David Greenwalt

Jean-Claude Killy, the famous French skier, once said, "To win, you have to risk loss."

Although this statement is true, most of us are risk averse. Granted, we chose a business fraught with risk. Risks the healthcare industry faces today are readily apparent: an aging population that will require extensive capital investment, payment that does not provide the margins necessary to generate that capital, and a regulatory environment that limits organizations' abilities to manage around these issues. These ever-present concerns may explain why many organizations tend to overlook another key risk-the loss of a critical information system.

With capital at a premium and most in the industry already committing their strategic dollars to facility use, sudden need for system replacement poses a significant business threat for many healthcare organizations. Organizations that aren't planning for a system replacement in the near term may find the decision is not within their control.

Changing Times

Significant consolidation of IT vendors over the past five years has left many legacy applications neglected or soon-to-be superseded. In particular, many organizations are finding that their niche or departmental systems are being integrated into advanced clinical systems. In these situations, the organization typically must either pursue a different niche vendor (which is also vulnerable to acquisition!) or proceed with implementing the advanced clinical system before the organization is ready to do so.

Even providers that depend on large, seemingly stable vendors may find themselves facing unanticipated system replacement. Consider the scenario of a little fish that is swallowed by a bigger fish, which is then devoured by a shark. Recently, a large enterprise resource planning developer acquired a smaller competitor that used a completely different technology platform. Shortly thereafter, the acquiring vendor was itself acquired. The shark in this tale was a large, multiproduct vendor whose principal business was more technology related than pure ERP. And neither of the smaller players was exclusively based on its solutions. The result? There will likely be pressure to convert the acquired client base to the larger firm's platforms. For healthcare providers not currently using those platforms, this migration could be considerably disruptive.

In clinical computing space, several vendors have acquired other vendors during the past five years and have developed or are developing replacement systems for the "old" applications. These vendors typically announced a strategy to supersede the acquired applications and transition the existing customers to the new solution.

In some cases, existing client bases that are not pleased with plans to change systems can convince the vendor to reconsider. Still, IT vendors manage to a bottom line as we all do. These vendors need to recover the development dollars sunk into replacement products and cannot afford to maintain disparate systems in similar market space. This economic reality means that healthcare organizations may eventually need to face an unexpected system replacement.

Mitigating Risk of System Replacement

The best way to mitigate the risk of system replacement is to understand the incidence, prevalence, and probability of the issue at hand.

Develop a long-term strategic plan for IT. Every healthcare organization should have a plan for IT spanning the next five to 10 years. This strategic plan should clearly support the clinical and business goals of your organization and help proactively determine when and why you should replace or add new technology, such as advanced clinical computing. The process of developing this plan will in itself help identify an organization's vulnerabilities and prioritize capital expenditures. The following are basic steps in developing the strategic plan:

  • Define strategic context. The strategic plan for IT should exist within a realistic context that serves the business and clinical needs of your organization. A strategic context document should articulate business priorities, assumptions, guardrails, metrics, and principles, and guide the IT strategic planning process.
  • Assess current IT effectiveness. Your organization's current IT environment should be sufficiently robust to meet your identified business and clinical needs. The technology infrastructure should be appropriately comprehensive and stable yet flexible enough to meet changing needs of the future computing environment. The application inventory should be adequate to respond to the computing needs of users and offer sufficient support and dependability.
  • Identify gaps. Management and user expectations for the services and support provided by IT should be clearly defined. A clarification of the gap between current IT capabilities and articulated needs is a key component of the planning process.
  • Develop a strategy. A defined strategy needs to be selected that will make the IT vision a reality. Specific plans then need to be developed for implementing the selected IT strategy. Budget models, each with a required technology focus, should be defined and approved by executive management.
  • Implement and communicate the strategy. A strategic plan needs to be communicated clearly and concisely throughout the organization to facilitate corporate commitment at all levels.

Talk to your vendor. Acquiring a customer is very expensive for a healthcare IT vendor. As such, these vendors want very much to retain their clients. Providers can sometimes use this leverage during conversations with vendors to get them to address product plans. The following steps can help if you're concerned about an unwelcome system replacement.

  • Find out who is responsible for product direction. In most cases, a handful of individuals are responsible for the planned future of a product or product line. Developing a personal relationship with them will help you understand the vendor's view of the product's future.
  • Ask vendors about their commitment. With a large, multiproduct company, the best indication of its commitment to a product may be expressed in financial terms. Vendors that see a future in a product are more likely to lend financial support to it and devote significant development, sales, and marketing staff.
  • Ask for a long-term support agreement. Asking for a five- to seven-year maintenance contract can provide some protection from product termination. At a minimum, it demonstrates to the vendor a strong commitment to the product.
  • Join the user community. There is clearly power in numbers. A strong, vocal user community has more power to get information from vendors about their plans.

Ask an expert. IT has many experts whose sole business is to track the plans and success of vendors. Additionally, most IT consulting firms track industry, vendor, and product trends, even though they do not provide that knowledge as a standard service. You may find that the "inside" advice of a trusted adviser is more valuable to you than the more formal knowledge of other firms.

No Perfect Protection

In the end, there is no perfect protection from any risk. We live in an imperfect place and work in a volatile environment. System replacement is inevitable in the ever-evolving quest to improve care delivery and make best use of new technologies. Still, proactive investigation and planning are your best tools against unwelcome surprises. The better your organization is able to anticipate and plan for system changes, the more smoothly these transitions can occur. None of us likes risk without the possibility of an associated reward.

David Greenwalt is a principal consultant, advisory services, Healthlink Incorporated, Houston. Questions or comments about this article may be sent to him at david.greenwalt@healthlinkinc.com

Publication Date: Wednesday, June 01, 2005

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