The digital transformation is underway at health systems but it increasingly doesn't involve in-house IT departments.
Health systems are transitioning their analytics and tech employees to managed service companies as they look to scale virtual care, artificial intelligence and analytics initiatives. By moving the work out-of-house and the employees with it, a process called rebadging, health systems struggling with razor-thin margins say they can deploy IT projects more efficiently while saving on costs.
In September, Care New England transitioned its IT and applications employees to managed service provider Kyndryl to develop clinical applications and prepare for its enterprise-wide install of an Epic electronic health record system. The move saw most of the 150 employees of the Providence, Rhode Island-based health system move to Kyndryl, said Tomas Gregorio, Care New England's chief information officer.
“We took a large look at our IT department, and we realized that in order for us to reach the level of the digitalization that we are hoping to achieve by going into an Epic enterprise install, we need to upscale our staff,” Gregorio said.
Gregorio said the health system’s leadership team realized that beefing up staff in-house to achieve those goals would be a challenge based on available talent and financial resources.
“What you’re seeing is organizations are focusing on their core: taking care of patients and doing the clinical work,” Gregorio said.
Managed service agreements can help shave costs, including employee-related costs, at a time when health systems need it the most. Kyndryl has helped Care New England reduce the number of duplicative software applications, Gregorio said.
In November, consulting firm Guidehouse surveyed health system CEOs and chief financial officers about their top three IT investment priorities in 2024. A third of respondents said they have expanded relationships with IT outsourcing partners, which didn't surprise Erik Pupo, Guidehouse's commercial health IT advisory director.
“We work with a lot of hospitals that are just struggling on margins and financials where they look at IT and they say, ’We've got to reduce,’” Pupo said. “More hospitals are going to ‘workforce on demand’ models, where you treat your IT workforce like you do the cloud. It scales up and down and you can bring in resources when you need them.”
Other systems are following suit. On Monday, Boston-based Mass General Brigham, the largest employer in Massachusetts, cut nearly 20 jobs on its tech team one month after offering voluntary buyouts to employees in the same department, a spokesperson confirmed. On an August call with analysts, Chief Financial Officer Niyum Gandhi said the health system needed to moderate its expenses.
But there are downsides to the strategy. The transition of employees can be bumpy. Also, by offloading IT employees, the quality of work can be worse when the outside company doesn't understand the system as well.
Aaron Miri, chief information and digital officer at Jacksonville, Florida-based Baptist Health, has used contractors for various projects, including the systemwide install of Epic. But he said the concept doesn't work for certain tech-related projects, such as improving employee engagement.
“You’re giving up something to net something,” he said. “You can't have it cheap and have top-quality, happy employees. Something has to give. You have to consider the tradeoffs.”
Carle Health works with Health Catalyst
Phil Rowell was vice president of clinical and business intelligence at Urbana, Illinois-based Carle Health when he and about 60 other clinical and business intelligence employees were moved to Health Catalyst. The January move shocked employees, said Rowell, now chief analytics officer at Health Catalyst.
“When we announced this organizationally…a lot of other departments were like, ‘Are we next? Is there anything happening?’” Rowell said.
Under the five-year agreement, Health Catalyst provides tech-enabled managed services in analytics, data management, reporting and project management to Carle.
Rowell said every employee who made the transition, which was 96% of those who were made an offer, remains with Health Catalyst one year later. The communication plan, which included Health Catalyst CEO Dan Burton flying in to meet the team, helped because “we were able to put a human face with that transition,” Rowell said.
For Carle Health, the decision to transition those employees came down to understanding it couldn’t scale its analytics and digital tech capabilities on its own, said Matthew Kolb, chief operating officer.
Kolb said the collaboration has been successful. Carle has seen efficiencies including creating faster analytics reports for substance use disorder treatments and has saved $200,000 in labor costs.
“Other industries have moved in this direction a lot more quickly and historically have had these types of partnerships,” Kolb said. “When you have a good mission-aligned partner, I think it's a good opportunity.”
Baptist Health's Miri cautioned against health systems thinking every project should be outsourced. There are some examples where it makes sense such as working with Best Buy Health for hospital-at-home services, and there are some where it is being done simply to improve margins, he said.
"And I guarantee when it's done for margins, they pull those people back eventually because the quality you get isn't the same," Miri said.