The effect of information technology investment on firm-level performance in the health care industry.
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. Understanding individual IT factors that directly contribute to business value should provide insight into the productivity paradox.


OBJECTIVE
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 $100,000 in increased profit, and each additional IT service outsourced is associated with approximately $950,000 in increased profit for an average-sized Integrated Healthcare Delivery System.


CONCLUSIONS
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.
Thouin
Mark F
MF
Rawls College of Business, Texas Tech University, Lubbock, TX, USA. mark.thouin@ttu.edu
Hoffman
James J
JJ
Ford
Eric W
EW
D002017:Budgets; D002201:Capital Expenditures; D003362:Cost-Benefit Analysis; D019033:Delivery of Health Care, Integrated / Q000191:economics / Q000458:organization & administration*; D017598:Efficiency, Organizational; D019538:Health Care Surveys; D006801:Humans; D007256:Information Systems / Q000191:economics* / Q000706:statistics & numerical data; D007449:Investments; D012044:Regression Analysis; D014481:United States