When it comes to IT outsourcing, healthcare providers have the option of “a little or a lot.” They can turn over the entire IT function to a contractor if they so choose, or they can test the outsourcing waters by farming out small portions to gauge how well it works.
The rationale for organizations when contemplating what and how much to outsource basically comes down to their confidence in the company that offers it. That is why established companies like Malvern, Pa.-based Siemens like to promote their long-established identities to engender trust with potential customers. Jim Way, vice president of IT managed services, says the medical manufacturing giant has been involved in IT outsourcing since 1992.
“Back then there was much less competition – it was either us or no one,” he said. “IT outsourcing was more strategic then, it was a way to gain an advantage over the competition. Over the years it has turned into a cost game – who can do it cheaper, faster and better.”
Siemens has built its outsourcing component up to a level where it can assume the entire IT operation – help desk, operations, network administration, desktop management and telephony communications, Way said. The savings, he said, come from leveraging people, processes and technology.
While Siemens offers an enterprise-wide IT outsourcing service, most hospitals start with one component, such as help desk or applications, to evaluate how well the process works. Way says that suits him fine because it still gives the company exposure.
“We see it as an opportunity,” he said. “We know that if we do our jobs right, it will lead to more business down the line.”
Saint Vincent Catholic Medical Centers in New York had no problem outsourcing important IT work to Siemens, and CFO Martin McGahan says it proved to be an advantageous decision.
“Because we understand our strengths, which is delivering medicine and quality care, we look for partners to assist us in other areas so we can focus on our job,” he said. “We had an established relationship with Siemens for our billing software, so we were confident when we decided to make our IT shop a Siemens shop. It has worked out very well – they brought not just the software and tools, but the human resources, training and expertise aspect that would have taken us a lot of time, money and focus to develop internally.”
Boca Raton, Fla.-based Eclipsys also covers the IT waterfront, using a 1997 acquisition of Alltel’s Healthcare Informatics to create its outsourcing division. Gary Trickett, senior vice president of outsourcing, says Eclipsys saw a huge amount of potential based on the number of customer inquiries.
“We looked at the market and analyzed where we could take it,” Trickett said. “We have since grown three-fold, with double-digit growth each year. And there is no slack in demand going forward.”
Besides providing lower costs, outsourcing also provides a ready-made professional staff to an industry that is often in dire need of qualified workers, said John McAuley, Eclipsys senior vice president and general manager of outsourcing. Over the past 10 years, the company has honed its technique to the point where it can now offer hospitals a complete portfolio of services, he said.
“We can bring it at fixed cost and can leverage off the rest of the organization,” he said. “We are 100 percent focused on healthcare. We come from this world, know the workflow issues, the critical mass and the entire environment. Based on that, we can put the right policies and procedures in place.”
Passage to India
India has become synonymous with the outsourcing movement as a number of companies in the U.S. economy seek to capitalize on cheaper labor, mainly for back office functions. Rizwan Koita, CEO of CitiusTech in Mumbai, specializes in healthcare technology, contending that his workers’ specific knowledge is what drives the offshore advantage for subscribers in the vendor community. In turn, cost benefits trickle down to providers, he said.
“Generic outsourcing has been around a long time and is now commonplace,” he said. “The world of outsourcing is mainly in finance, telecom and manufacturing. But we are the first company to set up a global back office processing and tech support system that focuses on healthcare, which means we are much more than cheap Java programmers.”
The key to securing a knowledgeable support staff, Koita said, is training that centers on providing workers with information about healthcare trends as well as specifics about the nature of the healthcare business itself. And although hiring offshore help is now mainstream, Koita acknowledges potential clients’ reticence about the concept’s effectiveness.
“You have to be comfortable with the outsourcing organization – I understand that,” he said. “We are confident that customers will see us as a support system that delivers a solution they need within the overall time and cost frame.”
Coloring the spectrum
Providers can also get benefits from outsourcing indirectly through price breaks given to others, such as payers and suppliers.
For instance, Cambridge, Mass.-based NaviMedix facilitates electronic communications services for payers on programs such as disease management. Although the company does not contract with NaviMedix, providers are part of the electronic communications exchange and get ancillary benefits from the company’s services.
“For provider connectivity, the challenge is when they do things in-house,” said Tom Morrison, executive vice president of marketing and product development. “We have a network of 90,000 providers and deliver an aggregated number of health plans to them. And because they have enough financial challenges to deal with, we don’t charge them for it.”
New York-based Infinity Info Systems sees itself as an extension of the life sciences industry, taking a series of platforms and tailoring them for specific companies. Because hospitals interact with many of Infinity’s biotech and pharmaceutical customers, Infinity’s systems can provide them with several advantages, said CEO Yacov Wrocherinsky.
“We offer an efficiency tool to help them communicate with vendors and point them in the right direction,” he said. “They can track different pharmaceutical companies they are dealing with, they can get profiles of companies, the reps and issues associated with the drugs, and they can use it as a drug management system.”
One of the biggest concerns about using outside personnel is protecting IT systems from security breaches, so providers need to take a hard look at a contractor’s safeguarding procedures before hiring them, said Cheryl Traverse, president and CEO of Jersey City, NJ-based Xceedium.
“Organizations looking to outsource often focus on cost savings to the detriment of security,” she said. “Hospitals need to make sure that the outsourcing service has a valid IT operations security model that can deliver the separation of data and activity required by HIPAA and the audit and tracking required by Sarbanes-Oxley for their technical people, who are the greatest threat to critical infrastructure.”