John Tanner is chief information officer of a Fort Worth, Texas-based health network, but he doesn't have a single employee on staff. What he does have is an outside contractor that handles the hiring and the hands-on operation of information systems at JPS Health Network, part of the Tarrant County Hospital District.
That outsourced contractor in turn handles subcontracting to other companies offering special outside expertise when needed -- four companies at the moment. The result: comprehensive but also targeted expertise for a full range of existing and emerging needs, from computers and networks to software and troubleshooting.
Michael McCoy, M.D., is CIO of UCLA Medical Center and has plenty of employees working for him, but he thinks there are better ways to use their high-priced expertise than to assign them mundane chores -- such as maintaining the balky printer for the billing department. The IT department at one point was printing, stuffing and mailing hundreds of thousands of bills each month. "Printer maintenance alone cost $150,000, and it was going to cost us $500,000 to replace the printer," McCoy says. "We could only afford one printer, and when it broke, I had to pay people to fix it."
McCoy pronounced those tasks "totally commodity services" that were available on the open market. So he outsourced the entire operation. "I can now pay more attention to getting important IT upgrades done than paying someone to watch a printer all night," he says.
Sometimes the things that are supposed to command attention of IT staff end up needing more and better attention. Information system capability is only as good as its productive use on the front lines of healthcare, and three years ago St. Vincent Hospitals and Health Services concluded that the quality of computer support and response to problems was too low.
"Customers were unhappy, and we were making too many return trips," says Jim Norman, CIO of the Indianapolis-based healthcare system. So St. Vincent contracted with Daou Systems of San Diego to take over all desktop services as well as new installations.
Sometimes there are too many skills needed, too many skill-hungry projects to complete, too many specialized operations to support and not enough skilled professionals to go around, IT experts say.
In the healthcare industry, where money is chronically tight, it doesn't make sense to hire people with all the collective skills needed for all purposes even if they could be found and hired, says Walt Zerrenner, a consultant on outsourcing issues who recently agreed to manage a fledgling outsourcing relationship for New York-Presbyterian Hospital and Health System as its new CIO.
The answer for some organizations is to bring in outside expert help, not just to advise and consult on how to do information systems tasks but to help do the work. But that answer leads to a host of new questions. Should an outsourcer be put in charge of the whole operation or just part of it? What types of outsourcing arrangements are available? And which type makes sense for a specific organization and its particular information-related needs?
The whole thing
The most extreme arrangement is to turn over IT operations and future enhancements lock, stock and barrel. But the situations leading to that option can be very different and call for dissimilar approaches (See pages 12-22).
At JPS in Fort Worth, InfoHealth Management Corp. has assumed responsibility for supporting the computers and networks of the healthcare organizations as well as computer security and the telephone network.
InfoHealth's expansive role developed over time following JPSO first go-round with outsourcing. The network's original decision to outsource information technology services reached some years back when it needed an outside firm to make over JPSO help desk. "We struck an arrangement with another firm that provided all the staff -- but the more they did, the more they billed us for," Tanner says. "It was unsatisfactory."
The performance of the help desk was only one of many problems needing an overhaul, Tanner says. Updates to software applications were years overdue. The capacity of computer hardware was inadequate, and the under-appreciated and underpaid information systems staffers were leaving faster than they could be replaced. "JPS was on a collision course with total IS meltdown," he says.
Underlying the problems was a lack of executive commitment to information systems, Tanner says. "JPS ignored IS budget needs so long that the in-house group could no longer function."
After getting rid of the first outsourcing firm, JPS brought in InfoHealth, a Chicago-based company that supplies information professionals to healthcare organizations for outsourcing engagements, as an interim solution while it shopped for a permanent vendor. Tanner found that he liked InfoHealth's flexible approach and decided to award it the deal in July 1998. The relationship has since grown to include other support services and network management: 31 individuals working for four companies install hardware and applications, set up and maintain secure networks and Internet connections, and respond to calls for service. It sounds complicated, but it works, Tanner says, because "it's an open arrangement," allowing for the normal shifting of priorities that occurs in any healthcare organization.
Under the new regime, the quality of the information systems staff has been the first benefit, he says. "No healthcare organization has better staff. Our computer systems have all been upgraded or replaced. Application software is being kept current." With a strengthened staff, JPS management is freed from the nightmare it had before, and it can concentrate on its healthcare mission, he says. The contract with InfoHealth continues through June 2003.
For St. Vincent, it was important to improve the response of IT professionals to computer glitches and breakdowns in computers upon which healthcare employees depended to do their jobs.
In the agreement with Daou, 15 employees from St. Vincent's IT support staff were hired by the contractor, and now 30 individuals are working on-site. In addition to keeping day-to-day computer operations going, Daou is responsible for a certain number of new installations under its five-year contract. Last year its staff installed a system to collect and retrieve patient information at the point of care, which runs on a total of 5,000 devices.
St. Vincent pays a range of fees intended to build financial incentives into the performance of the outsourcer. To reach the top of the fee range, Daou has to reach the top level of performance as measured by agreement with St. Vincent. Both organizations agreed at the outset of their contract to renegotiate performance levels each year.
At the time of signing, "we weren't sure ourselves that the measures were right," says Norman, St. Vincent's CIO. There are 20 measures in total. "Daou is doing a good job," he says. "We got lucky, and you can't write that into a contract."
Healthcare organizations probably don't need or want to staff for every operating system, database architecture or other specialized base of skills. Instead they can put outside consulting firms on retainer rather than pay full-time salaries to under-used staff, Zerrenner says.
This is also the right approach for gearing up for the Health Insurance Portability and Accountability Act of 1996, he says. The two-year period in which to comply with myriad regulations on data standardization and privacy protection is likely to call for intense but limited-span information technology. "Do you really want to hire and train staff and then audit all the applications they install for HIPAA compliance? I don't think so," Zerrenner says.
One of the simplest forms of outsourcing is the interim CIO, brought in to bridge a gap in leadership or executive experience. A healthcare organization might be frustrated with current IT leadership or be unable to fill an empty CIO spot.
The interim CIO may oversee a major transition, such as adapting to a corporate merger. Or, the addition of executive know-how from outside can speed up the development of the healthcare systemOs information system capability, which might not have kept up with the times or with the roster of services that need to be supported by computerization.