Hospitals and health systems are confronted with a bewildering array of vendors, consultants, and other service providers vying for their business. Outside of major capital purchases, such as an electronic health record (EHR), there are rarely enough internal and external data to fully evaluate potential business partners’ capabilities and their likely impacts on specific organizational environments, nor are there industry standard evaluations like those for meaningful use.
With investment in healthcare startups at an all-time high (surpassing $10.5 billion in the first two quarters of 2018), healthcare decision makers are currently reckoning with a major gap in their business intelligence: the absence of a process for evaluating the value, fit, and opportunity costs associated with each potential vendor—not to mention determining how that vendor stacks up against its direct competitors and against the capabilities that already exist in-house. a It’s fairly clear how they’ve dealt with this gap so far: Healthcare spending on management consulting grew in 2018 to $45 billion, with that figure projected to exceed $60 billion by the end of 2019. b
Health systems may need to rely on external advisers in some cases, but a better route for them is to establish a long-term roadmap independently, leveraging internal business intelligence to make the right decisions for their organizations. This approach may mean creating an internal tool to manage the inputs necessary for a complete evaluation, or it may mean exploring new ways to harness peers’ experience to inform their internal decision making.
No matter which path they take, though, health systems first will be to understand exactly where they’re starting.
Step One: Perform a Complete Self-Assessment
To balance their lack of knowledge about countless potential vendor-partners, health systems must know their own goals and needs deeply. A self-assessment should have goals that are firm enough to help the organization navigate the vendor landscape over the next five to 10 years. Yet it also should have a framework that is flexible enough to ensure it doesn’t miss out on a valuable innovation that would support those goals. Such an assessment is needed to provide the basis for the organization’s strategic roadmap.
Admittedly, there aren’t many tools for conducting rigorous self-assessments routinely. But acquiring the ability to do so is a critical first step toward reducing reliance on outside opinions with an internal plan tailored to the health system’s unique capabilities and needs.
Front-line intelligence provides a way to identify those capabilities and needs. Most health systems already rely on reports and analytics platforms to identify negative metric trends, but it’s nearly impossible for a program to indicate where a process should be automated or where a better business partner would create a more cohesive work environment for staff. For that, they need input from the IT analysts or operations staff who use the technology or service day to day and are familiar with its positive and negative features. Health system executives tend to know what the salesperson told them, what their friends are saying about the solution, and how their general metrics are trending. They are less likely to have heard the insights of folks on the ground, at least beyond the few squeaky wheels.
Another self-assessment challenge is being able to understand the effectiveness of a business partner in relation to the health system’s unique environment. There is plenty of evidence that the same product integrating with the same EHR system can produce vastly different outcomes for different health systems depending on the experience, abilities, and implementation plan of the respective IT team, operations team, and associated service partners.
Step Two: Move Forward
A health system’s next step after identifying its specific needs and assessing its internal capabilities will be to implement a solution, which entails considering in-house and external options. Tailoring an in-house solution may be more beneficial than using an external standard solution, and technology advancements make the former option possible: There are many user-friendly, broadly accessible platforms available today that allow organizations overlay existing technologies and enhance automation for spot solutions—a far cry from the days of a single IT staff creating a home-grown accounts receivable (A/R) system. Opting for the in-house route not only could realize a significant financial benefit but also could improve staff’s professional satisfaction and buy-in if they are included in the solution design.
Revenue cycle management is an area that relies heavily on advisory services, making it a useful testing ground for closing the vendor gap in business intelligence. In one instance, for example, a series of acquisitions left a health system with 90 separate vendors within the revenue cycle space alone, and many of these services had competing functions. Without an established, reliable way of vetting those services and functions, the health system is challenged to resolve this issue.
Consider, for example, denials management, which is a particularly complicated revenue cycle area. Meeting the needs of a large health system in this area typically requires a mix of services—from and integrated process for checking the status of claims and a deep analytics platform to various degrees of denial automation (either through the A/R system or other automation platform) and outsourcing for complex accounts. When embarking on a new service relationship to meet these needs, though, decision makers will want to leverage their self-assessment and strategic roadmap to ensure they don’t make a purchase that either replicates existing capabilities or sacrifices long-term goals for a short-term win.
Step Three: Evaluate
Health system leaders require access to external information and experiences to understand whether their purchasing decisions have been effective, and they need a way to evaluate the effectiveness of adopted solutions continually over time. Yet none of these resources or tools is readily available today.
What leaders can ascertain on the financial side, however, is how the service’s post-implementation performance compares with hard benchmarks. They can assess staff productivity according to the number of touches, or how many accounts per hour. What’s not as apparent from the financial key performance indicators is how satisfied staff are overall with the suite of tools in place, how well the tools integrate with each other, the level of manual intervention required to maintain performance, where duplicate solutions exist, and the impact of the overall solution on operating margin.
At this point, health systems have only a rudimentary ability to manage the intelligence gap around in-house capacities versus requirements for outside help, existing vendor management, and the logic and fit of future partnerships, and they lack clear solutions to address these limitations. Decentralized decision making, mergers and acquisitions, and executive turnover exacerbate the lack of institutional knowledge.
Health systems should make it an explicit goal to close the intelligence gap by creating a new environment that features unobstructed insight into business partner capabilities, crowd-sourced feedback (i.e., peer reviews, references, and commentary shared in an online forum without vendor influence) ready access to historical decisions, and internal analytic abilities combined with existing metric-based evaluations.
Erick McKesson is a co-founder of Venddy, Denver.
Phil Rogerson is a co-founder of Venddy, Chicago.
a. Weintraub, A., “Healthcare VC Investing Could Hit a Record High in 2018,” Forbes, June 12, 2018.
b. Consulting.us, “U.S. Healthcare Management Consulting Market Tops $50 Billion” Sept 17, 2018.