Healthcare Boards of Directors: Realizing Returns on Information Technology Investments

[Dr Clarence Nixon]

We live in a culture that predicates what’s important on its ability to generate a healthy return on investment. It’s highly likely that if we can predict the return, and if it’s great, the investment however large pays for itself. In terms of business, generating profit is the bottom line. In order to understand an organization, you must understand its parts and how they coexist. Within that hierarchy, every one must be comfortable in their own realm to make the whole fruitful.

Furthermore, every entity must see to it that profitability and efficiency of the organization run parallel to the vision. That said, nationally, and even internationally, health care and its viability have garnered an enormous amount of attention. On the surface, big business (pharmaceutical companies, insurance companies) have met and exceeded zenith in profit, namely through placing a price tag on extending and increasing the quality of life.

Consumers that pay for health care coverage, have a say in the way service is administered, or least can expect that our government is holding the health care industry to a standard that employs overall proficiency. With that said, we can turn our attention away from the prevailing powers of government and look specifically at the boards of directors at hospitals and other health care industries, whose oversight is paramount.

In the business framework, the board of directors is charged with choosing a CEO while holding accountable other executives including CIO and other acronyms that are closely aligned with the company’s mission and vision. Simply put, they ask the right questions of executive management and track performance and trending. The board’s agenda shifts according to the needs of the organization and they disseminate what matters. Applying this same model to the health care sector, among health care industry insiders, experts and the like, Information Technology is the conduit by which Return on Investment (ROI) is leveraged.

The fact is that there is no real template for IT governance in many organizations because there has been a fear of corporate dependence. To perpetuate this viewpoint, many boards allude to the Y2K scare to substantiate lackluster IT competency. The health care industry, in a copycat manner, should adopt what Mellon Financial, Home Depot, Procter & Gamble and Wal-Mart to name a few have instituted: “board-level IT committees that are on a par with their audit, compensation, and governance committees.” (McFarlan, Nolan 2005)
If IT is important to the board of directors that creed is filtered through to all its parts. Why should the health care industry be joined in union with IT?

As early as 2002, three different healthcare organizations were credited with using technology to enhance their operational practices and overall profitability. In the magazine Health and Management Technology, Bethany Williams chronicles Kettering Medical Center Network, The Lehigh Valley Health Network (LVHN) and Peace Health as organizations that identify the value of integrating systems to incorporate superior operability. Williams offers three profiles that affect the ROI for the specified organizations beneficially.

Kettering is ranked one of America’s Top 100 Hospitals, according to U.S. News and World Report Magazine. Kettering’s LastWord Enterprise Clinical and Financial System (installed in 1980 in two facilities) was expanded to support an entire network of four hospitals. The system corroborates the financial, clinical and administrative processes.

LVHN is one of the largest teaching facilities in Pennsylvania and it operates three clinical campuses. LVHN’s system incorporates ordering, care documentation, pharmacy, lab and emergency services, in addition to scheduling, registration and patient accounting (Williams 2002).

Peace Health is an all-inclusive delivery network that covers five regions from Washington, Oregon and Alaska. Their idea for “a community health record—an integrated electronic medical record every patient in every region housed in a single database,” is close to being actualized.

In 2008, Cleveland Clinic, an academic medical institution and champion in health information technology, introduced a pilot program with Google aimed at empowering the patient. Before the pilot program was introduced, well over 100,000 Cleveland Clinic patients benefited from Cleveland Clinic's electronic personal health record (PHR) system called eCleveland Clinic MyChart. The pilot was presented as an invitation-only opportunity offered to a group of Cleveland Clinic PHR users, seeking to enroll between 1,500 and 10,000 patients.
The concept behind the pilot program is to “test secure exchange of patient medical record data such as prescriptions, conditions and allergies between their Cleveland Clinic PHR to a secure Google profile in a live clinical delivery setting.” The end result is to create a “patient-centered” and “controlled model” which enables patients to interrelate with multiple physicians, healthcare service providers and pharmacies. This best cost technology enabled solution will allow Cleveland Clinic to focus on patients, reduce costs, while steadily changing the operating paradigm.

What is the benefit of an integrated clinical and financial system? Expedited profit cycle. Better data reliability. Readily available clinical information. At LVHN, the director of patient accounting promised the board of directors a $14 million dollar ROI in three years. This figure was achieved in only 18 months. In employing online insurance eligibility checking in accordance with the integrated system, LVHN earned $120,000 per year in revenue. Before this innovation, the revenue was once “written off” due in large part to missing or incorrect insurance eligibility information.

Another benefit to technological innovation in the health care sector involves death attributed to hospital errors. “In 2000, the Institute of Medicine (IOM) released a report focusing on patient safety estimating that 44,000 to 98,000 people die in U.S. Hospitals annually as a result of medical errors.” (Report to Congress: New Approaches in Medicare) For fair argument there is no innovation without an anticipated “barriers to adaptation.” A hospital operating within the complete functionality of health information technology will use all, or some, of the following services: Electronic health records (EHR), an automated order-entry and patient tracking system; Computerized provider order entry (CPOE), a medication ordering and fulfillment system; Clinical decision support system (CDSS), provides physicians and nurses real-time diagnostic and treatment recommendations, Bar Coding and Automated dispensing machines ADMs).

An all-encompassing clinical IT system that includes CPOE and EHR can cost upwards of tens of millions of dollars. “CPOE on its own [is] estimated to cost about $8 million for a 500-bed hospital.” (Abt Associates for MedPAC)

Bar coding can cost up to $1 million for the average hospital. For individual physician practices, the average cost for EHR is said to range from $16,000 to $36,000. Cost is obviously a heavy consideration, but efficiency and ROI outweigh the startup discrepancies. Many research outlets recommend grants and loans be awarded to health care organizations that wish to employ health care information technology. This is a decision that needs to be weighed heavily by boards of directors. Simply put, IT is the business.

It is safe to assert that once IT becomes as important in an operational audit as say fiscal appropriation, only then will a giant push for its incorporation into the health care industry in all facets be realized.

[Jeremy Engdahl-Johnson]

Federal funding may be encouraging a move toward EHR, but there's more to it than just installing systems. How can healthcare data pooling lead to a better system? More at http://www.healthcaretownhall.com/?p=1499.

[CC-Conrad Clyburn-MedForeSight]

Dr Nixon,

Excellent. Well reasoned and researched. I think your point of elevating the Board of Directorl's It Committee to the same status as Audit or Compensation was particularly salient, Thank you for the contri bution.

CC