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H&HN Daily

Tech Spending and Profitability: The Chicken or the Egg?

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Does health IT spending lead to financial stability, or is it the other way around?

Is robust, aggressive hospital spending on new technology — from EHRs to telemedicine and beyond — a strong indicator of financial stability five or ten years down the road, or are organizations that are already fiscally sound and well-prepared strategically more likely than not to spend money on them — and spend that money wisely?

That's an issue I've been kicking around as I prepare for an upcoming spread in H&HN's Fiscal Fitness series on the role of hospital technology spending and development in an era of reduced overall budgets. Last week, I took a look at some of the recent data on the topic, including a 2011 report from Fitch ratings that found that hospitals in its portfolio that were already Stage 6 or Stage 7 HIMSS meaningful use ready had 46 percent higher revenue than other hospitals in its portfolio.

The question that always raises for me, of course, is whether aggressive technology strategies are a sound investment for hospitals, or whether the early adopters are simply more likely to be in a position to make those investments — and are more likely to effectively carry them out.

Given the plethora of nightmarish stories about EHR rollouts that didn't take the first time or never-were HIEs, it's a valid question for debate, and I brought the question up during a recent talk with James LeBuhn and Adam Kates, analysts with Fitch Ratings and the authors of the recent Fitch survey on IT adoption.

Kates noted that the survey looked broadly at growth rates as an indicator of success instead of absolute profitability, and found that early adopter IT hospitals, as well as those with strong quality measure performance, fared better than the overall portfolio.

"We found that the high-quality and IT [performing] hospitals were growing at faster rates than general portfolio hospitals," Kates said.

Another factor? Hospitals that are several years ahead of the curve on IT, Kates noted, made the capital investments years ago, and might need to spend a great deal of time or money today to comply with meaningful use or other federal incentive programs.

LeBuhn added that Fitch has seen sizeable IT investments pay off for some of its portfolio hospitals, pointing toMinneapolis-based Allina Health as an example of a hospital system that used an early investment in a comprehensive EHR system to stimulate overall growth, landing a recent A-minus rating from Fitch.

"Those organizations that have been stronger have been able to make the investment in IT, and have seen a return that's allowed them to outpace the performance of the rest of the market," LeBuhn said. "Clearly, the organizations that have had the financial wherewithal to do so have improved performance. [Allina] has done very well in a fairly competitive marketplace."

And regardless of how you answer the chicken or egg question of health IT and overall performance, Kates believes that in the years to come — as population health, chronic care management and overall quality performance become increasingly intertwined with a hospital's overall financial health — the question of whether to invest heavily in technology will become a no-brainer.

"[Early adopters] are able to track clinical trends and see what's resulting in readmissions," Kates said. "It's nice to see management ahead of the curve."

Does health IT spending lead to greater returns and performance, or are high-performing hospitals simply more likely to make those investments in the first place? Email your thoughts to hbush@healthforum.com.

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