to this new environment.

  8. Michael Smith says:

    I enjoyed reading your posting. Throughout my career I have always attempted to focus of the benefits derived from technology, perhaps this reflects the time spent early in my career in the employment of a vendor. Later as I joined an health system IT department in a leadership capacity, I distinguished myself in the department by continuing to focus on benefits, and communicating the benefits. This became extremely challenging with the pace of activity, and the volume of projects increasing.
    Identifying the benefits, measuring the value achieved (e.g., ROI, Quality improvements) is not easy work. Cost information is not readily available. Few organizations have the focus and the human talent to gather this information (e.g.,BPA, BPM, Workflow).
    IMHO until BoDs and executive leadership sets the expectation that ROI will be calculated, allocates time and appropriate resources, we will all be continuing this dialogue for years to come.

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