We’re living in the hype cycle of the HIT portion of the economic stimulus package. Lest we get too carried away, a survey sponsored by NCR reminds us that hospitals are rationing their health IT spending in 2009.

Only 15% of hospital leaders say the economy is having ‘no effect’ on their IT spending. Otherwise, 36% are cautious; 14% are slowing down spending; 19% of leaders are postponing ‘some’ purchases; and, 16% are postponing all non-essential projects.

Hospitals are facing declining revenues in the recession. Coupled with rising joblessness, hospitals’ financial health is eroding. The negative impact of hospitals’ declining fiscal fitness on health IT investment is highlighted in The Economy’s Impact on Healthcare IT Spending – Hospital Leaders Retrench for a Continuing Recession, conducted by NCR with Healthcare Informatics.

Increasing unemployment negatively impacts hospital finances in two ways: first, top-line revenues are falling with consumers choosing to forgo procedures, physician visits, and drugs. Second, at the point of payment, consumers are less able to cover copayments, coinsurance amounts, and inpatient charges not covered by insurance.

Health Populi’s Hot Points:
The bottom line for health IT is that 71% of hospitals expect smaller budgets for HIT next year.

The conundrum for providers is that The American Recovery and Reinvestment Act of 2009 (ARRA) requires them to be up-and-running with electronic health records by 2011. Those providers who haven’t yet begun to migrate from paper to digital systems may not be able to benefit from incentive payments beginning in 2011.

According to NCR and Healthcare Informatics, the one area where hospitals are going to focus on growth is expanding outpatient services, which virtually all hospitals say will be very or somewhat important. This strategy is surely meant to grow the top-line of hospital revenues.

It will be important while growing that top-line to carve out budget that drives paper out of the operation through EMR adoption and electronic data exchange. Working on both expanding outpatient revenues while going digital will help providers maximize the margins on service lines (old and new) and favorably position providers for those incentive payments that ARRA will make available from 2011 onward.

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