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Whether it's purchasing a new information system or upgrading existing technology, weighing an investment in information technology (IT) can be particularly challenging. Factors contributing to the pressure-filled situation are numerous.

The magnitude of IT operating and capital budgets. IT operating expenses may consume 2 to 3 percent of the total operating budget, and IT capital may claim 15 to 30 percent of all capital. As a result, an investment in IT easily can mean the difference between a negative or positive operating margin. Also important is the potential impact on competing interests and strategic planning. An IT capital expenditure of 15 to 30 percent reduces the amount of funding available for opportunities such as biomedical equipment, which could be used for new revenue, and buildings, which support the growth of clinical services.

The projected growth in IT budgets. Provider organizations may permit overall operating budgets to increase at a rate close to the medical inflation rate. However, expenditures on IT often experience growth rates of an additional 2 to 5 percent. At some point, an organization will note that the IT budget growth rate may single-handedly lead to insolvency

Demand often seems insatiable. Worthwhile proposals go unfunded every year. And infrastructure replacement and upgrades can seem never ending. It's not uncommon to hear leadership say: "I thought we upgraded our network two years ago. Are you back already?"

It is difficult to evaluate IT budget requests. IT's diverse applications can make the examination process challenging. For example, it can be difficult to compare a proposal that is directed to improve service with other proposals designed to improve care quality, increase revenue, or achieve some level of regulatory compliance.

Reputations for failure are difficult to outlive. Leadership may return blank stares when asked, "List three instances over the past five years where IT investments have resulted in clear and unarguable returns to the organization." However, the conversation may be difficult to stop when asked, "List three major IT investment disappointments that have occurred over the past five years."

Despite these numerous obstacles, some techniques can help aid the process of assessing IT value. Finding the most useful approach typically begins with understanding that value from IT investment decisions is real and diverse.

Where's the Value?

Value occurs when IT implementations catalyze or contribute to tangible improvements in organizational performance, such as reductions in medical errors, reductions in costs, improvements in service, and increases in revenue. Practical examples of IT applications producing value are numerous.

At Boston-based Partners HealthCare System, an analysis of the costs and benefits of the computerized medical record shows that financial benefits can range from $9,000 to $19,000 per physician FTE per year. This revenue can be captured through reduction in transcription costs and record-retrieval costs, improved conformance to ordering from approved formularies in cases where risk is shared, and improved billing accuracy

At Brigham and Women's Hospital, a member of the Partners system, inpatient provider order entry has led to a 55 percent reduction in serious medication errors. The technology employed highlights possible drug allergies, drug-drug interactions, and drug-laboratory result problems at the time of medication order entry.

At a health center of Massachusetts General Hospital, also a member of the Partners system, implementation of a picture archival and communication system (PACS) has reduced time spent for interpreting radiology images from 72 hours to one hour. Introduction of the technology also has reduced the cost of an examination by 30 percent and reduced the time that image-intense specialists, such as neurosurgeons, spend trying to locate films.

These and similar experiences at other organizations clearly demonstrate that opportunities for value creation through IT implementation are real and diverse.

How Do You Find Value?

The diversity of value means that the analyses of proposed IT investments must use diverse techniques. The investment-analysis technique of calculating return on investment (ROI) comes to mind first, and in many cases it is effective. For example, managers can calculate an ROI if a set of investments, including an IT component, is intended to reduce clerical staff.

However, there are times when calculating ROI is clearly not appropriate, particularly in relation to strategic initiatives. For example, consider determining the ROI of electronic mail or word processing. Such an analysis would not fully capture the benefits of the technology What's more, the technology's full impact would most likely not be understood until years after the investment. When it comes to strategic uses of IT, ROI analysis done at the time of weighing an investment frequently becomes wrong and is highly speculative at the very least.

# posted by Medical Information : 4:06 AM