Why Most Hospitals Are Outsourcing IT — And How to Do It Right.

Three-quarters of health systems with more than 300 beds and 81 percent with fewer beds are outsourcing various IT services, according to Black Book Research. Their reasons are many, but concerns about meeting increased patient needs and achieving higher quality population health are front and center. Hospitals are looking externally for a wide range of complex technology services including full IT department management and outsourcing of discrete functions such as network infrastructure, service desk, application support and legacy support as old systems are replaced with new.

Here’s what you should know:

  • Healthcare organizations are being held to new standards, partially as a result of federal EHR standards and pay-for-performance requirements, but increasingly because clinicians and patients are being provided with new technologies that require new types of services. The speed of systems development has become a major challenge for hospitals that need to stay competitive.
  • Even basic IT such as service desk, data storage, network management, application support, systems implementation and data security are mystery functions for most hospital executives. Most cannot keep up with direct IT management. Central healthcare activities are already so complex that many organizations have determined that non-core IT activities should be outsourced to specialists.
  • Healthcare organizations know they must develop their operations for the future. For functions like IT, external specialists can help hospitals move forward through expertise that in-house IT staff often doesn’t have.
  • Small (rural, or urban) hospitals are experiencing great difficulty in attracting and retaining IT talent needed to create the sustainable, high quality IT organization they need. Specialty outsourcing firms are able to leverage their staffs to sustainably resolve these issues, with financial savings.
  • Poorly performing IT shops are frustrating hospitals. Qualified healthcare IT outsourcers can eliminate this problem by installing best practices, providing qualified staff, and working with hospital executives to ensure accountability through stringent service level agreements (SLAs).

If your hospital intends to join the 75% to 80% of hospitals doing IT outsourcing, or if it intends to expand its external support, how do you make sure you get your choices right?

  1. First, choose a partner, not a vendor.   What’s the difference?   A vendor provides basic service delivery, e.g. answering your service desk calls for X dollars. A partner is committed to achieving much more — to proactively help you improve your IT operation. The partner looks for new and better ways to continuously improve your users’ experience, the overall quality of performance, and cost-effectiveness. It works with your hospital to meet its vision of the future. The genuine partner is committed to the hospital’s successes and experiences the hospital’s successes as its own. These folks are not nine-to-fivers; this is a group that cares and goes two or three extra miles if needed. Some of our greatest outsourcing accomplishments at Phoenix have been with clients where we took over entire IT departments with a myriad of failing projects, and turned all of them around.
  2. Insist on defining specific services and levels of performance. In a complex outsourcing engagement, it may be difficult to identify 100% of key performance indicators upfront. Still, SLAs must be a foundation of your agreement. If some of those needed standards are initially elusive, insist on certain best practices, e.g. good change management and project management methodologies. Outsourcers who are committed to industry best practices like the ITIL (Information Technology Infrastructure Library) standards and the PMI project management standards are best positioned to make the impacts you need.
  3. Choose a partner with experience in hospital IT outsourcing.   The industry is filled with service firms who think they can handle hospital IT outsourcing, but either don’t understand how it’s different from other industries or think of it as a body-shop contract, i.e. 3 FTEs for 5 years. The riskiest scenario is outsourcing a hospital function to a company that has insufficient hospital experience. Knowledge of the urgent interconnections between IT, clinical care and revenue cycle workflows is essential for a successful outsourcing relationship.  Deep experience with HIPAA requirements is also a key issue, often forgotten in the heat of competitive bidding. Choosing a non-healthcare specific outsourcing firm is likely to be highly damaging to your hospital’s patient care activities and claims operations, and even to patient safety.
  4. Be completely forthcoming.  We’ve seen too many occasions where the hospital initially downplays the challenges it is facing, in an attempt to keep costs under control.   Part of defining an outsourcing engagement is identifying the challenges and developing strategies to overcome them. In the case of a full outsourcing engagement, this definition is very similar to the work of an IT strategic planning project.  Being less than straightforward undermines the effectiveness of the short- and long-term planning that the outsourcer will undertake on your behalf. On the other hand, be wary of any “up playing” of the challenges by vendors you are interviewing, who may be looking to add an extra service or FTE here or there to push up revenues.
  5. Finally, choose someone you trust.   No matter how thorough a job you do defining services and developing service level requirements, unexpected problems will arise. The healthcare operating environment is too complex, and the future too fluid to lay out every potential situation in advance.  The solutions required may stretch the definitions of scope in the original contract, and it’s critical that both parties work together to define how these new requirements fit into the scope of the existing work, and what might be additional (or even decreased) work. Too often today, vendors and hospitals do not take the face-to-face time needed to establish trust and determine the potential for a synergistic long-term relationship. Buying software or hardware through email and telephone may work well enough, but a multi-year IT services contract requires time and effort in establishing a trusted relationship between both parties’ senior leadership.

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As a longtime outsourcer that has been ranked as the #1 IT department outsourcing firm in the country for two years — 2017 and 2018 — Phoenix is proud of its record of meeting the ever-changing IT challenges that hospitals are facing. Our methodology entails full discovery, including understanding budgetary constraints, providing the specific expertise that is needed, establishing mutually agreeable SLAs, and finding cost savings for our hospital clients. Then we hit the ground running with tailored solutions that will make a difference quickly.

We can offer you additional criteria for choosing an outsourcer, or simply answer your questions. We also would be happy to discuss a potential proposal. Contact us.

About D’Arcy Guerin Gue

Vice President, Industry Relations

D’Arcy Guerin Gue is a co-founder of Phoenix, with over 25 years of experience in executive leadership, strategic planning, IT services, knowledge leadership, and industry relations —  and a special focus on patient engagement and federal compliance issues.

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