Brian T. Malec, Ph.D.

Professor of Health Administration Department of Health Sciences California State University, Northridge Northridge, CA 91330

 Upon completion of Part 3 of the lecture, the student will: Understand the role that organizational structures play in assessing the value of HIT investments. Evaluate the roles played by a hospital’s IT Investment Committee and IT Portfolio Management Department Understand the role that accountability plays for project sponsors

 Are the right people making the IT investment decisions?  Organizational strategies drive IT investments Strategic vision not technological opportunities  When building a business case for an HIT investment, the decisions should be made as close to the end-users as possible  There needs to be a formal structure to ensure the benefits and costs are measured and managed. Advances for Health Information Executives, April 2006, pp

 An emerging trend in the USA is to create IT Investment Committees  This hospital committee focuses on specific areas such as clinical systems, supply chain systems, nursing systems, administrative systems or other specific systems.  The name can vary but the functions should be the same: Regional Information Systems Strategy Council IT Executive Steering Committee Information Services Steering Committee IT Advisory Committee  Additional subcommittees that could feed advice and recommendations to the IT Investment Committee (i.e. Physician Technology Advisory Committee)

 Define technology strategy, ensure alignment with organization’s strategies  Evaluating IT systems based on need and economic value  Developing metrics and monitor performance  Review business cases for IT investments  Use scorecards and reports to show earned value and any project obstacles  Monitor process change resulting from IT investment and hold managers responsible for outcomes Journal of Health Information Management, Fall 2007, Vol 21, #4, page 21

 Another emerging trend: IT Portfolio Management Department  The functions of this department include: Pre-approval of HIT project: Assist end-users and sponsors in defining expected benefits and costs and tracking the management of the benefits realization Post approval: Identifying tasks and task sequences and interdependency of tasks Determine resources and time requirements for each task The department has to manage multiple projects with overlapping resource demands  Some hospitals have a generic Project Management Office Tracks IT project schedules, budgets, and perhaps benefits.  A greater range of responsibilities is generally associated with the organizations size.

 Is this an IT department function?  Is the End-User department responsible for building the justification and documenting the economic value?  Usually it is a join effort between IT and the end-user department.  But then who is responsible for managing the benefits realization and cost controls? An emerging trend is to include projected benefits or cost reductions on the scorecard for project sponsors, as a part of their performance review.

 Step 1: Who expects what from the investment? What is the scope?  Step 2: Develop the criteria for the decision analysis  Step 3: Align the business plan with strategic objectives of the organization  Step 4: Perform the calculations. NPV, IRR, BCA, etc  Step 5: Analyze the results and find the winning alternative  Step 6: Package the business plan and sell it *Roger Kroft and Guy Scalzi, Making Information Technology Work, Health Forum, Inc, AHA Press, 2007

 The following two slides present an example of the work flow through a hospital organization’s process for new information technology proposals.  Process is iterative as projects are evaluated and potentially sent back for multiple refinements.  There are decision points in which the business case for an IT project is approved, not considered further or sent back for refinements.  This is a hypothetical example to demonstrate the checks and balances required for approval of HIT investments.

 Request submitted to IT from business unit  Is this routine or a new project?  If routine then prioritize and schedule and implemented  If a new project, then go to CIO to determine need to proceed with business case. ▪Project might end right here ▪Project might be forwarded to develop business case

 The Information Technology Investment Committee (ITIC) evaluates the business case  Business case could be sent back to be refined and return to the ITIC  The business case could be rejected and the process stops  The ITIC could continue to review or approve.  If approved the project is scheduled or other action taken  If it needs more refinement it would return to the ITIC and either be approved or rejected or send back again for refinement

 If you are going to spend $5 million on a new IT system, do you include in the business plan the funds to measure the before and after impact of the new system? Many organizations do not budget for the pre and post implementation evaluation. Lack of internal organizational structures accounts for this lack of financial and administrative support of the evaluation phase of HIT. 13

 The sponsor for the business case should have the predicted outcomes of benefits and costs as a part of their performance review. If they don’t meet targeted values from the HIT investment it could result in: Not accepting proposals in the future from this individual Downgrading their performance review Changing their current employment status 14

In conclusion:  Calculating the economic value of IT investments is difficult given the intangible benefits of most IT projects and the timeline for achieving the benefits.  Medical practices are less complicated then hospitals, but the economic and administrative barriers they face make it difficult to implement cost effective electronic medical (health) records.  Hospitals generally have a formal process to evaluation the economic value of an IT project and the business case is generally a joint effort with end-user departments and the IT department.

 Formal organizational structures like IT Investment Committees and IT Portfolio Management Departments are indications that someone is responsible for measuring and managing the benefits and costs resulting from an IT investment.  Without specific management structures, the realization of an IT project’s full potential will not be achieved.  The formation of internal structures also brings the political issues faced by hospitals into a structure that can resolve differences, prioritize projects, and make sure IT investments are driven by mission and strategy and not technology opportunities or the political power of end-user departments

 Journal of Health Information Management, Fall Volume 21, Issue 4.  Brian Malec, Ph.D., e-Poster Presentation at the World of Health Information Technology (WOHIT), Measuring and Managing the Economic Value of Information Technology Investments: Organizational Challenges, Copenhagen, Denmark, 2008  Roger Kropf and Guy Scalzi, Making Information Technology Work, Health Forum, Inc, AHA Press, 2007  Karen Wager, et al., Healthcare Information systems: A practical Approach for Health Care Management, 2nd ed.