A recent article in The Economist caused me to stop and reflect upon just how fast the healthcare landscape is changing with healthcare reform, new business models, and mergers. It’s truly incredible.  For me, it feels like history is being made before my eyes.

As I read on, what really stood out was the economic uncertainty that hospitals and organizations are facing. There is an incredible amount of hospital consolidation going on. This isn’t surprising, considering that 47% of community hospitals are operating with less than 2% margin. Cuts in Medicare and Medicaid, as well as a still-struggling economy, have led healthcare organizations to do more with less and think in new directions.

As health systems streamline their business and operational expenses, technology investments have come under fire. Many healthcare organizations are holding onto cash until the economy improves and are only spending on what they consider to be critical IT capital expenditures such as electronic health records (EHRs). Many in the industry are calling for more “common sense financing” strategies for capital expenditures. However, this doesn’t mean that healthcare IT needs have gone away. Now, more than ever, is the time for new thinking and fresh perspectives.

Moving to an opex model

Many organizations’ CIOs have begun considering funding technology needs with an operational expenditure (opex) model versus a capital expenditure (capex) model, a move made practical by increasingly ubiquitous cloud technology and the ability to eliminate large capital expenditures. For instance, as the volume of medical images continues to grow, health systems and other organizations could upgrade PACS storage systems or implement enterprise image management systems to manage the data. However, with tight budgets and the need to do more with less, the question is as much about how to store lots of images as it is about the return on investment if the system can’t meet the increasing demand for images that can be readily accessed or shared between health systems.

For example, The Wall Street Journal covered the cloud’s role in medical image management in an April article. Rather than invest hundreds of thousands of dollars in new hardware, software and other upgrades, Henry Ford Health System in Detroit decided to try a new and less expensive solution to manage their medical images: cloud image management and storage. This allowed them to replace technology without jeopardizing cash position on large capital expenditures.

Consider every angle

Organizations of every kind have to be sure they take into account all considerations when investing in IT infrastructure. There are many considerations including scalability, lifecycle of hardware and software, as well as the cost of future replacement. An often-overlooked consideration is the requirement for space and the expense of power consumption. Additionally, IT staff is a critical aspect of the infrastructure.  IT leadership must consider staff accountability, any potential single source of failure, dependencies, and data security.

Alternately, cloud-based IT operating expenditures offer two distinct implications for consideration. Direct implications may include significant tax advantages, easier predictability of direct expenditures, and the opportunity to spread costs over time. Financial decision-making for smaller, regular operational costs is easier than for larger capital purchases. Furthermore, much needed IT resources can be redeployed to higher level tasks. Indirectly, the cloud can support enhanced  patient care and efficiencies, including improved care coordination and collaboration. There is also the ease of immediate implementation, a cost-effective HIT infrastructure, as well as the ability to streamline HIT delivery.

With advances in technology, radical changes in the healthcare industry and increasingly adoption of the cloud in healthcare, it’s time to explore different funding options to make delivery of services more efficient and effective, and support improved patient outcomes – today. By partnering with proactive technology leaders, you can afford to make your organization’s goals a reality.

How is your organization financially positioned for the future? Have you weighed the pros and cons of an opex vs. capex financial model?