Most hospital CIOs are facing a second round of 2009 IT budget cuts but must somehow begin funding electronic health records projects or face penalties in the form of reduced government subsidies. Two-thirds of CIOs say that balancing act is impossible.In spite of their near-term budget predicament, hospital CIOs are looking at reduced Medicare reimbursements of almost $3 million per year unless they have a government-certified, interoperable EHR system up and running by 2015, according to a new study from PricewaterhouseCoopers LLP. And in order to have such a system up and running by 2015, they need to start spending now. The problem is, after two rounds of IT budget cuts already this year, many hospital CIOs just don't have any money left to invest.

"The stick, even more than the carrot, makes a fiscally compelling argument for adopting electronic health records," said Daniel Garrett, managing director of PricewaterhouseCoopers' health industries technology (HIT) practice. "It's a small carrot compared to the amount of resources it will take to deploy this technology over the next five years. If an organization wants to have an enterprise-wide EHR up and running by 2011, they've got to start now. The incentives eventually go away and the stick will only get bigger."

The PwC study, called "Rock and a Hard Place: An Analysis of the $36 Billion Impact From Health IT Stimulus Funding," cites the following grim statistics from a March survey of 100 hospital CIOs:

--82 percent of hospital CIOs have already cut their IT spending budgets in 2009 by an average of 10 percent, with one in 10 making more drastic cuts of greater than 30 percent. --Two-thirds (66 percent) of CIOs say they expect to be asked to make further cuts in IT spend before the end of 2009. --Sixty-four percent of CIOs agreed that it is impossible to balance demand with the need to cut costs. --One-half of CIOs with more than 500 beds say that federal funding is "crucial" to their ability to implement EHRs.