Vogel, Lynn. (2003). Finding Value From Investments:

¶ … Vogel, Lynn. (2003). Finding value from investments: Exploring the elusive ROI in healthcare.

Journal of Healthcare Information Management, 17(4): 20-28.

When introducing a new IT system to the workplace, the inevitable initial expense is usually justified by the logic that it will improve the organization's financial health and productivity over the long-term. However, as noted by Lynn Vogel in her article "Finding value from investments: Exploring the elusive ROI in healthcare," calculating ROI in healthcare presents some unique challenges. Vogel notes that the role of IT has shifted from primarily one of labor substitution in the 1990s to that of quality enhancement. In theory, the use of IT such as electronic record-keeping should decrease medical errors. However, from the perspective of the industry, IT investments do not seem to always produce the tangible results that investments in technology related to patient care or improvements in physical infrastructure yield. "With the added complication of significantly reduced reimbursement for care from both public and private payers, the pressure on healthcare industry managers to justify their information technology investments has increased significantly" (Vogel 2003: 22).

The goals of healthcare are also slightly different from other industries. While other organizations primarily define themselves by profitability, ultimately healthcare's role is to make sick people well, and to sustain the industry infrastructures which enable organizations to accomplish this mission (Vogel 2003: 22). Investments in new technology must improve patient care and they must also not unduly strain the budgets of cash-strapped organizations and take away much-needed resources from other aspects of the practice of medicine. The benefits of a new IT system must be weighed against the opportunity costs of investing in other aspects of the healthcare system.

The use of IT in the form of electronic medical records clearly yields benefits in terms of efficiency and accuracy for the organization, enabling it to more easily diagnose, treat, and research the causes of disease. It can be used to measure the accuracy of treatment thus enabling the organization to make use of its resources more effectively and generate cost savings However, "information is perishable in that its value tends to decrease over time" and while longitudinal data on patients can be valuable on an individual basis and in a collective manner for research purposes, these savings can be difficult to quantify in the sense that it is hard to tell what value is gained from having vs. not having this data (Vogel 2003: 23). Add to this the additional problems regarding the protections of patient privacy required by law, and institutional resistance to new IT can become difficult to overcome. Measuring value is further complicated by the fact that reimbursements to the organization are filtered through a variety of different channels (different insurance companies and the government).