CIOs aren’t the only leaders concerned about rapid changes in health care technology. According to Logicalis Healthcare Solutions, the health care practice of Logicalis US, an international IT solutions and managed services provider, regulatory changes and declining reimbursements have caused health care CFOs to adopt a “survival of the fittest” stance in order to keep their organizations healthy and growing. Mergers, acquisitions, and affiliations are on the rise in today’s health care market, and with regulatory and reimbursement uncertainties in the air, experts predict M&A activity will only increase this year.
“All of this has put enormous pressure on hospitals and health care systems to better manage costs, particularly when it comes to capital expenditures like information technology,” says Ed Simcox, health care practice leader, Logicalis US. “For health care providers to maintain their status as a competitive provider, they need an IT infrastructure that can quickly adapt to changing administrative and patient care needs, plus increasing regulatory requirements, while offering the interoperability necessary for smooth affiliation integrations as they take place.”
Logicalis has identified six ways health care CFOs can facilitate IT cost reductions while protecting and improving service-level expectations. With a little creativity and a few sharp pencils, these steps can help transform the relationship between CFO and CIO into one where both execs are working in tandem, finding ways to make IT, at best, a much higher performing business function and, at least, much less costly.
Making Health Care IT More Efficient
Click through for six ways health care CFOs can facilitate IT cost reductions while protecting and improving service-level expectations.
Brainstorm with the CIO
For those finance execs who have not yet shifted their thinking about IT from a cap-ex to an op-ex mindset, it’s time to give this some serious thought. CFOs may need to do some old-fashioned brainstorming with the CIO about the “right way” to buy when it comes time for a technology refresh or upgrade. Instead of signing a purchase order for a capital project, consider op-ex leases that can save precious capital dollars for physical build-outs or other growth initiatives in the process.
Consider Using the Cloud
Turning to “the cloud” changes the way organizations pay for IT infrastructure and services from a cap-ex cost to a consumption-based, operational expense model. With some solid planning, a health care organization’s IT systems can actually become money savers for their organization and can provide competitive advantage as well. This includes things that might normally be very costly like data analytics implementations or integrating the IT systems of a new affiliate.
Set Up Charge-Back Mechanisms
Consider working with your CIO to set up chargeback mechanisms for IT consumption by clinical and administrative departments. Chargeback enables business users to understand the true costs and business value of what they request from IT. Health care business leaders presented with “good, better, best” price and performance options (as opposed to only performance) when selecting technology are more inclined to not choose the “best” option every time, but to consider the best price/performance ratio for the particular business need. This forces business leaders to be mindful of costs and be better financial stewards since these IT purchases affect their department’s financial performance.
Re-Evaluate Your Technology Portfolio
Start by conducting a thorough evaluation of the health care organization’s current IT portfolio and how those assets were financed when they were acquired. Then, evaluate requested upgrades and enhancements and rank them. Technology choices have changed considerably over time and today there may be cost savings just waiting to be realized. Look for opportunities to upgrade, consolidate and retire IT assets on a regular basis. Newer technologies, “as-a-service” offerings, and managed services outsourced to firms that have created strong economies of scale for managing the organization’s IT assets can all play a role in holding down IT costs while allowing IT to maintain or improve internal service level expectations.
Enforce Maintenance Audits
One way the CFO can encourage the IT department to operate as cost efficiently as possible is to challenge the CIO to conduct regular maintenance contract audits. Industry experts say the typical service contract costs between 10 and 12 percent of the overall purchase price of the equipment, and can be as high as 18 percent if the technology has very complex computing requirements. What if that cost could be reduced to between 7 and 9 percent across the board simply by requiring an IT maintenance contract audit at regular intervals? This may be something the IT team doesn’t have the bandwidth to do, but there are third-party solution providers skilled in doing these kinds of assessments and audits that both the CFO and CIO can turn to for assistance. Hiring a firm to perform an independent audit can pay for itself.
Meet with Your Solution Provider
The best IT solution providers are adept at creating bridges between IT and finance, and they know what has worked well for others who’ve faced similar challenges. As a result, they can help the CFO and CIO work together to make the company’s business and technology operate as one.