Demonstrating Value-based IT when Leadership has one foot in the Volume-based canoe and one foot in the Value-based canoe?
Healthcare IT; carving a niche.
The question of how to demonstrate the value of healthcare IT, in a financial environment of shrinking resources, is one I have been thinking about since the start of MHCD. Senior leadership has an inherent understanding of the need for IT and a robust EHR, however, do they appreciate the value added of these same capabilities? Regardless of where a health systems resides on the volume-based to value-based continuum, all leadership has an understanding that further “cost reductions” will be directed at hospitals and physicians, rather than consumers. The result is key business service lines, including IT and medical informatics, competing for limited dollars.
There are several healthcare IT benchmarking services available, all of which use some form of a ratio of IT spend to organizational revenue or operating expenses (IT OpEx as % of Org OpEx). There are also measures of personnel expenditure (Users supported/IT FTE or IT FTEs as % of Org FTEs). The Health Care System for which I work is a member of the Scottsdale Institute (SI), which has multiple well established, data driven IT benchmarks. Based on any SI benchmark we spend 16-24% less than the mean (interestingly, said mean is about 50% less than non healthcare industries), with excellent quality, safety, and satisfaction metrics. So, the response given to requests for more financial resources to support growth of market share has been that “other areas are more in need of the dollars”.
My goal is the define a niche for healthcare IT that is data driven, financially secure, and accepted. Demonstrating value by under investing, falling behind and having IT use and effectiveness problems is suboptimal and provides recovery challenges. To more specifically frame some questions;
- Has anyone developed a strategy for secure, sustainable funding for healthcare IT in their company?
- Are there suggestions for how to approach this from a business perspective, specifically when competing for dollars? We have had some success with aggressively defining Capital Expenses (CapEx) to move below the line, reducing our OpEx.
- I am looking for conceptual ideas that clearly define the important use cases for IT, in order to rise out of the mosh pit competing for dollars.
- What will help senior leadership (mostly non-clinical) understand the importance of investing in IT, and the associated non-monetary ROI?
This was very interesting to me. thinking about the first question you ask (about strategy), after pondering that, I think maybe it’s more about culture. Our organization is largely about data and consistent quality tracking and reporting (in an 8 hospital system). Ultimately, the site presidents are the accountable parties for quality performance. So, those operational leaders develop the plan to fund IT (with the Chief Quality officer at the table). The culture is one that believes IT is a key element to drive outcomes (versus a nice thing to have).
If a business perspective is sought to justify allocation of dollars towards IT as opposed to some other functions, I believe it would help in sub-classifying the IT projects into specific buckets: increasing operational efficiency (e.g. better utilisation of physician outpatient time), rationalising consumption (e.g. better inventory control and optimal procurement for better cashflow management) or clinical improvements. Each of these projects could then be assessed through an ROI lens. You could present the project to the leadership and an improvement project, where a better IT system or tool is a means to an end and not an end in itself. By re-framing the problem, you may have a better shot getting dollars allocated for your project.
Interesting topic as my organization moves further into VBC and tries to get a handle on how we use data. I don’t have any great answers. But trying to get buy in from leadership to spend on IT might require getting some of your respected clinical leaders to lobby for IT spend based on patient outcomes. Might even start out anecdotal and work toward more data driven arguments to be made.
IT has become a large bucket term that means too many things across organizations. If you were to survey your physicians, managers, administrative leaders…what do they think of when they hear “IT”? Do they associate IT with people who make their jobs easier, more efficient, better….or do they roll their eyes with comments re how the IT “faceless” team makes their lives harder…and is out of touch with their needs? Breaking the concept of IT into subgroups, clarifying added value with concrete examples and being clear on where the IT dollars go and for what purpose can be helpful.