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Investment in digital health? Definitely. ROI? Maybe.

MHE PublicationMHE April 2024
Volume 34

The imperative to upgrade healthcare technology infrastructure is clear, but the returns from such investment are anything but.

Stephen Hughes, MBA, is well aware of the complicated calculations around digital health investment. He is the director of healthcare information technology policy for the American Hospital Association. Previously, he was in charge of information technology at a midsized regional healthcare system, and that is where he learned that the best-laid healthcare technology plans can go awry.

Stephen Hughes, MBA

Stephen Hughes, MBA

“I was part of the setup of a clinic in rural Virginia,” Hughes says. “We got there with a great idea and a great business plan, and then [we] realized the local internet service provider could not offer the bandwidth for the services we were offering.”

Luckily, another provider soon stepped in to extend fiber optic internet to the area.

“Which was great,” Hughes says, “but it still cost us a quarter-million dollars to connect it from the street to the practice.”

That’s the problem with digital health investment, he says: There’s only so much a health system can control. A great idea can bump up against the sharp edges of reality when health systems have to contend with changing supplier costs, infrastructure limits, new regulations and
competitive pressures.

“There are so many factors that kind of pop up in the middle of a project that all of a sudden make it harder,” he says.

Murky ROI

Hughes’ story is not unique. As healthcare providers work to leverage digital health technology through investment, training and service expansion, they often face the undesirable prospect of shelling out large amounts of money without a clear picture of when — or even whether — they’ll get a return on their investment (ROI). That uncertainty is reflected in a report released by the consultancy Ernst & Young LLP (EY) in 2024. The firm surveyed 100 payer and provider executives and found that although 86% of respondents see the potential of digital health investment to reduce costs, 70% of respondents said they had not yet seen any ROI from their digital health spending to date.

Kaushik Bhaumik, Ph.D.

Kaushik Bhaumik, Ph.D.

Kaushik Bhaumik, Ph.D., EY’s U.S. health technology leader, says he was not surprised by the results, because most digital health implementation is still in a relatively early phase.

“The COVID-19-driven digital wave was largely about providing tele/video visits between patients and their doctors,” he says. “While that was absolutely necessary, it has only now started to progress to the next wave of digital, which involves care follow-ups, scheduling, prescription management, behavioral health, etc.”

That wave will take a lot more work, he says, because it involves improving and leveraging things such as back-office system connectivity, interoperability and advanced analytics.

Half of respondents in the EY survey said the lack of ROI is amplified by “siloed” tracking metrics, which make it difficult to identify revenue tied to a particular technology. Hughes shares that concern, saying the challenge of proving ROI is particularly steep in the healthcare sector.

“I mean, that’s why technology people like myself are forced to go back and get MBAs,” he quips.

Hughes says another issue is that many healthcare leaders have a jaded view of technology spending. The problem goes back to well before COVID-19 when the federal government began pushing providers to use electronic health records (EHRs).

Hughes says the expense of that transition was jarring for many health systems. “And I can tell you, no one’s making money on their EHR,” he says. “Nobody. Ever. They are a massive expense.”

EHRs certainly led to some efficiencies in paperwork and clerical costs, but he says those were more than offset by the cost of hiring people to implement and maintain the systems and then train staff to use them.

“I can tell you that all EHRs are very labor intensive,” Hughes says. “To get them to actually work right to gain those efficiencies, it takes a lot of people.”

In addition, he said, healthcare executives have had to invest heavily in cybersecurity in recent years. Those security measures are necessary both for regulatory reasons and to keep patient data safe, he says. Yet, as with EHRs, cybersecurity spending is difficult to justify from an ROI standpoint.

“Unfortunately, any money you spend on information security only gives you protection,” he says. “It doesn’t give you any better clinical care, doesn’t give you any increased revenue … It’s money you’re setting on fire.”

More promise

If EHRs and cybersecurity have left healthcare executives questioning the potential ROI of technology spending, other types of digital health technology have a clearer connection to financial returns. Bhaumik says survey respondents reported spending money on products such as patient engagement systems, remote care management, e-scheduling and electronic prescription management, among other categories. Such technologies have the potential to streamline business operations, limit the loss of follow-up appointments and improve the working conditions of employees. However, he says healthcare leaders need to use a wider lens if they want to understand the financial benefits of such technologies.

“Comprehensive business cases that include care provider/nurse retention improvement, administrative cost reduction, improved patient referrals, [and] utilization management will all need to be addressed to demonstrate ROI,” Bhaumik says. “And it will take time.”

Realizing and demonstrating the ROI of such technology will likely take five to 10 years, which Bhaumik says is a similar amount of time that it took to fully deploy EHRs. Even then, he says, the benefits of technology spending will only materialize with careful attention.

“Keep a strict eye on the ROI business case elements,” he advises. “Draw tight boundaries around technology pilots for them to demonstrate success, as opposed to dragging them out. Have your clinicians deeply involved in the design and rollout of new technologies and make them accountable for their ultimate success.”

The telehealth example

Hughes says the telehealth boom of the COVID-19 era is a useful case study of the difference between using technology only when necessary and using it to its full potential. Although most health systems now use telehealth in some capacity, he says a more strategic approach can create efficiencies that, among other things, make it easier for providers to practice at the top of their licenses.

He posed a scenario in which a health system serving a rural area might open a remote telehealth center staffed only by a technician who could take blood samples and other basic medical readings and send the results to a supervising physician in a regional command center.

That type of in-person/telehealth hybrid can pay dividends, he says, “because I’m bringing in people who otherwise would not have come in for care and I’m doing it with a lower-salaried person.”

The EY report showed other ways clinicians can benefit when digital health technologies are utilized. For example, the survey results showed that 90% of healthcare leaders feel that the shift to digital solutions has given them more time to handle the needs of healthcare providers.

Still, Hughes says the fastest way to get to a return on technology investment is by acting swiftly. A number of health systems have made a name for themselves as early adopters, but he says there are also good reasons to move slowly. Although it’s fine for the healthcare sector in general to prioritize the bottom line, he says health systems and hospitals in particular cannot put the bottom line first.

“The unique social contract and social trust that hospitals have with their patients and with the community is that you have to put the ability to serve those patients and serve them safely above anything else, including your ability to earn revenue to keep the place up and operating,” he says.

If spending a large amount of money on digital health solutions is necessary to improve patient care and patient safety, Hughes says, health systems need to be prepared to do so, even if the technology will never pay for itself.

“You will absolutely sacrifice everything else for patient care and
safety,” he says.

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