Managing Technology Expenses in the Health Care Industry

Manage Increasing Technology Spend in Your Medical Practice
Medical practices all over the nation are experiencing an exponential increase in how much they spend on IT. Over the past decade, information technology moved from back office billing and collections departments, out onto the clinical floor and even into the operating room. In fact, most operational activity in your practice now uses a technology backbone.

As a result, the IT expense line has grown to contain a mixed bag of infrastructure costs, maintenance agreements, application subscriptions, custom programming and depreciation among many other costs.

Practices benchmarking IT spend as a percentage of revenue against similar practices may not be getting a true picture of the value of their IT investments.

The Challenge with Benchmarking
Industry benchmarks can be useful but an operational and strategic mandate is a better driver of tech investment. The main issue with benchmarking IT spend as one category is you do not have visibility into other practices to know what’s included. Do they include equipment depreciation? Telephone and internet connectivity? Phone systems? Cloud-hosted payroll? Staff?

If you are benchmarking your IT expense against other practices, you are almost certainly not getting an “apples to apples” comparison. When this expense line was relatively small, this may not have mattered. But now, with CIOs reporting a 50% increase in technology[1] budgets in 2017, it’s time to adopt a more strategic approach.

Additionally, managing this as one expense line can have adverse results for your practice. Mandates to cut or hold expenses are not always strategically executed. Sometimes pressure to hold expenses down can inhibit appropriate spending and can result in your practice having outdated systems which put you behind the competition.

Red Flags
There are some red flags that would indicate you may need to re-think how you manage your technology investments. Is hardware or software only updated when something is broken or end of life? Do you only have the manpower to manage updates when a problem occurs? Does your staff struggle to learn and use multiple applications, passwords and updates in their daily work? Are spending decisions made reactively instead of proactively?

Digging Deeper
Taking an operational and value approach will allow you to look beyond traditional distinctions between operating and capital expense and move to track investments across business operations.

It’s important to understand that technology initiatives that modernize or automate enterprise systems can drive top-line growth and long-term expense reduction. Focus first on delivering business value, second on minimizing expense.

It’s critical that you map your operational strategy and priorities across every technology application you use today and lead with a business mandate. This not only increases transparency, but also builds trust that IT investments are generating value.

Want to learn more? Sign up for Somerset’s “Managing Technology Expenses” webinar on Thursday, February 6th at 1pm ET.

[1] Source: Deloitte 2017 Global CIO survey

We Can Help
Mapping your strategy and priorities across technology applications is as much art as it is science. Contact us at 317-472-2200 or to help determine the best technology portfolio for your practice. We can help you brainstorm ways to align your IT capabilities with your strategic and operations business priorities.