Hospital execs expect managed services to ramp up by 2019

Managed services allow organizations to offload routine IT tasks and to ensure they are getting the maximum value from their investment in their own IT team.
05:23 PM

A majority of healthcare organizations using IT outsourcing have either already seen a return on investment or were within six months of seeing one in mid-2017. That finding comes from a recent Black Book poll of nearly 1,600 hospital executives, representing 244 hospital organizations and 798 physician practices that have adopted managed services.[1]

One hospital in that camp is CHOC Children’s Hospital in Orange, California. Seven years ago, the organization made the decision to outsource its EHR data center management.

“The main reason we chose to outsource it was that we had a pretty non-compliant data center that wasn’t ever going to be HIPAA-compliant, because the costs that would have been involved to get it there were too high,” Bill Feaster, MD, chief health information officer at CHOC Children’s Hospital, said. “Second of all, we wanted to get more reliability, and our hosting provider is incredibly reliable and incredibly redundant. It’s nothing that we could ever hope to match for anywhere near the cost of outsourcing it.”

Healthcare organizations surveyed in Black Book’s poll also predicted that adoption of managed services would either accelerate or maintain its current levels over the next two years. Some 58 percent of the hospital executives said their facilities would maintain their current usage of IT outsourcing through 2019, while 34 percent of the participating organizations expected to ramp up their adoption of managed services.

A key driver for the increased adoption of managed services is a shortage of healthcare IT professionals with relevant experience.

“Even if an organization wanted to set up its own data center, deploy its own EHR servers and manage it, it’s difficult and expensive to recruit and staff people to do that,” Rob Havasy, senior director of health information systems at HIMSS, said. “It’s not as much of a problem in big cities like Boston or many places out in California, but for large swaths of the U.S., it is high-cost labor to bring people on to keep a critical application up and running and get everybody up to speed on it. For much of the country, outsourcing that is a viable strategy.”

A majority of IT leaders at hospitals polled by Black Book cited the immediate access to trained staff that managed services bring as one of their primary motivators for outsourcing. The only driver of managed services adoption that a larger number of hospital leaders pointed to was return on investment.

“We have a ‘right-sized’ IT staff for the work we have to do,” Feaster said, “but we would have to substantially expand our technical staff to support as complicated a system as an integrated EHR. It gets down to the availability of qualified staff that have the expertise in our local market. It probably is a little easier for us in Southern California in Orange County, but if I were in a place like North Dakota, it might be a little hard to find the expertise I needed. So I would outsource it at the drop of a hat if you can get the expertise you need without having to hire people.”

Havasy noted that managed services also free up a healthcare’s IT team to focus on its organization’s particular core business while leaving the more mundane tasks to the managed services provider.

“In the big research institutions, managing that research data is their primary business, and so they are going to devote their staff to that,” Havasy said. “You will find organizations who are building and deploying some large chunks of infrastructure but still outsourcing specialty applications, billing applications or other clinical delivery applications. Their core business, what they want to manage for their own profitability, is their research data.”

Black Book’s survey found that the two primary benefits of outsourcing that hospital CIOs pointed to were reduced time spent on infrastructure and an ability to focus on the health system’s core business.

“It also reduces our long-term costs substantially,” Feaster said. “It’s just something we don’t have to focus on now. We reduce our staffing costs and our worry. We don’t need to think about backup disaster or adding another data center. All of that adds up to make this extremely high cost.”

Most provider organizations with 100 beds or more are currently exploring additional IT outsourcing, according to Black Book. Of those provider organizations surveyed, 83 percent said addressing complex IT outsourcing is a priority for them moving into 2018.


[1] “IT outsourcing by hospitals and medical groups continues to boom, fewer vendors meeting expectations,” press release, Black Book Market Research, September 27, 2017,

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