Ascension Health needed a way to more economically manage and upgrade a conglomeration of information technology services thrown together with the many formerly independent hospitals or groups of hospitals that now constitute the St. Louis-based healthcare system in 20 states and the District of Columbia.
The Catholic system took a big step toward that aim last week by signing a 10-year, $1.35 billion contract to hand over responsibility for its IT operations to Computer Sciences Corp., or CSC, El Segundo, Calif. The outsourcing agreement will put Ascension on a faster track to consolidate computer operations across its 67 hospitals and related healthcare facilities than it could have managed on its own, Chief Information Officer Sherry Browne said.
Because of its spread-out geography of independent technical centers, the healthcare system did not enjoy the economies of scale it should expect from an organization its size, Browne said. Ascension also had ambitions of new capital spending on IT areas aimed at improving patient care, she said.
The contract is more than four times larger than the $320 million IT outsourcing deal announced last month by Stanford Hospitals & Clinics in Palo Alto, Calif. (Sept. 27, p. 19). CSC will consolidate and manage the infrastructure of computer operations, including networks, security, help desks and telecommunications. The agreement, effective Jan. 1, 2005, isn't expected to save money but rather to get more out of each IT dollar.
Most healthcare organizations that go to an outside IT firm "are not doing this to save money. They're doing this to stop the acceleration of costs that they're experiencing," said Ivo Nelson, president and chief executive officer of Healthlink, a Houston-based healthcare IT consulting firm.
The Ascension agreement continues a trend in the industry that has made inroads in fits and starts during the past decade. The idea of hospitals sticking to their core competency of patient care while leaving technical challenges to those companies specializing in IT has been pushed as a matter of common sense in healthcare, but "Every time common sense tells you to do something, it doesn't happen at the pace it should," Nelson said.
Outsourcing firms can get costs down for large healthcare systems in several ways, Nelson said. For example, they can use the bargaining power of large-scale hardware needs among many customers to wrest discounts on computers and lower the costs of replacing many types of computer equipment to keep it current, he said. Outsourcing companies operating huge data centers also can get the most out of them by spreading out the capacity among multiple industries that have varying peak processing times, enabling them to keep going 24 hours a day, Nelson said.
The CSC agreement stipulates that personal computers will be updated on an agreed-upon schedule, server capacity will be updated as needed and all computers and software will benefit from current vendor maintenance agreements and new software releases. IT professionals throughout Ascension "now do this in some places rather well; in other places we don't do it at all," she said.