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The Challenges of Investing and Cutting Costs

Edward Prewitt, for HealthLeaders Media, February 13, 2014
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This article appears in the January/February 2014 issue of HealthLeaders magazine.

At HealthLeaders Media's recent CEO Exchange and CFO Exchange events, we asked attendees about their most pressing priorities. The top financial challenge named by top executives and financial leaders alike was cost reduction and efficiency (see the CEO Exchange report, p. 76). That's not a one-time need; shifting reimbursements and declining volumes will squeeze bottom lines for years to come.

So what's the biggest waste of money in healthcare organizations today? It's EHRs, according to our sixth annual Industry Survey (see the summary starting on p. 30). Nearly one-third of executives from hospitals and health systems say electronic health records have been a bad investment. "A lot of people have put in an electronic medical record only to find they have to replace it with something that really works," says Michael Burke, senior vice president, vice dean, and corporate CFO of the New York University Langone Medical Center, and an advisor for the survey.

This finding is unsurprising for anyone familiar with major technology installations. "Rip and replace" happens for many reasons: user rejection, inadequate supporting software systems, mergers with organizations using incompatible platforms, and, sometimes, bad software. But EHRs are vital in healthcare organizations today, even if getting it right means extra expense. The 2014 Industry Survey also finds that more than half of respondents plan to begin or increase investment in EHRs over the next three years.

Healthcare leaders need EHRs but they also need help in getting them right. This issue's cover story, "In Search of EHR's ROI" (p. 12), investigates what has come of all that effort and money—including nearly $20 billion in federal meaningful use incentives. Senior Technology Editor Scott Mace finds some evidence of return on investment, such as at Sentara Healthcare, which calculates $54 million in annual savings and a five-year payback ending in 2014. Rather than setting up the EHR according to existing workflows, Sentara used process redesign teams to reexamine everything from clinical delivery to coding.

Other healthcare organizations told Mace they have trouble calculating ROI and simply accept EHR investment as the cost of doing business. An EHR is just one tool to help leaders understand the quality and value of what they do—and how the equations are changing. Our Intelligence Report on healthcare analytics (summary beginning on p. 42) finds organizations embracing data analytics for many reasons: for business decisions, to improve clinical quality, to prepare for population health management.

But all this IT investment costs money—a lot of it. How will your organization balance cost-cutting with the need to prepare for the future?


This article appears in the January/February 2014 issue of HealthLeaders magazine.


Edward Prewitt is the Editorial Director of HealthLeaders Media.
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