Health IT's Three Big Issues: Money, Money, and Money

Gienna Shaw, February 16, 2010

This year's HealthLeaders Media Industry Survey presents a snapshot of the healthcare industry at a time of excitement, uncertainty, and tumult. And healthcare IT is in the center of so many of the big changes that are coming, especially because of the Health Information Technology for Economic and Clinical Health (HITECH) Act.

From budgets to staffing to investment in new technologies that will help organizations achieve meaningful use, healthcare IT leaders spoke out on how the changes will affect their organizations—and their organization's budget.

Not surprisingly, respondents said government laws and mandates were the No. 1 driver of healthcare costs. Fifty-six percent said clinical IT spending will increase because of HITECH, under the American Recovery and Reinvestment Act of 2009 (ARRA). Other cost drivers included clinical technology, which ranked sixth, and medical devices in ninth place.

IT budgets are growing: 34% of respondents say that their operating IT budget as a percentage of the overall operating revenue is between 4 to 6%—up 10 points from last year's survey (24%), and nearly doubled from the 17% response in our 2008 HealthLeaders Media CIO Survey.

The percentage of respondents with IT operating budgets that were 7% or more of the total operating budget increased from 3.35% in 2008 to 5.19% in 2009 to 12.5% in 2010. The majority of providers still fall into the 1% to 3% range of the overall operating budget at 47.92%, but that number has dropped from 70.95% in 2008 and 61.69% in 2009.

But the increase in operating budgets seems to be fueled by the smaller organizations that responded—18.52% of small hospital respondents, which have fewer than 200 beds, say their IT operating budget was 7% or more. Similarly, 14.29% of critical access hospitals spend 7% or more of their operating budget on IT.

"To get meaningful use, it takes supporting the product, upgrading the products, and getting a new type of staff to do the analytics to get the really meaningful data out of the systems," Jack Kowitt, chief information officer for Parkland Health and Hospital System in Dallas, recently said in HealthLeaders magazine's coverage of the CIO survey. "It could be the smaller hospitals realizing that they have to invest heavily in IT."

Respondents also predicted that spending on clinical IT is expected to increase in the next five years. Most said there will be a "substantial increase" (43%) or at least a "slight increase" (37%). Then, we asked the next logical question: If your spending on clinical IT will increase, is it because of the HITECH Act under ARRA? Most (56%) said "yes."

Another area where costs will go up is in staffing: More than 72% of respondents said the number of IT employees at their organization will grow in the next five years. Twenty percent said staffing levels would stay the same and only 7% said the number would shrink.

Despite all of the challenges in healthcare IT, more than 78% of tech leaders said they would encourage their child to pursue a career in healthcare. Said one respondent: "There are so many problems in healthcare that there is a wealth of opportunity."

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