When Paul Levy first took the job of president and CEO at Boston\u2019s Beth Israel Deaconess Medical Center in January 2002, he knew that a strong IT department would be the key to turning the financially troubled hospital around. At the time, Levy was executive dean of administration for the Harvard Medical School, and Beth Israel Deaconess is one of Harvard\u2019s teaching hospitals. Levy says he accepted the new position in large part because he knew and respected the hospital\u2019s CIO, John Halamka. Technology is essential to keeping hospital costs down and patients safe. Had the IT department lacked strong leadership and talent, there would not have been sufficient time to turn it around before Beth Israel Deaconess collapsed, he says.Levy\u2019s trust in Halamka was soon tested by a massive network failure that took the hospital\u2019s systems offline for days. (Read more about the network crash online at www.cio.com\/120105.) But Levy didn\u2019t fire his CIO. Instead, he educated himself about the need to invest in and maintain infrastructure. Nearly four years later, Beth Israel Deaconess is profitable, and the medical center has regained its standing as one the country\u2019s foremost teaching hospitals and health-care IT innovators.Levy is best known for overseeing the cleanup of Boston Harbor as executive director of the Massachusetts Water Resources Authority from 1987 to 1992. "People laugh when I say this, but there is a similarity between running a sewage treatment facility and running a hospital," he says. What comes into a wastewater treatment system, like what comes into a hospital, "is unpredictable and highly variable." And the outcome of treatment, whether for wastewater or patients, "has to meet very, very strict quality standards." But running a hospital is more complex because every patient requires individual attention.Levy says Halamka has taught him much about how complex the health-care environment is\u2014and how difficult and expensive it is to apply IT to traditionally paper-based processes such as drug-ordering and medical record-keeping. Nevertheless, Levy wants the hospital to use IT not only to improve its efficiency and quality of care for patients but also to pioneer how technology is used in health care.Levy talks about how IT can improve hospital efficiency and patient safety, and how he makes hard decisions about IT spending.CIO: As CEO of Beth Israel Deaconess, what is your vision for IT?Paul Levy: Information technology is going to transform the delivery of health care in several respects. First, it will transform administrative processes, which include the back office, billing and communication between providers, insurance companies and consumers.Secondly, it will transform our logistics. We will be able to monitor the flow of materials, medical devices, pharmaceuticals\u2014even human tissues and fluids\u2014through the organization. And we will therefore be able to optimize our operations.Thirdly, it\u2019s going to transform health-care quality and safety, because we will be able to see much stronger correlations between the actions we take with patients and the results we obtain. For example, we get thousands of patients a year with inflammatory bowel disease. What I envision, and what John Halamka envisions, is that we will be able to look at those patients statistically\u2014at what we did with them and for them\u2014and we\u2019ll be able to correlate that with the outcomes. And that information will be used to enhance the delivery of medical care.Our intention is to set the standard in this field. We fully expect to have, if not the best, then one of the best information systems in the country. So I could not overstate IT\u2019s importance to us as a business proposition.Given that vision, what are your priorities for IT investments?There are three areas: the administrative systems, logistical operations and health-care quality. I would like to have fully conceived and implemented information systems that permit us to optimize what we do in those three areas.We have a good foundation that consists of clinical and administrative systems that work reliably, and that are accepted and routinely used by medical and administrative staff. But I think John would say there\u2019s still a lot to be done, and that it\u2019ll be pretty expensive getting there\u2014tens of millions of dollars. We\u2019re still trying to get away from paper in certain respects, and John is focused on this area. One of John\u2019s latest projects is to have an electronic consent form, so a patient would sign a tablet [and the form] would enter into the patient\u2019s electronic record instead of sitting at the foot of the bed. This would provide us with a more reliable record that can\u2019t easily get lost.Moving away from paper will save us money because it will reduce the amount we spend in records management. For example, we store paper records onsite, and we archive older records at a warehouse. It\u2019s difficult and time-consuming to retrieve them when we need them in a hurry.You went through a period of cost-cutting. How has that affected your ability to invest in new projects?When I came in we had to cut the budgets dramatically. At the time, the hospital was losing $70 million a year. The first year, we had to cut $30 million, and the goal was to break even by the third year. And John volunteered budget cuts in IT. If anything, however, we were probably spending below what we should have on IT, relative to the size of the enterprise. So we\u2019re trying to make up for that now that we\u2019re profitable. We had a consulting firm look at our overall investment and staffing in IT last year, and they determined that we have a lean IT department that could use some expansion. We\u2019re now in the process of expanding the department so that working conditions are better and so that staff continue to be interested in what they do. Beth Israel Deaconess\u2019s IT budget amounts to 1.9 percent of the hospital\u2019s overall budget and is increasing as Beth Israel grows.There are systems such as electronic medical records that are expensive, and the payback is not immediately apparent. Then there\u2019s the issue that IT in the health-care setting can have life-or-death implications. How do you take these factors into account when making investment decisions?Where there\u2019s an explicit issue regarding patient safety, where having a system in place is clearly going to make a difference in lives or deaths, you do it regardless of the cost. But those are the easy cases.The more difficult decisions are about the systems that give you an improved information flow, where you suspect if you had that information in place, you would make better decisions about patient care. And there, it\u2019s a matter of IT judgment and medical judgment. We get people together and we talk about it. We look at the experience in other places, if it exists. The problem is\u2014or the advantage, depending which way you look at it\u2014is that we\u2019re inventing some of what we\u2019re doing here.For any capital investment, whether hardware or software, we do a full business analysis and then rank it according to several criteria. First of all we consider patient safety. Second, we look at the number of doctors or patients that would benefit from it. Third, we look at ROI, and then fourth we judge whether the investment is consistent with our overall strategic plan.The network crash in 2002 revealed that Beth Israel Deaconess had not invested enough in its infrastructure. What have you done to make sure this won\u2019t happen again?We completely rebuilt the network after the crash, and the new one is much less vulnerable. That said, I wouldn\u2019t attribute all of that failure to an explicit lack of investment in this area. There was also a lack of vigilance of how the traffic was flowing within the network and what had been added on to the network. That all may have been compounded by lack of investment. We understand now what it takes to keep the network up-to-date. And John now has a budget that is sufficient to keep the network running smoothly.Do you ever say no? Your CIO is somewhat of a risk-taker. For example, he had an RFID chip implanted in his arm to test the technology as a tool for tracking patients and their medical information. What would be going too far?The guy\u2019s got a great imagination, but he\u2019s well-grounded in terms of what\u2019s appropriate. We\u2019re seeing nearly 40,000 inpatients a year; we\u2019re not going to experiment with our patients. We want to be on the frontier, but the systems have to work.I don\u2019t need to put any limits on John because generally I\u2019m not involved when he is making decisions to try new things out. He\u2019s not going to do something without talking to members of the hospital staff. He\u2019s dealing directly with the experts. Not only do I have trust in him personally but I know that he consults with the appropriate people on a regular basis and he certainly would never knowingly do anything that would jeopardize the hospital.