Healthcare IT Blog

Insights on advancing the business of care



How Much Should You Spend on Healthcare IT?

As a % of Revenue

Over the years, as we’ve met with practice managers and other healthcare administrators, many have asked us how much they should be spending on healthcare IT. Or they’ve asked us what our other clients spend. Sometimes we’d tell them, and get the response “Oh, that’s way too much.” Or “We could never justify that.”

What we realized is that a lot of practice managers don’t have realistic expectations of what a healthcare IT budget should be. So, we went looking for some industry reports and to help benchmarks to demonstrate what a healthy budget looks like. We thought it might also be useful to offer some tips on setting up your IT budget.

It’s important to keep in mind that healthcare IT encompasses a lot. A budget will include your hardware such as computers, laptops, tablets, printers, and other peripherals. It will include all of your software, from your electronic medical records (EMR) system to your customer management system (CMR) to your patient portal, and much, much more.

And of course, your budget must include the outsourcing costs for whoever is going to manage all of your IT needs. If you have your own IT staff, their salary will be covered in another part of your overall practice budget. 

Industry Statistics on Healthcare IT Spending

OK, now we’re ready to talk numbers. The national average for healthcare IT expenditures is $32,500/per full time provider (MGMA Cost & Revenue Report via ModernMedicine). 

And a recent Gartner IT Budget Report breaks the numbers down even further, and compares healthcare entities to all other enterprise. 

  • IT as % of Revenue
    • 2.5% All Enterprise
    • 4.3% Healthcare
  • IT as % of Operating Expenses
    • 3.3% All Enterprise
    • 4.5% Healthcare
  • IT Spending per Employee
    • $6,383 All Enterprise
    • $6,820 Healthcare

PEAKE’s experience is 3% to 4.5% of Revenue. In addition to benchmarking your IT spending levels by looking at your IT budgets as a percentage of revenue, you may want to look at other ratios as well. This could include looking at IT spending per user. For example, healthcare companies tend to have many more users than employees.

Setting Up a Healthcare IT Budget

Technology is such a big part of what keeps your practice running smoothly that it makes sense to create a separate IT budget. By doing so, you can highlight areas that are working, and areas where you need to invest more resources. IT systems can enhance productivity and efficiency when they are working well. But when they are old, glitchy, and temperamental, they can do just the opposite.  

To create a budget that is well thought out and reflects reality, it helps to do the following:

Put in the Necessary Time

Be prepared to spend some time putting together your healthcare IT budget. It will require input from management and physicians as well as office staff, as your IT systems are used by everyone. Getting feedback is especially important when you are looking to upgrade a system.

Look to the Present (and the Past) to Predict the Future

Start your IT budget by creating a baseline budget showing your IT expenses for the current year, and then adjust it for expected changes. Reviewing your IT budgets from previous years can help you see how revenue and costs vary month to month, by quarter, and year over year.

Remember the Budget Is an Estimate

Your healthcare IT budget is just an estimate, so don’t try and account for every penny. If your projections are off, you can adjust when you review your budget each month.

Make Sure Your IT Budget Aligns with Your Practice Goals

If you want to improve the patient experience, improving the patient portal and upgrading your legacy phone system may be good ways to achieve your goal. Budgeting for IT improvements that help you achieve your goals turn IT costs into practice profits.

Budget for Hardware and Software Updates and Replacement

Many practices have outdated hardware and software because they don’t keep track of when these resources should be updated or replaced. As a result, systems may slow down, get glitchy, or completely fail. You can read more about what can happen when you fail to make needed upgrades in our recent blog Chronic Pain: The Hidden Costs of Neglected IT

A healthier approach is to utilize an asset management system to keep track of when hardware and software need updates or are approaching end of life. This allows you to budget for upgrades and replacements.

Invest in Security

By this, we mean cybersecurity. Ransomware and other cybercrimes are on the upswing, and healthcare providers make an attractive target. Security measures to consider include:

  • Email filtering
  • Firewalls
  • Secure gateways
  • Antivirus installed on EVERY device
  • Encryption on emails, file sharing, backups, patient portal, etc.
  • Backups, with at least one off-site 
  • Installing updates right away
  • Maintaining all systems
  • Monitoring all systems

We can run a security risk assessment to help you see where your practice is vulnerable.

Don’t Postpone or Cancel IT Training to Save a Buck

While training may be a discretionary line item in your budget, it’s best to get your employees up to speed on any new software or tech equipment sooner rather than later. Don’t delay training to reduce costs. It may end up costing you more in the long run.

Employees who are working with software and equipment who have not received training will be slower and less productive than staff who are well-versed in all systems. And security related issues are less likely to happen when everyone has received the appropriate training.

A Word to the Wise: Don’t Cut Corners on Healthcare IT

Your healthcare IT budget doesn’t have to be extravagant, but make sure you cover all of the bases. If you try and cut corners with low-end hardware, you’ll have to replace it more often, which drives up costs.

Don’t cut corners when it comes to security either. Guard your systems like they’re Fort Knox, and you lessen the chances of falling prey to a bad actor. 

By taking the time to do a thorough analysis of your IT needs now and in the future, you can develop a realistic budget that you can justify to all stakeholders.

Work with a Trusted Healthcare IT Partner

At PEAKE Technology Partners, we have the experience you need in a healthcare IT partner. We provide a wide range of services to keep your practice’s IT systems running smoothly and securely. We can also help you create a realistic healthcare IT budget – one that takes into account your present and near term needs as well as your security needs. Our team can also help your practice find ways to save money without jeopardizing your practice. 

Call us at (866) 357-3253 or use the contact form to schedule a conversation.

by Chris Knotts, Partner

June 17, 2021

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