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CFOs Measure the Benefits of New Technology
June 2007
In the early days of applying information technology in health care, many CFOs were in the driver's seat. The first applications on the market were designed to automate the billing process, so it was only natural that the CFO called the shots.
Over time, however, as I.T. became more pervasive in clinical departments, most provider and payer organizations hired CIOs to lead the charge, and many CFOs stepped away from assessing information technology purchases.
However, the pendulum is swinging back. Organizations spending millions of dollars on the latest hardware and software, especially for point-of-care clinical systems, are looking to the CFO to help measure the potential benefits of these huge, strategic investments.
"CFOs now need to figure out not just where to get the money for the technology, but where to get the benefits from it," says Frank Cavanaugh, principal at Cardinal Consulting, Homer Glen, Ill. The consultant laments, however, that too many organizations still turn to the CFO merely to "defend" an I.T. purchase rather than to measure whether it actually will yield tangible benefits.
"People think that installing a piece of software will solve their problems, but it rarely does," says Henry Lipman, executive vice president and CFO at LRG Healthcare, a two-hospital rural delivery system in Laconig, N.H. "Software is just a tool. How you deploy and use the tool is much more important than the tool itself, just like it is with a power saw."
That's why more financial officers are serving key roles on teams that analyze how technologies should be deployed and then monitor, over time, whether those investments are paying off with strategic benefits.
And CFOs realize that clinical information systems now are a necessity, Lipman argues. "There's certain technology that needs to be in place to deliver quality medical care," he says. "It's almost become as essential as a seatbelt and an emergency brake."
Clinical information systems are essential investments which, in and of themselves, may not produce a direct return on investment, says Richard Clarke, president and CEO of the Healthcare Financial Management Association, a Westchester, Ill.-based group representing CFOs and others. "It's often the tool for a strategy that develops a return," he notes. For example, the technology can support a quality improvement initiative, provide a competitive advantage in the market and contribute to improved productivity, he explains.
Measuring benefits
Quantifying the potential benefits of a clinical information system is more complex than measuring the impact of a financial system, which can be assessed based on improvements in cash flow. But CFOs are coming up with ways to build a consensus among senior executives and board members that a potential multimillion dollar clinical I.T. investment will in the long run pay off strategically.
CFOs need to take a lead role in sizing up the benefits of clinical systems, such as improved outcomes; more efficient business processes, including accurate codes for billing; and even improved physician relations, says Cavanaugh, the consultant.
"This is an area of omission that the CFO needs to address," he stresses. "This is well beyond the realm of the CIO, and the CEO shouldn't be saddled with this responsibility. But there is no blueprint for how to do this."
Even more challenging than predicting potential benefits, Cavanaugh says, is measuring whether those benefits are being obtained after the technology is installed. "That's the trick."
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