Hospital information technology and positive financial performance: A different approach to finding an ROI

Nir Menachemi, Jeffrey Burkhardt, Richard Shewchuk, Darrell Burke, Robert G. Brooks

Research output: Contribution to journalReview article

83 Scopus citations

Abstract

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 hospitalwide 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.

Original languageEnglish (US)
Pages (from-to)40-58
Number of pages19
JournalJournal of Healthcare Management
Volume51
Issue number1
DOIs
StatePublished - Jan 1 2006
Externally publishedYes

ASJC Scopus subject areas

  • Leadership and Management
  • Health Policy
  • Strategy and Management

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