Executive Summary Hospital Information Technology and Positive Financial Performance: A Different Approach to Finding an ROI, Nir Menachemi, Jeffrey Burkhardt, Richard Shewchuk, Darrell Burke, and Robert G. Brooks
This empirical study examined the relationship between information technology (IT) utilization and hospital financial performance. Using primary and secondary data we specified and tested a series of regression models that examined this relationship in Florida hospitals. In addition, we employed performance group analysis for a select group of operational performance indicators. Findings suggested a significant and positive relationship between increased levels of IT use and various measures of financial performance, even after controlling for case-mix acuity and bed size.
Regardless of the analysis or method employed, the results indicated that IT adoption is consistently related to improved financial outcomes both overall and operationally. This relationship was present when examining IT collectively and for clinical IT, administrative IT, and strategic IT as individual measures. Lastly, although higher IT use was associated with a higher level of revenues, income, or cash flow, higher use was also associated with ratios based on higher expenses. This probably reflects the relatively high acquisition costs associated with obtaining and maintaining sophisticated IT systems. Given that a true return on investment is so difficult to obtain for many individual hospital-wide IT systems, our data can serve as a proxy for hospital leaders and policymakers who want to understand the potential financial effects of investing in IT in the acute care setting.
Executive Summary Changes in Service Availability in California Hospitals, 1995 to 2002 Paul B. Kirby, Joanne Spetz, Lisa Maiuro, and Richard M. Scheffler
Hospitals face serious financial challenges in the current healthcare marketplace. In response to these challenges they may alter their service offerings, eliminating services that are perceived as money-losing or adding new services in areas where profitability is expected to be greater. Although research has examined hospital closures, the more subtle phenomenon of hospital service changes has not been systematically studied. This issue is important because different types of hospital service changes could have different effects on hospital financial viability: Extensive service closures could contribute to a downward spiral leading to hospital closure, whereas adding new services might help improve a hospital’s finances.
This article examines changes in hospital service availability in California general acute care hospitals between 1995 and 2002. Our major findings indicate that many California hospitals made changes in their service offerings during the study period, although few made extensive changes. Altogether, about half of the hospitals in our study population either closed or opened at least one service. Nearly one-fourth of the hospitals in our study population closed one or more services, whereas just under one-third opened one or more new services. However, the vast majority of the hospitals that closed or added a service made only one or two such changes. In addition, few hospitals both closed and opened services. The service closed most frequently was normal newborn labor and delivery (obstetrics), whereas inpatient rehabilitation was the most frequently opened service.
Hospitals that made the most service changes tended to be small, rural, and financially troubled at the start of the study period. Among this group of hospitals service closures were associated with continued financial deterioration, whereas new service openings were associated with improvements in key financial ratios.