Are Hospitals Cutting Back on Technology Spending Due to Y2K?

By Vecchione, Anthony | Drug Topics, December 6, 1999 | Go to article overview
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Are Hospitals Cutting Back on Technology Spending Due to Y2K?

Vecchione, Anthony, Drug Topics


Are hospitals and health systems spending fewer dollars on information and automation technology? Some industry analysts think so. In the mid-1990s, hospitals made huge investments in automation and information systems. But that trend seems to be slowing down as the millennium approaches.

Industry giant McKesson HBOC Inc. recently reported a 19% decline in its health-care information technology business, even though the company posted increases in its health-care supply management and pharmaceutical and medical-surgical businesses. Pyxis Corp, a Cardinal Health Inc. subsidiary, reported revenue growth of about 60% a quarter in its first and second halves; however, the company is projecting flat revenue in the first half of fiscal 2000.

Both Cardinal and Pyxis attribute the slowdown to Y2K worries. Cardinal believes that many customers, including hospitals, have delayed capital-equipment purchases to focus on Y2K readiness. McKesson attributes virtually all of its technology sector slowdown to Y2K as well. "We find that many organizations today have a freeze on the purchase or installation of any new software until Jan. 1, 2000," said McKesson spokesman Larry Kurtz. Some customers, he said, have tabled even the review process for new technology.

"Y2K has scared a lot of people, and justifiably so. It's the great unknown," said Robbie Trussell, senior project manager for pharmacy systems at Presbyterian Hospital in Dallas.

Yet while some industry observers agree that Y2K is certainly a contributing factor to the slowdown, not everyone is convinced it's the sole reason. Larry Pawola, executive vp. at Sheldon I. Dorenfest, a Chicagobased health-care management consuiting firm specializing in information systems, believes that other underlying issues play into the equation. As a pharmacist, he said he's seeing ever greater emphasis and consideration by hospitals on what they're actually getting in terms of a return on their information technology investments.

"There's a renewed emphasis on results," he said. He believes that in this era of cost containment and accountability, an increasing number of board members and hospital executives are questioning whether or not they're getting the best bang for the bucks they've invested in technology. The renewed thinking among many hospital bean counters is that they need to have some idea of the kinds of results they're going to get before they make additional technology investments. This new philosophy, he asserted, may explain why there's a temporary delay in some hardware and software purchases.

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Are Hospitals Cutting Back on Technology Spending Due to Y2K?


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