Using IT to Support Population Health Management
The main reason for IT outsourcing underperformance is that healthcare organizations are not crystal clear on what they want to get out of the arrangement. However, CFOs can help their colleagues make the most from these models, says P. Tracy Currie, CEO, Capto.
Given the many competing capital priorities in an organization, CFOs need to make sure they understand the “why” behind their IT investments, says P. Tracy Currie, CEO and co-founder, of Denver-based Capto.
“The best CFOs that we have worked with are rigorous around the business case,” Currie says. But this means more than just focusing on the economics. “They also assign value to the potential impact on revenue, time to market, and ability to execute.” This is especially true when healthcare CFOs are asked to direct sizable investments in big data and analytics as their organizations move to value-based care and initiatives such as population health management.
See related tool: Key Question Checklist for CFOs When Evaluating Population Health IT Investments
Leveraging IT for Population Health Management
Currie says healthcare organizations face three main pain points when implementing IT for population health management or other large IT centric investments. “First, most IT teams in health care have grown up focused on cost management and how to deploy technology and capabilities as cheaply as possible,” he says. “Yet population health management applications, which are critical to the financial success in value-based care, require more of a product mentality that focuses on time to market, competitive priorities, the minimum viable product, and product life cycles. A key decision for CFOs is determining if these strategic initiatives can be driven by your IT team or more likely by your business development or strategy team and supported by IT.”
The second pain point is that the most efficient use of capital is rarely infrastructure. “The more you can focus on the direct value or capability you want, in this case the analytical insights to drive population health, rather than on specific IT infrastructure like storage or servers, the faster your time to value, and the larger the ROI,” Currie says.
The third point may be the biggest risk of all, and that is finding qualified staff to effectively use these new technologies, Currie says. Various estimates peg the shortfall of healthcare informaticists, healthcare professionals with data science certifications, as high as 70,000 over the next few years, he says. “The top 20 medical schools only graduate maybe 2,000 to 3,000 medical informaticists a year, so that gap is tremendous,” he says. “Even if you invest in these systems, you may not be able to attract and retain the talent to use them effectively.”
For that reason, many healthcare organizations should carefully evaluate “buy” as well as “build” models for healthcare IT infrastructure and analytics that support population health, Currie says. “We often advocate that organizations buy the capability to ask key questions based on their data but use a service provider’s infrastructure, data scientists, and healthcare informaticists, paying only for the answers they receive,” he says. This is referred to as an “insights-as-a-service” model.
The insights-as-a-service model has been adopted successfully in the telecommunications industry, Currie says. Early on, telecom companies made large investments in building their own big data and analytics capabilities. But when it was time to make another round of capital investments, many telecom companies opted out and chose an insights-as-a-service model to accelerate their time to market and improve competitive advantage. “These companies still have the big data warehouses, data lakes, and IT infrastructures that they had before, but to get new capabilities quickly, they went to an insights-as-a-service model using companies like IBM, as an example.”
Currie believes some healthcare organizations can follow telecom’s lead and skip over major IT infrastructure investments. Instead, they may want to consider leveraging their core clinical expertise and focusing their investments on better understanding the outcomes they need to achieve to drive population health. Currie says. “There is an opportunity for health care to learn a lesson from the telecom industry by skipping an IT investment cycle,” he says.
Currie offers the following advice for CFOs who want to make smart healthcare IT investments.
Ask the tough questions. Determining what percentage of the capital budget should be allocated toward IT investments is a common struggle between CFOs and CIOs at healthcare organizations. Currie says.
“You should have conversations with your CIO to make sure your IT organization is operating within certain parameters, both on an operating expense basis and a capital expense basis,” Currie says. “Another interesting conversation is this: If you’re spending X amount of your capital with IT, how is that investment allocated? Your capex [capital expense] investment allocation for run-of-the-mill IT like servers and other infrastructure should be a relatively low percentage of spend, as opposed to some of these new, strategic investments, which should be a larger allocation.”
CFOs also can help other members of the C-suite sort out whether a buy or build model makes the most financial sense based on their mission, Currie says.
Don’t be a wallflower. Small and mid-sized hospital networks find that their challenges are only exacerbated by the movement toward big data, Currie says. “Building an IT infrastructure to support these applications is just too capital-intensive for most of these organizations based on their other capital needs, so they will likely have to buy these capabilities as a service,” he says. “But getting someone to pay attention to you when you are a smaller organization can be very difficult. So the vendor management and procurement process for leaders in those organizations probably will be more challenging.” To avoid being overlooked by vendors, smaller organizations should invest in their technology vendor management and procurement processes, bringing in experienced partners to manage that function or partnering with firms that specialize in outsourcing that work, he says.
Set up the proper governance models between business strategy and IT. “This can help ensure that IT investments remain aligned with what the business strategy is,” Currie says. “It’s a broader, C-suite discussion that needs to take place.”
A few organizations have taken extreme measures to make this happen. “Some organizations may not give IT a substantial budget beyond keeping the lights on, and every penny for a new capability is written from the checkbook of another department,” he says. “Although that may be an overreaction to an out-of-control governance model, some leading organizations are moving toward that end of the spectrum to make sure they are getting a return from their IT spend.”
Consider your sourcing models. “Most IT organizations are heavily outsourced already, and your independent contractor spend may be quite high compared with your full-time employee spend,” Currie says. “Yet an overreliance on independent contractors is one of the least effective forms of outsourcing because it is the most expensive and you get the worst performance outcomes.”
As CFOs participate in discussions about different sourcing models, they should consider a progressive, outcomes-based sourcing model, he says.
One such model, based on research by the University of Tennessee, is known as Vested Outsourcing. “This progressive outsourcing model says that you pay for outcomes as opposed to transactions,” he says. Under a traditional outsourcing model, an organization might outsource its customer care center and pay based on metrics like number of calls taken or call minutes accrued. In an outcomes-based model, an organization might instead pay a vendor based on higher-level business metrics such as upsell/cross-sell performance, productivity, or net promoter scores. In this way, incentives are less aligned with high call volumes, and more with customer experience and improved economics for both the vendor and the healthcare organization.
“IT outsourcing as a capability, compared with other business disciplines like supply chain management, has traditionally underperformed both financially and operationally,” Currie says.
The biggest single reason for this underperformance is that healthcare organizations are not crystal clear on what they want to get, he says. But CFOs can help their colleagues make the most from these models. “You need to be very thoughtful about the three or four things that you are hoping to achieve from a sourcing program and make sure you are buying those outcomes,” he says.
Laura Ramos Hegwer is a freelance writer and editor based in Lake Bluff, Ill., and a member of HFMA’s First Illinois Chapter.
Interviewed for this article:
P. Tracy Currie is CEO and co-founder, Capto Consulting, Denver, and is a member of HFMA’s Colorado Chapter.
Forum members: What do you think? Please share your thoughts in the comments section below.
- What percentage of the capital budget should be allocated toward IT?
- When does it make sense to buy versus build an IT capability?
- What other advice do you have for CFOs trying to prioritize their technology investments?