We probably all know at least one negative story on IT outsourcing in healthcare from years past. But the outsourcing pendulum is swinging back. As core IT services become more of a commodity and CIOs need 
to focus on strategic initiatives, selective outsourcing is worth consideration.
The recent announcement that Trinity Health is outsourcing application management and rebadging approximately 450 staff is getting attention from other provider organizations. There are other examples – many in infrastructure.
More and more I hear from CIOs who are considering selective outsourcing for various reasons – reduce costs, modernize the infrastructure, provide scalability and flexibility as health systems grow, deal with recruiting and retention challenges, or focus on strategic initiatives instead of commodity services. Many CIOs are finding themselves part of overall cost reduction efforts at their health systems. While some CIOs start from a defensive posture and say they can’t possibly reduce costs any further, one of the most progressive IT leaders I know said she is looking at it as an opportunity to transform IT.
I was part of an organization wide cost reduction initiative when I served at Brigham and Women’s Hospital, Michigan Medicine and University Hospitals. As the CIO, I was asked to identify opportunities to reduce costs while other departments’ opportunities needed additional IT help to achieve their reductions. But saying no to cost reduction is usually not an option. CIOs must partner with their peers and engage their staff to identify opportunities.
The healthcare IT outsourcing market is expected to reach $73 billion by 2024 according to an article published by Xtelligent Healthcare Media titled “Health IT Outsourcing Grows for Hardware, Software and Staff”. A Black Book survey cited in that article found that 84% of respondents confirmed that they saw an increase in efficiencies and reduced costs. 81% stated that the ROI was enough to keep their outsourcing partners. And 73% said that immediate access to trained staff and technology was their primary reason for outsourcing.
One of our experienced CIO advisors at StarBridge Advisors, Rich Pollack, talked about outsourcing in a blog post titled “Selective Sourcing vs Complete Outsourcing in HIT”. His conclusion was well stated – “In a healthcare era where the competition for scarce capital and operating funds has grown more intense and where the ability to find, retain and develop a talented workforce is always challenging, partnerships that can deliver certain essential IT services at effective cost and performance end points are well worth considering.”
Is it time for you to consider selective outsourcing?
Related Posts:
Selective Sourcing vs Complete Outsourcing in HIT
Ernie Hood on said:
We at The Advisory Board totally agree! We’ve seen some bad outsourcing arrangements in the past – all or nothing IT outsourcing, contract terms that are too long (10 years or more), unenforceable service agreements, little or no cost escalation control, etc. etc. There have been a lot of improvements in the options available and now we see that it’s possible to do selective outsourcing (e.g. flex staffing even), short (3-5 year) contracts, risk sharing tied to service levels, inflation caps, etc. So it’s definitely an option out there that can be used selectively to boost an IT department rather than competing with one.
Thanks for the smart post!
Sue Schade on said:
Ernie, thanks for the insight! You summarized well the problems of the previous rounds of outsourcing. It’s a new day!