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The Health IT Outlook for 2009: Fuzzy

Kathryn Mackenzie, for HealthLeaders Media, January 6, 2009

By most accounts, the health information technology sector in 2008 fared relatively well even as the economy was collapsing around it. Yes, hospitals and health systems have had to make some calculated moves to cope with the crisis, such as delaying facility upgrades, equipment purchases, or health IT initiatives, but those moves could be seen as a small price to pay compared to the alternatives being experienced by other industries (read: massive layoffs, bankruptcies, bail-outs).

Predictions for 2009 suggest that health IT looks set to see some slowdown for at least the next 12 months as hospitals and health systems reevaluate budgets and identify cost cutting measures. "For those organizations with decent margins, I think they will continue to fund IT, but not look to make increases, being very conservative, awaiting the righting of the financial markets. They will also want to be conservative awaiting the new administration's plan on HIT—while there have been rumors and trial balloons thrown out there, nothing definitive has occurred and the mood of the new congress has yet to be tested," says Joel S. Shoolin, DO, vice president of clinical informatics at Advocate Healthcare in Oak Brook, IL.

Health IT budgets are distinct from other departments in that so much of HIT spending is long-term. Shoolin says that though new items are being put on hold, there are enough big ticket items already in the works to keep the department busy, "although we are unable to move as far and fast ahead as we'd we'd like," he says.

A new survey by the College of Healthcare Information Management Executives, The National Alliance for Health Information Technology, and AHA Solutions Inc., says the bulk of IT operating budgets are actually healthier than those of their organization's. Two-thirds (65%) of the 144 chief information officers and 27 chief financial officers and vice-presidents of finance surveyed say the annual budgets for running their departments will increase or stay the same in 2009 compared with 31% who say their budgets will decrease. One chief technology officer in the report summed up his department's spending philosophy by saying, "Cost cutting is important, but we can't ignore the potential of IT to have a profound positive financial impact on the organization in these trying times. This is precisely the time when creative leadership in IT can be most effective."

That perspective is being echoed by CIOs of hospitals large and small, who realize that it's going to take some investment to meet the requirements for upcoming P4P incentives and proposed HIT requirements related to Medicare. "Our current on-hold projects are not P4P. They fit mostly into convenience or nice-to-have. There are some that could improve patient safety and I suspect these will be the first to be reassessed," says Shoolin.

Of course, the idea that you must spend money to make money only works if you have the money to spend in the first place. The general consensus seems to be that if this economic situation continues deep into 2009, gaining access to the capital needed to fund any big projects will become increasingly difficult. For example, 52% of CIOs report reductions or delays in funding for EMRs, according to the CHIME/NAHIT/AHA report. Slightly fewer—43% of CIOs—expect cuts or delays in funding for CPOE systems.

Meanwhile, more than half of CIOs in the survey report that their organization's capital budget will remain the same in 2009 while 36% said it would decrease. Just 2% expect their organizations' capital budgets to rise. So it seems the old, "do more with less" adage is in full effect these days.

Jane Horowitz, NAHIT's chief operating officer says one of the first places hospitals are looking to cut spending is with outsourcing and consulting. "Hospitals are asking what can be cut back and what can you bring internally. We even saw a decline in the addition of new applications and software. It's definitely a 'make due with what you have' scenario," she says. Horowitz says she expects to have a clearer picture of how 2009 will treat IT when the groups conduct a second follow-up survey later this year. "There is still a lot of the unknown. A few people indicated to us that it is simply too soon to tell what the effect a recession will have on health information spending," she says.

I'm not much of one for predictions. This year is a good example why—the economic breakdown caught a whole lot of people smarter than I off guard. So, I'm not making any predictions here. However, based on everything I am reading and hearing, health information technology is one area that looks to offer at least a little stability in difficult times. Even the Congressional Budget Office, in its largely pessimistic analysis of major health insurance proposals, predicts the federal government could save a total of $34 billion over 10 years from a Medicare requirement for doctors and hospitals to use health information technology. With billion dollar savings estimates like that one floating around, I predict (okay, just one) that demand for HIT services will only grow over time, despite economic conditions. However, to predict whether the money will be there to fund the projects spawned by that demand, that takes skill that falls outside of my pay range.


Kathryn Mackenzie is technology editor of HealthLeaders magazine. She can be reached at kmackenzie@healthleadersmedia.com.
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