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The Effect of Information Technology (IT) Investments on Firm-Level Performance in the Healthcare Industry

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Eric W. Ford, Professor (Creator)
Institution
The University of North Carolina at Greensboro (UNCG )
Web Site: http://library.uncg.edu/

Abstract: Background: The return on investment for information technology (IT) has been the subject of much debate throughout the history of management information systems research. Often referred to as the productivity paradox, increased IT investments have not been consistently associated with increased productivity. Understand individual IT factors that directly contribute to business value should provide insight into the productivity paradox. Purpose: The effects of 3 different firm-level IT characteristics on financial performance in the health care industry are studied. Specifically, the effects of IT budget, IT outsourcing, and the relative number of IT personnel on firm-level financial performance are analyzed. Methods: Regression analysis of archival survey data for 914 Integrated Healthcare Delivery Systems is performed. Results: IT budgetary expenditures and the number of IT services outsourced are associated with increases in the profitability of Integrated Healthcare Delivery Systems, whereas increases in IT personnel are not significantly associated with increased profitability. Each one tenth of a percentage increase in IT expenditures is associated with approximately $950,000 in increased profit for an average-sized Integrated Healthcare Delivery System. Implications: To increase profitability, IT administrators should increase IT budgetary expenditures along with IT outsourcing levels. IT administrators in the health care industry can use such findings during budgeting cycles to justify increased investments in IT personnel as being budget neutral while increasing organizational capacity.

Additional Information

Publication
Health Care Management Review. 33(1), pp. 60-69
Language: English
Date: 2008
Keywords
Health care, IT outsourcing, IT payoff, Outsourcing, Productivity, Return on investment