The American Hospital Association (AHA) claims that advances in technology have transformed patient care, particularly in the shift from inpatient to outpatient settings and in the development of less invasive diagnostic and therapeutic techniques.  Perhaps this explains why annual IT spending in the healthcare industry has jumped $12 billion since 2000.

According to industry analysts Sheldon I Dorenfest & Associates, $31 billion dollars was spent on picture archiving and communications systems, and computerized provider order entry systems, among other IT gadgets and software this year.  And it doesn’t look that this spending splurge will end anytime soon.

This detail clearly challenges the view that healthcare organizations spend much less on IT than other industries. According to reports on spending in 2001, banking and financial services spent about 5% to 6% of revenues on IT, compared with 3% to 4% for healthcare organizations.

Data from a Modern Healthcare/PricewaterhouseCoopers annual survey of hospital executives indicate that the typical healthcare organization allocates 2.5% of the operating budget to IT. Senior hospital executives responding to the Modern Healthcare 2005 survey indicated their primary near-term IT priority to be the electronic health record (EHR).

Implementing a national EHR system would be in the realm of $276 billion to $320 billion over 10 years.  Broken down this translates to an estimated initial cost of $2.7 million for a medium-sized hospital and then $250,000 per year, with an expected annual savings of $1.3 million once the system is fully operational.  If accurate, that could mean a $77.8 billion annual savings nationally.

Originally reported in Canadian Healthcare Technology.