From First American

In an era of digital natives1, new technological solutions to health care challenges appear almost daily. Not surprisingly, health IT spending is rising again, with two-thirds of hospitals reporting increased technology budgets for this fiscal year. More than a quarter of hospitals — 27 percent — have seen increases in their tech budgets of more than 5 percent.

A survey by First American Healthcare Finance, in partnership with Health Forum, the strategic business enterprise of the American Hospital Association, identified this rise in budgeting for hospital and health system information technology. With a median health IT budget between 2 and 3.9 percent of a hospital’s total operating budget, this increase can be a significant amount of money — several hundred-thousand dollars, or even millions, for a large organization such as a major academic medical center or multi-hospital system.

Winners, losers and continued growth

No longer are legacy systems the only major focus for hospital tech investment. According to the survey, maintaining compliance and improving patient satisfaction are major motivators behind health IT spending increases. Hospitals are venturing into new tech territory, and top new investments planned by 2018 include implementing self-service kiosks for patients (54 percent) and investing in big data/predictive analytics tools (53 percent). At the time of the survey, only 14 percent and 16 percent of hospitals respectively had already implemented these solutions, which indicates that while self-service kiosks and big data/predictive analytics may be currently novel, they are about to become increasingly common.

Additionally, hospitals intend on implementing remote monitoring tools (44 percent) and telehealth services (41 percent) for the first time by 2018, with roughly equivalent numbers of hospitals noting these categories as ongoing investments.

Health information exchanges, patient portals and mobility remain core infrastructural features of hospital investment plans, with 57 percent, 71 percent, and 44 percent of hospitals reporting continued investment respectively, indicating legacy spending is an ongoing consideration for tech budgets. However, while it is an established health IT investment priority, the face of mobility is changing. When asked about technologies that would receive the most investment through 2018, 24 percent of hospitals answered tablets/mobile devices, about three times as many as those who cited laptops (9 percent).

The technologies that will receive the most investment by dollar amount through 2018 are both practical in nature and likely necessary to keep up with the volume of information generated by other health IT investment. Hospitals reported servers and data storage devices will be the top expenditure in health IT budgets for 46 percent and 44 percent of hospitals respectively.

Budget areas that may be less immediate priorities include wearable technology and 3-D printing, with three-quarters (wearables) and 84 percent (3-D printing) of hospitals indicating they did not have plans to invest in these items before 2018.

Benefits of new health IT investment

Prioritization of spending indicates where hospitals expect technology to provide value. Eighty-eight percent of hospitals expect technology investments to have a moderate or significant impact on compliance, while 77 percent say this of patient satisfaction, and 65 percent say the same of physician recruiting. The expectation of these particular benefits shows a commitment to meeting regulations and performing well on quality of care measures, both of which are linked to reimbursement. Of note, 55 percent of hospitals say tech investment has little to no direct impact on their cost savings.

To glean these expected benefits, hospitals are diversifying funding sources. Currently, internal funding is the largest source of dollars for health IT projects. Ninety-eight percent of hospitals report using this funding method, followed by leases (65 percent) and bonds (54 percent). Spending growth will come mostly from rises in internal funding, set to rise for 44 percent of hospitals, and leasing, expected to increase for 19 percent of hospitals. Aside from internal funding, leasing will increase more than any other funding method, and its growth is double that of the projected increase in bonds, three times that of donations, four times that of lines of credit, and nearly 10 times that of loans for health IT investment purposes.

Hospitals also indicate through their overall budgeting priorities that health IT is worth the investment; inadequate funding is not what limits most hospitals in getting tech projects funded. Rather, it is competing priorities for that funding. Nearly three-quarters — 73 percent — of hospitals reported this was an obstacle they are facing to acquiring technology. Just one percent of hospitals said they cut tech budgets before other departments, while 30 percent cut other departments first and 70 percent cut IT budgets proportionally with other departments.

The bottom line

These survey results show a shift in the way hospitals are spending on technology. Investment seems focused now on refining technological capabilities, as most hospitals are already wired for the basics. Hospitals are leveraging technology investment to maintain compliance, better satisfy patients, replace unsatisfactory legacy systems, update mobile capabilities and find ways to store massive amounts of data in a secure manner. These particular investment goals may reflect a continued push for hospitals to improve efficiency to better compete for market share and expand services into new territory.

Health IT investment seems poised to continue changes to the way care is delivered. As the biggest barrier to funding a technological project — competing priorities — shows, there are endless options for health IT investment. While strategy depends on each hospital, widespread emphasis on keeping health IT funded illuminates its importance as a tool, however indirect, in hospitals’ quest to provide patient-centric and high-quality care.


1. The Oxford Dictionaries defines a digital native as: “A person born or brought up during the age of digital technology and so familiar with computers and the Internet from an early age: ‘the digital tools that are reshaping our economy make more sense to young digital natives than to members of older generations.’”