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Direct link to graphs: IT Costs as a Percentage of Patient Care Costs

BIG Data last updated fiscal 2020/21


Healthcare stakeholders are aware of the benefits of information technology solutions, given that most hospitals and healthcare companies are currently engaged in some level of digital transformation. The need for broader use of information technology has been made more apparent by the ravaging COVID-19 pandemic. The constraints of physical healthcare infrastructure, supplies and manpower call for the dynamic adaptation of resource deployment to address changing healthcare demands.


In addition, the social distancing-based strategy to flatten the curve of the COVID-19 transmission has provided more options to the conventional face-to-face consultation approach. New care delivery methods, broader access to health services, better operational efficiency, and improved patient outcomes are all possibilities with digital health technology. These are critical measures relevant to turning the tide in the pandemic.

Healthcare systems that are ahead of the technological curve and have made the appropriate investments in hardware, training, and provider remuneration infrastructure before the COVID-19 pandemic can now tap into a valuable new resource in their fight against COVID-19.

Exclusive BIG Industry Data

Recent Trends in Hospital IT Spending

Data from BIG Healthcare (a healthcare company specializing in collecting and analyzing financial and operational data from hospitals in Ontario, Canada) reveals the most current five-year trend in hospital information technology spending. BIG Healthcare data shows that:

1) Hospitals have increased their IT expenditure proportionally by nearly 30% over the past six years.

IT Costs as Percent of Patient Care Costs

2) An inconsistent rise in IT spending across hospital groups. Small hospitals have grown their relative investment by more than 20%, while large community hospitals have increased by more than 50%. IT investments by teaching hospitals have remained relatively stable.

IT Costs as Percent of Patient Care Costs

The discrepancy between hospitals IT spending could be due to many factors. Some probable reasons include:

  • Smaller or large community hospitals may have delayed IT investments longer than their teaching hospital counterparts. This necessitates more robust investments in digital solutions to catch up to the teaching hospitals.
  • Alternately, the fixed costs of investing in productive information technology systems may represent a more significant fraction of patient care expenditures for many smaller or larger community hospitals.
  • Also, some of BIG Healthcare’s smaller or larger community hospital clients are part of a shared IT service model where these hospitals co-fund their respective digital solutions programs. These hospitals may believe that by participating in these shared arrangements, they are subsidizing the costs of teaching hospitals. However, it may also indicate that smaller hospitals are acquiring highly functional IT solutions that they would not be able to implement on their own.

Rising Costs of Digital Solutions

However, the broader integration of digital solutions in healthcare is not without consequences. Typically, adopting digital solutions portends a rising cost of healthcare. This is likely to increase as more efficient and sophisticated digital solutions are adopted.

Furthermore, hospitals may have to deal with inefficient and underperforming technology, which ideally should have helped streamline operational costs. These suboptimal digital solutions strain healthcare resources. Also, healthcare institutions are sometimes billed for maintenance contracts and software licenses prior to the go-live date. It implies that hospitals accrue costs for the technology that is yet to contribute to their operations.

Presently, the cost of greater adoption of information technology solutions in healthcare is problematic as hospitals and healthcare systems worldwide are trying to deal with the increased spending associated with the perseverance of the COVID-19 pandemic. Nonetheless, more robust integration of effective information technology appears to be one of the solutions to the myriad of problems healthcare systems battle globally.

Easing the Cost of Digital Solutions

To ease the rising cost associated with digital solutions in healthcare and enhance patient-centered care, clinical effectiveness, and operational efficiency, the Ontario Ministry of Health and Long-Term Care has actively advocated investments in healthcare information technology systems.

According to the 2016 Annual Report of the Office of the Auditor General of Ontario, between 2002/03 and 2015/16, the Ministry spent over $8 billion on Electronic Health Records (EHRs). The Auditor-General anticipates that expenditures on digital solutions will continue because additional work is required to enable a fully functional EHR backed by a province-wide network. Since the Auditor General’s report, healthcare institutions have raised their proportional investment in information technology. This is corroborated by an increase in the total health expenditure in Canada, rising to 300 billion dollars in 2021.

As healthcare systems prioritize leveraging digital solutions to make the most of the vast amount of new clinical, financial, and socioeconomic data being generated by electronic health records (EHR), linked medical equipment, smartphones etc; stakeholders must continually raise investments in healthcare to cope with the strain of rising health IT expenditure.

Next Steps and Conclusions

Healthcare will inevitably become more digitized and technological. Most healthcare institutions in Canada allude to this premise. Many hospitals acknowledge the need for further investments to renew their aging and inadequate information systems.

Collaboratively, a recent report published by Frost & Sullivan indicates that more than fifty percent of hospital respondents surveyed have plans to increase their IT investments as they work to navigate their way through the COVID-19 pandemic.

Telemedicine consultations and an increased emphasis on preventative care are anticipated to become more prevalent in the future. This is because the focus of care is shifting toward keeping patients away from hospitals. Additionally, the COVID-19 pandemic has increased demand for technologies that make it possible to conduct virtual visits and remote patient monitoring.

Furthermore, as the data management skills of health systems improve, predictive analytics is another area that can benefit from more robust investments. Tools for data visualization and artificial intelligence will likely be a high priority soon due to the increasing interoperability and usability of healthcare data across the health system.

In conclusion, as hospitals grapple with how to realign legacy systems and strategies to meet the changing healthcare environment, strategic investments in healthcare IT have clearly increased and will likely continue to expand. So, it is imperative for healthcare institutions and stakeholders who are skeptical about investing in digital solutions to make the needed change to catch up and get ahead of the technological curve.