Healthcare executives face an escalating demand under healthcare reform to extract the greatest possible value from their organizations’ IT resources.

At a Glance

Hospital leaders can take four strategic steps to ensure their IT systems are prepared to meet the requirements of healthcare reform:

  • Examine the extent to which current IT system capacity is sufficient to meet future demands.
  • Create a solid foundation for expanding IT capabilities or implementing a new IT system.
  • Share ownership and accountability for IT development and implementation with end users.
  • Reconsider the value of third-party solutions.

Both providers and payers view IT as a critical factor in addressing requirements of healthcare reform to reduce costs, coordinate care, assume greater risk, and manage complex payment models. In fact, 92 percent of healthcare systems polled in a 2012 study regarded innovative deployment of health IT across the continuum of care as being “extremely/very important” in developing a more sustainable business model (KPMG Healthcare & Pharmaceuticals, Transforming Healthcare: From Volume to Value, September 2012).

To get the best possible value from IT, it is necessary to take a broad, long-term view of IT needs and resources. Four strategic steps can help healthcare leaders ensure that their organizations are well prepared for the long-term future under healthcare reform.

Evaluate Capabilities of Current IT Systems

Healthcare organizations should first examine the extent to which they are exploiting the full capabilities of their existing systems. It is difficult to justify an investment in a new hospital information system (HIS) if the organization is not making full use of its current system, or if its leaders are unaware of whether the current HIS is being fully used. Therefore, careful analysis is needed to examine whether the legacy portfolio can adequately address the organization’s current needs, satisfy any unmet needs, and fulfill future requirements.

In analyzing a legacy system, leaders are likely to draw one of three possible conclusions.

 Particular capabilities are being underused. If this is the case, the next step will be to determine the root cause. A clear and specific cause, such as improper user training, could probably be easily addressed. But an inherent inability of the system to meet performance expectations poses a broader challenge with greater implications.

 The current system is being used to capacity, but additional capability is needed. In deciding the best course in such circumstances, hospital leaders should keep in mind that adding new applications can involve substantial costs and efforts, and they should weigh the pros and cons of revamping or replacing the current system.

 The existing system meets current needs but will be inadequate over the long run. Although this might be an unpleasant conclusion, it is better reached sooner rather than later. 

Often, the analysis of system functionality is focused on user feedback, which is affected by training, corporate culture, or even general resistance to the system born out of legacy issues and other subjective concerns. In fact, user dissatisfaction with a system often can result from response time issues that are not associated with the software at all, but that are a function of infrastructure issues. Given the subjective nature of user feedback, a critical step in the analysis is to properly weigh the validity and appropriateness of user concerns against a pivotal question for our data-driven age: Can data be extracted easily from the current IT system to generate timely, actionable intelligence? 

Answering this question requires understanding the big difference between data and intelligence. For example, data may tell a billing department that a certain claim has suspended by an insurer. But intelligence provides the insights and context to identify the source of the issue and take corrective measures.

Transforming data into intelligence may involve building reporting functionality into an existing system, extracting and exporting data to a software application for analysis, or redesigning staff workflows to align with a system’s reporting capabilities. Although most legacy systems can be retrofitted to some degree to perform these actions, doing so often comes at a considerable price. 

In short, an effective IT system can deliver real business intelligence only if it includes tools that can provide a comprehensive view of the healthcare organization’s clinical and revenue cycle performance. Having such an integrated view is critical to enabling leaders to make better informed, more productive decisions to resolve business issues, improve workflow efficiencies, reduce complexities and costs, and improve outcomes. Such improved decision making will be critically important for healthcare leaders in managing increasing clinical and financial risks, particularly as medical care becomes more integrated and collaborative through implementation of accountable care and other outcomes-based models.

In our discussion of the remaining three strategies that follow, we will draw on examples from the experiences of two organizations that developed successful strategies based on an initial analysis of their legacy HISs.

In 2007, Richmond, Texas-based OakBend Medical Center sought to optimize use of its existing HIS by attempting to extract more robust, timely revenue cycle data to strengthen its financial decision making.a The organization also attempted to redesign clinical workflows to match the system’s data-entry parameters. OakBend ultimately determined that its legacy HIS simply lacked the functionality for either of these objectives, and rather than custom-code reports at considerable expense, the organization opted to purchase a new HIS that would provide greater flexibility and functionality.

The experience of LHP Hospital Group, based in Plano, Texas, underscores the importance of examining strategic priorities when conducting a legacy system analysis.b In 2009, based on the findings of its analysis, LHP implemented a new HIS at Portneuf Medical Center in Pocatello, Idaho, and outsourced data center storage and endoscopy application support so it could better focus on internally managing system applications. Regarding this strategy, it should be noted that, in some cases, outsourcing certain services can yield more than simply direct cost savings; the ROI also can come from freeing up staff time and energy to focus on other areas that can best be managed internally. 

Build an Effective IT Foundation

In considering a new HIS, hospital executives should evaluate components that can affect the total cost of ownership, such as a single database design that integrates financial and clinical applications on a common technology and architecture standard like Microsoft. With this design type, all applications are built on a common database and written in the same code, so there’s no need for multiple interfaces to accommodate different applications.

A single database creates one master repository of clinical and financial data, which is key to enabling hospitals to better connect and coordinate care. There’s no need to extract data from one department to another because the data reside in a single location; information is updated in real time and accessible by various parties. 

Considerably different in size and scale, OakBend Medical Center and LHP Hospital Group have successfully completed HIS implementations with integrated platforms. Their experiences demonstrate the efficiencies involved in various steps involved in acquiring and implementing HISs.

 Purchasing the system. Up-front acquisition costs can be lowered by purchasing a single integrated solution that requires less hardware and fewer servers. LHP spent approximately 25 percent less to purchase an integrated system than it would have spent to purchase a multiple-component system or best-of-breed system with comparable capabilities; its virtual environment uses roughly half as many servers as a traditional deployment.

 Designing and building the system. Internal staff with a consultative, fixed-fee implementation methodology can be used to deliver a system that meets end-user requirements while eliminating the need for external consulting resources. A fixed-fee approach minimizes the hospital’s risk, while the consultative methodology ensures a flexible versus one-size-fits-all approach to implementation. As an example, LHP has incorporated clinical and financial users into its IT analyst organization, allowing the multihospital system, which is looking to standardize its footprint, to build a model system across the enterprise. This standard system reduces the number of decisions and the amount of build required by more than 50 percent compared with a traditional installation. It allows LHP to contract for very specific consulting services at a fixed fee as opposed to the traditional installation.  

 Implementing the system. By going live with its HIS as quickly as possible and generating information to improve its care delivery, OakBend was among the first healthcare organizations in the country to meet Stage 1 meaningful use requirements and qualify for incentive payments.

 Winning converts to change. By using largely familiar and intuitive Microsoft screens, OakBend accelerated user navigation, learning, and adoption, particularly among clinicians. OakBend rapidly achieved compliance for a number of clinical quality indicators, including admission assessments, development of individualized care plans, and medication reconciliation. 

 Maintaining the system. The need to devote staff resources to day-to-day issues should be kept to a minimum. OakBend needed only two additional IT analysts to support a greatly expanded HIS capability. LHP’s integrated environment requires 30 percent fewer interruptions for maintenance and upgrades and only half the amount of service time as was required for its previous system to perform the equivalent work on a component system.

 Improving processes. Through rapid physician adoption—facilitated by removing access to paper lab, radiology, input/output, and other reports—chart completion delinquency at OakBend dropped from 15 percent to less than 3 percent. 

 Expanding the system. Having successfully implemented its core financial and clinical HIS, LHP is looking to migrate additional specialty care areas to a single, integrated platform within the next few years.

Share IT Ownership and Accountability

No matter how diligently a hospital may have evaluated its legacy system and other technologies, it is ultimately the end user’s experience that creates the perception of the system’s overall value. Unfortunately, although creating a positive end-user experience is arguably the most important factor influencing total cost of ownership, it’s where most hospitals get into trouble. Why? They view system design, training, and promotion as an IT-owned initiative rather than an operations-driven effort

This perspective creates three significant complications. 

First, a hospital IT department often assumes ownership for building and customizing the system. IT solicits user requests and incorporates its interpretation of those requests into designs, instead of turning over the build process to end users and supporting their efforts. If end users are not intimately included in the design process, the system will not support staff workflow realities, so it will be flawed from the start. 

Second, a top-down IT-led initiative typically doesn’t alleviate end-user resistance to and fear of change. End users are less likely to accept technologies that have been handed to them without their input. Rather, they need assurance that these systems have been built for them, with their meaningful input. 

Third, many hospitals conduct system training in a phased, impersonal classroom environment—led by instructors who are not closely familiar with specific end-user needs and to whom the end-users are not accountable. Training complications at institutions with large employee populations can be compounded by a phased approach that stretches over weeks or months. Those trained at the beginning often forget what they’ve learned by the time they need to apply it. 

To avoid these pitfalls, IT implementations should be conducted as follows.

 Make IT implementation an operations-driven project. Finance, clinical, and other department directors should be engaged in the project and collaborate in defining system requirements that meet their needs. These leaders should assign experienced, committed individuals from their departments to serve as in-house consultants who can help design user screens and workflow modifications. This approach ensures the system will truly meet the needs of the end users. As an added benefit, because these in-house design consultants will be well-known colleagues of other end users, they can serve as credible champions of change to reassure all end users of the value of the project, dispel misconceptions, answer questions, and build excitement for the changes to come. 

 Reassign training responsibilities and practices. Department directors should take responsibility for ensuring their employees effectively use the new system. When department leaders view applications as their tools, they are better motivated to take the steps needed to optimize system use, including providing staff with essential training. Organizations should require that their senior executives and department directors become proficient in using the new system and personally attest in writing to the proficiency of each of their direct reports in using it. This approach transforms sterile and impersonal IT training into more relevant, timely, accountable, and applicable peer-to-peer instruction.

Both LHP and OakBend achieved their successful HIS implementations on time and on budget. 

OakBend’s new HIS was well received, with all of OakBend’s nurses using the system proficiently within the first month of go-live, and all of the organization’s physicians using the system within three months. In addition, more than 70 percent of all orders are now processed through the new system’s computerized provider order entry (CPOE), and all of OakBend’s physicians are using CPOE. OakBend’s cash flow also improved by 5.5 percent within the first 30 days after go-live, and days in accounts receivable dropped. Prompts built into the nursing workflow supported core measures compliance, resulting in 100 percent compliance with admission assessments and individualized care plans.  

LHP achieved 99 percent nursing adoption within 30 days of production for its hospitals on the integrated application. High physician adoption at all three facilities also has enabled LHP to achieve and maintain a CPOE adoption rate of greater than 70 percent. LHP also has strengthened its implementation capabilities by hiring clinical staff who not only have IT acumen, but also can assume leadership roles as change agents within their respective departments. Moreover, recognizing that users have different preferences for how they receive instruction, LHP has expanded its training options from prerecorded webinars and 12-student training sessions to include more intimate and frequent small-group coaching sessions. Doing so has increased user proficiency and reduced help desk call volume. 

The lesson learned from both of these organization’s experiences is clear: Successful implementations are not owned by IT; they’re owned and championed by end users. 

Evaluate Third-Party Relationships

The key to successfully developing and executing IT strategies is building and maintaining a deep hospital-vendor relationship, which is the responsibility of both parties. With escalating demands and resource constraints, one-way agreements should be replaced with collaborative partnerships. Any vague assumptions that may have existed since the beginning of the relationship should be identified and replaced with clear and realistic budgetary, timeline, and technical expectations. 

As an example, it should be clear from the beginning what types of desktop software are supported (e.g., whether it is Internet Explorer v6 or 9).  Software vendors are willing to listen if the customer is engaged and willing to be honest about its long-term goals. With demand for new installations at an all-time high, customers that consume fewer vendor resources ultimately help the vendor to focus on areas where its assistance is needed most. LHP’s goal is to standardize its software installations across all of its facilities. LHP chose to depart from traditional vendor-led installations, but to cooperate with its vendor to control costs.

Rigidity should be discarded in favor of long-term flexibility to accommodate evolving customer needs, industry regulations, and technological developments.  For example, instead of being driven by a particular vendor’s implementation methodology, the upgrade process should take into account the hospital’s timetable, acknowledging the importance of user concerns and providing timelines to address them. 

In some cases, a hospital will acquire all hardware through only the software vendor, using the vendor’s configuration methods. Although this approach may be appropriate for some organizations, those that have dedicated technical resources, like LHP, have created their own approaches to hardware, operating systems, virtualization, alternate storage methodologies, and security. 

In short, healthcare leaders should not view vendors as temporary, external product and service providers, nor should vendors assume a passive, reactive role in soliciting customer feedback. The two parties should thoroughly discuss the organization’s approach to ensure both understand each other’s goals and concerns. 

Healthcare leaders also should consider three important questions regarding engagements with third parties.

 Is the vendor candid about its technological capabilities? During OakBend’s HIS implementation, its vendor made it clear from the outset that an emergency department solution requested by OakBend would not be included among core deliverables until the solution had been fully developed and properly tested to meet high performance standards.

 Can the relationship create contract flexibility and creativity? LHP has built partnership-benefit expectations into certain IT contracts, giving the organization more pricing and design accommodations. (Some hospitals negotiate tiered-pricing structures with broader ranges to accommodate their specific needs.) LHP has also leveraged its HIS vendor partnership to purchase additional products and services, such as a picture archiving and communications system and a medication-management solution, under more favorable terms. 

 What is the vendor’s philosophy on dealing with change? The company should demonstrate a commitment to leading the pack with up-to-date solutions.

In the end, healthcare leaders should recognize that change will be constant and that their organizations’ requirements will evolve, possibly in new and unanticipated ways. The best partners, therefore, will be those that are:

  • Comfortable with and accommodating to change
  • Passionate about generating long-term value through the IT solutions they deliver
  • Committed to empowering their clients to make best use of their IT investments

Joseph Freudenberger is CEO, OakBend Medical Center, Richmond, Texas, and a member of HFMA’s Texas Gulf Coast Chapter.

 Larry Schunder is senior vice president, business process, and chief information officer, LHP Hospital Group, Plano, Texas.

 Walter Reid is a vice president, McKesson Technology Solutions, Charlotte, N.C., and a member of HFMA’s Georgia Chapter.


a. OakBend Medical Center is an independent, not-for-profit community hospital with 245 beds at two hospital campuses and two outreach facilities, more than 300 physicians on staff, and 600 employees.

b. LHP Hospital Group is a for-profit, privately held company that manages five hospitals in Florida, Idaho, New Jersey, and Texas, with 1,400 licensed beds and nearly 5,200 employees. 


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