Reduce IT Spending... Approach Rationalization The Right Way
AUTHORED BY Frank T. avignone, IV Transformation executive @ GUIDEIT
Meaningful Use, Health Information Exchange, and Predictive Analytics are a few phrases that keep hospital CFOs awake at night. As the hospital market prepares for another shift in reimbursement, including a 1.3% cut in reimbursement for 2015 Medicare and an additional 75% cut in DSH payments by 2019, the health system CFO has innumerable financial challenges in maintaining a healthy balance sheet. Add to these concerns the looming ICD-10 transition expense, consolidation (including the aggregation of physicians and post acute care providers), and the future is daunting for the chief financial officer and other executive stakeholders.
There is a bright spot for the health system CFO with respect to bringing sanity to the healthcare IT spend on the balance sheet. It just requires a little courage. The majority of US health systems maintain an IT portfolio that supports redundant functions across the enterprise. In a consolidation environment where M&A activity is increasing, this can result in $70,000-100,000 per bed to integrate disparate clinical and business systems. A simple effort of technology portfolio rationalization can reduce IT spend in any environment as much as 60% capex and 30% opex. The effectiveness of application portfolio rationalization and the impact on the health system, in terms of cost savings, revenue generation, and meeting the needs of clinical business users, depends on the right approach.
While traditional application rationalization projects will yield positive, quantifiable results, typically they do not take into account “Information Rationalization” that will negatively impact value and time to care delivery. The most important aspect of an application portfolio is not the application itself, but rather the information trapped within the application stack. Changing perspective will increase the value of any rationalization effort. Releasing the information contained within legacy applications is the critical focus. Organizations can accomplish this by leveraging an enterprise service bus to overlay the information rich interface engine architecture leveraging existing information without tired approach of “rip and replace” usually offered by software and IT vendors. Once information is captured within the enterprise bus, it can be analyzed and consolidated into events and used as real-time streaming information to better understand the real value of the data and it’s origins. While rationalization capex/opex cost reductions are the underlying principals of the APR effort, the health system CFO and CIO can work together to create additional value. Simply by releasing the information, and in some cases virtualizing their associated application’s logic, the health care enterprise can preserve the value and improve access to the information trapped within. This approach will allow for rationalization discovered by traditional disciplines and provide a single uniform source of information and infrastructure to rapidly enable new business solutions dynamically and rapidly.
The time has come for the health system CFO and CIO to work hand in hand to accurately understand and align business needs with an agile information technology stack that promotes boundary-less access to information independent of the siloes of applications, securely and dependably.