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Critical Success Factors for Outsourcing Healthcare Information Systems
By Satish Nagarajan, President, Apsana Inc.
Outsourcing Information Systems is current the rage amongst Healthcare organizations. Once you have made the decision to outsource your IS department and capabilities or seriously considering outsourcing, it is imperative you pay attention to the execution of this critical business decision.
Unfortunately recent history of Healthcare Information Systems outsourcing shows it is easier to do this wrong rather than right. Many organizations do not receive neither the business nor cost benefits they anticipated from the outsourcing. Consequently, organizations replace their outsourcer at the end of the initial contract period. If this is not executed well, the repercussions are not pleasant to any of the stakeholders.
This does not have to be your experience. Pay attention the following critical success factors and you can reap all the benefits you built in your solid business case for doing this.
Information Systems outsourcing is a critical strategic business initiative for most Healthcare Organizations. The first rule for succeeding with strategic business initiatives is to have a clear understanding of your own organization.
· What are your “real” mission, vision and values? Not just what the fancy plaques say but what is the “operational” meaning of this? For example if you “operate” in a high-touch service model for your physicians then you will need to evaluate the outsourcing initiative with respect to its impact on your service model. If you “operate” as the lowest cost provider of services then you will use that to evaluate this initiative.
· What are your competencies and capabilities? This needs to go both broader and deeper than “core” competencies. So if you have a better-than-market capability in Radiology then you need to think long and hard about what outsourcing will do to your Radiology systems. If you have struggled with managing your IS projects then you will need to consider how to prevent those challenges from impacting you in the future.
· What is your organization’s culture? Some organizations (especially academic medical institutions) may be run in a collegial committee based model. Others are run in a command-and-control hierarchical manner. Different cultures require different partners and different partnership models to be successful.
· What is your competitive position in the market place? Are you an acknowledged quality leader? If so how will commoditizing your information systems (an inevitable result of outsourcing) impact your quality outcomes/image? Are you in an ultra-competitive market in which case do your information systems offer a competitive advantage?
Know your (potential) partner
Outsourcing your information systems is similar to forming a joint venture with another organization. Except while a joint venture is usually limited to a defined scope of products and services, outsourcing information systems impacts everything your organization does. Outsourcing information systems is akin to marriage. You are going to be together a long time and so it is prudent to do your homework.
Most organizations will do good due diligence of their potential partner’s financial condition, customer referrals and contract terms. However, the following additional areas require careful consideration:
· What are your partner’s mission, vision and values? Again, look beyond the beautiful plaques on the walls. Look at how they really operate their business. What seems to be the prime drivers for their business? For all companies that are in good financial condition a prime driver will be financial performance. However your partner should also have other significant prime drivers like excellent customer service, low cost or innovation that matches your requirements. Look for situations where they have demonstrated willingness to compromise profit to satisfy their mission, vision and values.
· Can your partner make money in this contract while still meeting or exceeding your expectations? Most organizations do not spend any time thinking this through. In the course of most business negotiation, you are looking to drive the best deal you can and it’s the other person’s responsibility to take care of their best interest. While I am not suggesting you abandon that principle be careful of the naked man who offers you his shirt.
If your partner does not currently have the skills and capabilities to deliver the services you require at a cost that allows them to make a reasonable profit, more often than not they will not deliver the service at an acceptable service level. Whatever recourses you have built into your contract will not compensate you for the pain of a dysfunctional marriage and you will end up suffering through it until you can exit the contract. Beware there are a lot of companies buying their way into outsourcing who will someday be excellent outsourcers but they are going to do it over a lot dead bodies.
Why are you outsourcing?
I have just two words for this “Business Case”. If your “business case” is rational and solid then you have placed yourself in a secure footing for the future. If you do not have a business case or even worse if you have a business case full of visions and dreams instead of real facts then watch for the shoals ahead.
A business case for outsourcing must go beyond cost savings. Unless you run a truly bloated IS organization in which case you can deal with that issue without outsourcing. Cost savings is just one benefit from outsourcing. Other benefits include access to scarce skill sets, access to skilled management, risk sharing for applying innovative new technologies, service level improvements to your users, etc.
Can you and your (potential) partner together deliver the business case?
While there is a strong trend towards increasing outsourcing of Healthcare information systems, there is no significant trend towards successful outsourcing. The premise of outsourcing information systems is based two, often conflicting drives: scale efficiencies obtained through commoditized information technology and scarcity of skilled operators and managers who can deliver high service levels at a low cost. While there is a strong drive to commoditization of computer hardware there is no significant drive with respect to other system (clinical and business systems) and people (managers, analysts, architects) components.
A number of outsourcing companies act as if everything is a commodity and will deliver you a rude awakening when they realize your combination of legacy systems and market needs are anything but commodity.
This whole problem is compounded enormously by a general lack of skilled Project Managers who can effectively guide an organization through a long and substantial technology enabled transformation. In order to deliver the cost savings promised in the contract and built into that business case you presented to your Board of Directors your outsourcer needs to take your particular combination of people, systems and requirements and map them to their “standard” commodity infrastructure. They have to do this while still delivering a higher level of service than you currently have and meeting your unique requirements. This can be a tall order unless you have strong project managers and good methodologies.
Even if you have a good business case and have hired strong Project Managers who have the experience and knowledge to guide you through this process, the success or failure of the whole matter will hinge on the quality and quantity of executive ownership and sponsorship of this effort. Like all successful strategic initiatives this requires commitment of a senior executive to guide, oversee and champion this effort. The more critical this is to your overall strategic objectives, the more important it will be to dedicate substantial time of a senior person to this effort.
Resist the temptation to take your current IS executives and putting them to watch over their outsourcer. Human nature brings too many conflicts of interest into play here. If you have chosen to hand over your information systems to another organization then this is now no longer an IS issue but a business issue. So a business executive from the executive leadership group should be given sole authority/responsibility for this new initiative. This decision should be made based on the business case of this initiative. Whichever executive’s domain has to deliver the most benefit should typically be responsible for the whole initiative. This will work wonders to align your organization and your outsourcer’s goals.
When you pay conscious deliberate attention to these five factors and they are used in your contracting, organizational design, planning and on-going management decision-making success becomes natural.
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