To outsource or not to outsource: Examining the effects of outsourcing IT functions on financial performance in hospitals

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

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

BACKGROUND: Outsourcing of information technology (IT) functions is a popular strategy with both potential benefits and risks for hospitals. Anecdotal evidence, based on case studies, suggests that outsourcing may be associated with significant cost savings. However, no generalizable evidence exists to support such assertions. PURPOSE: This study examines whether outsourcing IT functions is related to improved financial performance in hospitals. METHODOLOGY: Primary survey data on IT outsourcing behavior were combined with secondary data on hospital financial performance. Regression analyses examined the relationship between outsourcing and various measures of financial performance while controlling for bed size, average patient acuity, geographic location, and overall IT adoption. FINDINGS: Complete data from a total of 83 Florida hospitals were available for analyses. Findings suggest that the decision to outsource IT functions is not related to any of the hospital financial performance measures that were examined. Specifically, outsourcing of IT functions did not correlate with net inpatient revenue, net patient revenue, hospital expenses, total expenses, cash flow ratio, operating margin, or total margin. PRACTICE IMPLICATIONS: In most cases, IT outsourcing is not necessarily a cost-lowering strategy, but instead, a cost-neutral manner in which to accomplish an organizational strategy.

Original languageEnglish (US)
Pages (from-to)46-54
Number of pages9
JournalHealth Care Management Review
Volume32
Issue number1
DOIs
StatePublished - Jan 1 2007
Externally publishedYes

Fingerprint

Outsourced Services
Technology
Hospital Bed Capacity
Patient Acuity
Costs and Cost Analysis
Geographic Locations
Cost Savings
Financial performance
Information technology outsourcing
Inpatients
Regression Analysis
Outsourcing

Keywords

  • Financial performance
  • Hospital management
  • Information technology
  • Outsourcing

ASJC Scopus subject areas

  • Leadership and Management
  • Health Policy
  • Strategy and Management

Cite this

To outsource or not to outsource : Examining the effects of outsourcing IT functions on financial performance in hospitals. / Menachemi, Nir; Burkhardt, Jeffrey; Shewchuk, Richard; Burke, Darrell; Brooks, Robert G.

In: Health Care Management Review, Vol. 32, No. 1, 01.01.2007, p. 46-54.

Research output: Contribution to journalArticle

Menachemi, Nir ; Burkhardt, Jeffrey ; Shewchuk, Richard ; Burke, Darrell ; Brooks, Robert G. / To outsource or not to outsource : Examining the effects of outsourcing IT functions on financial performance in hospitals. In: Health Care Management Review. 2007 ; Vol. 32, No. 1. pp. 46-54.
@article{fa19c95d90c149b3a785f65bd64fd5d8,
title = "To outsource or not to outsource: Examining the effects of outsourcing IT functions on financial performance in hospitals",
abstract = "BACKGROUND: Outsourcing of information technology (IT) functions is a popular strategy with both potential benefits and risks for hospitals. Anecdotal evidence, based on case studies, suggests that outsourcing may be associated with significant cost savings. However, no generalizable evidence exists to support such assertions. PURPOSE: This study examines whether outsourcing IT functions is related to improved financial performance in hospitals. METHODOLOGY: Primary survey data on IT outsourcing behavior were combined with secondary data on hospital financial performance. Regression analyses examined the relationship between outsourcing and various measures of financial performance while controlling for bed size, average patient acuity, geographic location, and overall IT adoption. FINDINGS: Complete data from a total of 83 Florida hospitals were available for analyses. Findings suggest that the decision to outsource IT functions is not related to any of the hospital financial performance measures that were examined. Specifically, outsourcing of IT functions did not correlate with net inpatient revenue, net patient revenue, hospital expenses, total expenses, cash flow ratio, operating margin, or total margin. PRACTICE IMPLICATIONS: In most cases, IT outsourcing is not necessarily a cost-lowering strategy, but instead, a cost-neutral manner in which to accomplish an organizational strategy.",
keywords = "Financial performance, Hospital management, Information technology, Outsourcing",
author = "Nir Menachemi and Jeffrey Burkhardt and Richard Shewchuk and Darrell Burke and Brooks, {Robert G.}",
year = "2007",
month = "1",
day = "1",
doi = "10.1097/00004010-200701000-00007",
language = "English (US)",
volume = "32",
pages = "46--54",
journal = "Health Care Management Review",
issn = "0361-6274",
publisher = "Lippincott Williams and Wilkins",
number = "1",

}

TY - JOUR

T1 - To outsource or not to outsource

T2 - Examining the effects of outsourcing IT functions on financial performance in hospitals

AU - Menachemi, Nir

AU - Burkhardt, Jeffrey

AU - Shewchuk, Richard

AU - Burke, Darrell

AU - Brooks, Robert G.

PY - 2007/1/1

Y1 - 2007/1/1

N2 - BACKGROUND: Outsourcing of information technology (IT) functions is a popular strategy with both potential benefits and risks for hospitals. Anecdotal evidence, based on case studies, suggests that outsourcing may be associated with significant cost savings. However, no generalizable evidence exists to support such assertions. PURPOSE: This study examines whether outsourcing IT functions is related to improved financial performance in hospitals. METHODOLOGY: Primary survey data on IT outsourcing behavior were combined with secondary data on hospital financial performance. Regression analyses examined the relationship between outsourcing and various measures of financial performance while controlling for bed size, average patient acuity, geographic location, and overall IT adoption. FINDINGS: Complete data from a total of 83 Florida hospitals were available for analyses. Findings suggest that the decision to outsource IT functions is not related to any of the hospital financial performance measures that were examined. Specifically, outsourcing of IT functions did not correlate with net inpatient revenue, net patient revenue, hospital expenses, total expenses, cash flow ratio, operating margin, or total margin. PRACTICE IMPLICATIONS: In most cases, IT outsourcing is not necessarily a cost-lowering strategy, but instead, a cost-neutral manner in which to accomplish an organizational strategy.

AB - BACKGROUND: Outsourcing of information technology (IT) functions is a popular strategy with both potential benefits and risks for hospitals. Anecdotal evidence, based on case studies, suggests that outsourcing may be associated with significant cost savings. However, no generalizable evidence exists to support such assertions. PURPOSE: This study examines whether outsourcing IT functions is related to improved financial performance in hospitals. METHODOLOGY: Primary survey data on IT outsourcing behavior were combined with secondary data on hospital financial performance. Regression analyses examined the relationship between outsourcing and various measures of financial performance while controlling for bed size, average patient acuity, geographic location, and overall IT adoption. FINDINGS: Complete data from a total of 83 Florida hospitals were available for analyses. Findings suggest that the decision to outsource IT functions is not related to any of the hospital financial performance measures that were examined. Specifically, outsourcing of IT functions did not correlate with net inpatient revenue, net patient revenue, hospital expenses, total expenses, cash flow ratio, operating margin, or total margin. PRACTICE IMPLICATIONS: In most cases, IT outsourcing is not necessarily a cost-lowering strategy, but instead, a cost-neutral manner in which to accomplish an organizational strategy.

KW - Financial performance

KW - Hospital management

KW - Information technology

KW - Outsourcing

UR - http://www.scopus.com/inward/record.url?scp=33846419787&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=33846419787&partnerID=8YFLogxK

U2 - 10.1097/00004010-200701000-00007

DO - 10.1097/00004010-200701000-00007

M3 - Article

C2 - 17245202

AN - SCOPUS:33846419787

VL - 32

SP - 46

EP - 54

JO - Health Care Management Review

JF - Health Care Management Review

SN - 0361-6274

IS - 1

ER -