Average IT expenses at U.S. hospitals

Hospitals and healthcare systems use hundreds of different software and information technology (IT) vendors, including solutions for:

These solutions cost anywhere from hundreds of thousands to millions of dollars, which in turn significantly impacts a hospital’s balance sheet, budget, and spending ability.

In the Definitive Healthcare HospitalView product, estimated IT operating expenses is a proprietary calculation based on a facility’s size, services, and the data they provide in the Medicare Cost Report

In this Healthcare Insight, we review the average IT operating expenses at U.S. hospitals and compare metrics by hospital bed size and location.

What is the average hospital IT operating expense?

Based on 2020 data from more than 4,668 hospitals in HospitalView, the average IT operating expense for U.S. hospitals is estimated at $7.76 million. IT expenses are estimated to be about 3% of a hospital’s total operating expense.

 

Fig. 1 Data is from the Definitive Healthcare HospitalView product. Hospital financial data is sourced from the Medicare Cost Report with estimated IT expenditures based on proprietary calculations. Data accessed August 2022.

How much do hospital IT expenses increase each year?

Estimated hospital IT expenses at U.S. hospitals have increased annually by more than 4% on average from 2016 to 2020. In comparison, hospital expenses have risen by about 5% each year from 2016 to 2020.

Full-year 2021 data is still being collected by Medicare, but early data analysis of about 3,800 hospitals show potential increases of 6% for hospital IT expenses from 2020 to 2021.

IT operating expenses by hospital bed size

According to the data, a hospital’s total operating expenses can be linked to its’ bed count. This correlation can also be found when examining a hospital’s IT expenses. 

 

Fig. 2 Data is from the Definitive Healthcare HospitalView product. Hospital financial data is sourced from the Medicare Cost Report with estimated IT expenditures based on proprietary calculations. Data accessed August 2022.

Hospitals with 25 beds or fewer spent only about $857,000 for IT in 2020, compared to hospitals with more than 250 beds, which spent nearly $27 million on average.

Hospitals with more than 250 beds also had the highest average annual increase in IT operating expenses since 2016 at more than 5%. Hospitals with 250 or fewer beds had average IT expense increases of less than 4%.

IT operating expenses by hospital region

Hospitals in the northeastern United States have the highest estimated IT operating expenses, with an average of $14.1 million reported for 2020. Large cities, such as New York City, and metropolitan regions in states such as New Jersey and Massachusetts, have large hospitals that contribute to the higher averages in the northeast region.

 

Fig. 3 Data is from the Definitive Healthcare HospitalView product. Hospital financial data is sourced from the Medicare Cost Report with estimated IT expenditures based on proprietary calculations. Data accessed August 2022.

Northeastern hospitals also had the highest average annual increase in IT expenses 2016 to 2020 at nearly 6%. With a 5.1% average increase in IT expenses year-over-year, the southeast region is the only other region where IT expenses increased higher than the average rate of 4.6%.

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