Boutiques, buyouts alter consulting's power players

Part two of a two-part series (Access part one):

The massive, 500-page report, Maximizing Your Consulting Investment: A Report on Healthcare IT Consulting Services, was released by KLAS Enterprises, an Orem, Utah-based market research firm, and includes the results of hundreds of interviews with provider executives.

The report covers 38 health information technology consulting firms, and KLAS divided the consulting services market into seven segments: implementation of clinical systems as a primary consultant; implementation of clinical systems in a supportive role; implementation of enterprise resource planning financial systems; IT planning and assessment; IT staff augmentation; technical services; and vendor selection.

In addition to the seven service categories, KLAS divided the consulting firm landscape into three groups by the breadth of services they offer, groupings that also tend to reflect the size of the firms. Full-service firms are one category, and, not surprisingly, its members include the largest consulting firms—Accenture; Affiliated Computer Services; Computer Sciences Corp.; CTG Healthcare Solutions, part of Computer Task Group; Deloitte Consulting; IBM Corp.; and Perot Systems Corp.—which all have broader capabilities and more depth than smaller, niche-specific firms. Some of those large firms “are more bureaucratic in nature, not as competitive in cost and not necessarily the best in one area,” according to the report.

The second group of consulting firms, according to KLAS, is the specialists. They tout expertise in either a service segment—for example, some firms that do best on clinical implementation assignments, but not on financial systems—or by vendor, such as those that specialize in EHR systems from one or more vendors. These smaller firms tend to cost less than the majors, although that is not always true, according to KLAS’ report. Smaller firms may have problems with a lack of visibility, and their size may raise questions about their viability, but because of their narrow focus, “they do one thing and do it well,” according to the report.

Finally, KLAS finds there is a third group of hybrid consulting firms that don’t have the breadth of the full-service firms, but have enough bodies and expertise “to provide services across several market segments and can therefore provide reasonable continuity of service across consulting areas.” They can be lower-priced than the full-service firms but, again, this is not always the case, KLAS said.

The report states that it “is intended solely as a catalyst for a more meaningful and effective investigation on your organization’s part and is not intended, nor should it be used, to replace your organization’s due diligence.”

Since a consultant’s reputation is its most valuable intangible asset, the report carries with it lawyerly language under the heading of “reader responsibility,” noting that the data gathered from various sources for the report include “strong opinions (which should not be interpreted as actual facts), reflecting the emotion of exceptional success and, at times, failure.”

The report noted top talent from some of the major consulting firms have struck out on their own, creating smaller companies that could produce top value for chief information officer customers.

“There has been a lot of consolidation that’s happened in the last three or four years,” said Mike Smith, general manager of financial and services research at KLAS and the author of the survey report.

In earlier KLAS surveys, Smith said, the major healthcare IT consulting firms were Capgemini, First Consulting Group, HealthLink and Superior Consultant Holdings Corp. Since then, IBM acquired HealthLink; Computer Sciences Corp. grabbed First Consulting; Affiliated Computer Services took over Superior; and Accenture bought Capgemini.

“That has had an impact on the industry,” Smith said. “You’ve seen a dissemination of talent.” Some of that talent has moved on to other firms, or to do other things. Some have opened their own boutique healthcare IT consultancies.

Most obviously, IBM/HealthLink has fallen in the KLAS rankings, according to Smith. HealthLink was a consistently top-ranked firm, Smith said. Yet in the current KLAS survey, IBM ranked last among consultants for clinical implementations.

“Some of their most senior leaders have changed,” Smith said. “It’s truly a different firm than it was two years ago.”

This diffusion of talent is not necessarily a bad thing for providers looking for help on an IT project, according to the report.

“The market is observing that relationships matter, and providers are often more loyal to a person than to the firm,” the report stated.

While many of these new companies “lack name recognition among providers, a little homework may lead a CIO to a high-performing firm with great value,” KLAS said.

In addition to personal relationships, tough times economically also are a key factor in consulting-firm selection.

“While cost is not the sole criteria for selection, many CIOs suggest that cost is more seriously evaluated now than ever before,” the report said.

Thus far, the flagging economy may be one factor in an overall reduction of engagements by the large firms, but that may change over the next five years with the flow of the federal IT money. Hospitals of 200 beds, where IT penetration rates are lower than at larger hospitals, and outpatient providers, where EHR penetration rates are low as well, are likely beneficiaries of the federal funds. “Those firms best able to provide performance and value in the community and ambulatory markets could benefit,” the report said.

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