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Is technology spending impervious to recent economic uncertainties?

October 21, 2008
by anonymous
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I read a short article that attempted to explain why technology spending (in this case wireless technology) would not be affected by the recent economic events. The reason was simple. Healthcare will be looking for ways to cut costs and increase efficiency and this technology can help. While I agree that this technology can certainly help, I don’t think that many hospitals are in a position to spend (in order to save). The economic impact is too great. For example, a NY Times article describes how disappearing credit is forcing hospitals across the country to delay improvements and new purchases. Closer to home in MA the financial crisis has had a substantial impact on our state budget. Last week the governor announced cuts that will hit two of our safety net hospitals in the form of lower Medicaid payments, in the millions of dollars.

Jane Metzger, my colleague in Emerging Practices, and a board member at one of the safety net hospitals summed it up quite well. The loss of dollars has reached a point where the hospital has enough to spend to keep the facility going. Projects in progress are being delayed with very few new ones on the horizon. If the choice is for new technology or replacing automatic doors and facility upgrades there is really not much to discuss.

While many hospitals are not financially squeezed as safety net hospitals, they are all feeling the pinch. New purchases will need to have a very compelling and quick ROI. In addition Michael Craige’s blog entry from last week offers great advice on how IT can help the hospital save money and increase productivity.



I couldn't agree with you more Fran. One of the IT projects that seems to qualify as a "no-brainer" with a seroius ROI is implementing a tracking system for hospital equipment such as IV pumps and wheelchairs. But even ROI becomes irrelevant when there's no money to spend. I think CIOs will have to pick up the vibe in their organizations and know when it's ok to pitch a new technology, versus when to just lay low and protect headcount.

Not only that, Pete, "ROI is something that is managed to, not bought" [credit to Glasser]. Maintaining adequate sponsorship to manage to an ROI will also become much harder with these economic events.  Sponsors have a limited capacity to do so, and capital pressures will, at least be a distraction.

Overall, Hospitals do not do a good job of documenting project ROI. In tough times, the true "Pet" projects are shelved for the projects that can document success. Maybe this will force organizations to implement a better process for IT project prioritization.