Preparing for Organizational Change
Hospital technology decision makers now confront a growing pipeline of information technology (IT) and major medical equipment that challenges traditional capital allocation processes. In a highly fragmented industry that is driven by coverage and reimbursement policies set by the Centers for Medicare and Medicaid Services (CMS) and private insurers, the cumulative impact of hospitals’ technology investment decisions shapes health care for decades. Hospitals are medical institutions with the goal of diagnosing, treating, and caring for patients with a wide variety of ailments and injuries. Because of this, it is necessary to have a broad range of equipment to be able to help more patients with greater speed and efficiency. There are many different types of hospital equipment, from simple and basic supplies to highly technical and sophisticated machines (Hyde, 2004).
Hospitals are often accused of adopting technology too rapidly or haphazardly (Rothenberg, 2003). Conversely, health care as a whole is accused of adopting many beneficial technologies too slowly (including those that are hospital-based) and generally being slow to innovate (Cutler & McClellan, 2001). In fact, hospitals invested an estimated $26 billion in IT in 2004, and approximately 2 percent of operating budgets were allocated to all technology, including devices, imaging, and IT (Carpenter & Hessler, 2001).
The purchase of new technology, including IT and major medical equipment, reached 51 percent of all hospital capital spending in 2001 (Rothenberg, 2003). Although overall capital spending remained relatively flat in the late 1990s, hospital executives reported an increase in this decade, and spending is expected to climb an average of 14 percent per year (Cutler & McClellan, 2001). Hospitals are relying more on earnings from operations to finance capital