Study: ROI for health IT takes time and comes with caveats

It takes a long time for health care organizations to see a return from IT investments, according to a report released today, which may explain why the industry has long been seen as a laggard in technology spending.

"The Economics of IT and Hospital Performance" report from PricewaterhouseCoopers, based on an analysis of performance data from nearly 2,000 U.S. hospitals, concluded that IT investment must reach a tipping point before it can lead to cost reduction. Until reaching that point, hospitals experience operating costs with little near-term financial benefit, the report noted.

Six out of 10 hospitals are at or nearing the tipping point, according to the report, and industrywide cost reductions and quality improvements associated with IT investment may soon begin to become more apparent. However, even hospitals that have reached the tipping point are experiencing less dramatic returns on investment that other industries have realized, the report noted.

"The business case for increased IT spending has been a foregone conclusion, but it is based largely on untested claims and the experience of other industries," said David Levy, principal at PricewaterhouseCoopers' health information technology practice leader.

"The lack of reliable, industry-specific empirical evidence has left hospital executives wondering whether IT investments will ever really pay off and unclear about the extent to which a transformation will occur," Levy said. "We can now retire this question and definitively say, 'Invest in IT; it works, but have patience.'"

The study also found that over the long term, hospitals investing in IT can reduce mortality rates without a corresponding increase in operating costs.

The report also found that, overall, hospitals making high levels of IT investments perform at a higher level of efficiency than hospitals with low levels of IT investments; IT investment at some point pays for itself by displacing costs elsewhere in the organization, such as for improving quality; and to fully realize the value from IT investments, organizations must redesign clinical and business processes.

The report was researched by PricewaterhouseCooper's Technology Center with Lorin Hitt, a professor at the University of Pennsylvania's Wharton School of Business.