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Hospitals Must Decide on Most Effective IT Spend as Costs Add Up

By Gregory A. Freeman  
   November 27, 2017

After rising in past years, IT budgets are showing signs of flattening out for some hospitals. Health leaders will have to decide whether their goals require spending more.

Health system IT budgets are beginning to settle down after significant increases in the past decade, driven largely by the adoption of electronic medical records and concerns over cyber security, but 2018 could require even more funding for hospitals that want to be cutting edge.

That isn’t the only path, however. Hospital leaders will have to consider the role of IT innovation in their missions and budget accordingly.

A primary concern is the amount of “technical debt” carried by a hospital or health system, says Munzoor Shaikh, a director in the healthcare practice at Chicago-based management consulting firm West Monroe Partners, which recently published a report exploring the three main future approaches healthcare organizations can take when budgeting tech expenses. Technical debt refers to the extra effort and expense incurred when choosing an IT solution that is easy to implement in the short run instead of the best overall solution.

“Every health system has technical debt, and that’s not always something you can eliminate. The goal is to right size your technical debt given your mission and your objectives,” Shaikh says. “But I can tell you most hospitals have too much technical debt, way more than they should have.”

After rising for a period, IT budgets are flattening out more recently and don’t have to continue increasing for all hospitals, Shaikh says. Health leaders who are satisfied with their current IT might hold steady on their budgets, but healthcare organizations that want to be among the most innovative will face higher costs, he says.

The cost of IT is forcing healthcare leaders to make strategic decisions, the report says. Some health leaders are looking for a way to be proactive and more deliberate with investments rather than continuing the reactive mode of past years.

Gregory A. Freeman is a contributing writer for HealthLeaders.

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