Reason #12 Why Healthcare Providers Pay Way Too Much for IT: Healthcare IT is Oversimplified

Author: Matt Hartzman

Healthcare organizations pay an unnecessary premium for IT systems, software and services. The reasons are many; NET(net) identifies the Top 12 in our White Paper.

With all the focus on reducing Healthcare costs, it may surprise you to learn that of the 30 industries we recently sampled, Healthcare organizations actually pay more for technology than any other industry.  Our analysis shows Healthcare organizations pay an average 17% more than that of the other 29 industries we sampled, and 33% more than the industry with the lowest average costs (Food Service).  In the first posting of this blog series, we outline why we believe Healthcare providers pay way too much for information technology starting with Reason #12.

Reason #12: Healthcare IT is Oversimplified

IT in the Healthcare industry is highly complex.  To begin with, Healthcare organizations spend less on IT talent than other industries, but have more staff due to inefficiencies.  Similarly, Healthcare organizations pay too much for technology, but have not efficiently automated key processes.  In addition, due to suppliers’ poor integration of their technology acquisitions and Healthcare organizations’ acquisitions of diverse technologies, real operational integration across the enterprise is elusive.

These complexities lead to gaps in experiences and competencies in many Healthcare organizations necessary to navigate complexity and change.  As accountability shifts from staff to suppliers in Software-as-a-Service models, these gaps are compounded.  Who is establishing effective Service Level Agreements?  Who is managing them to ensure supplier accountability?

The Other 11 Reasons:

11. Unprecedented Change and Mandate for Business Sustainability

10. Increased Government Regulation

9. Industry Centricity

8. Lack of Strategic Sourcing

7. Industry Specific Supplier Programs

6. Single Purpose Purchasing

5. Supplier Lock-In

4. Healthcare Organizations Don’t Always Negotiate Diligently

3. Healthcare Systems Are Often Inefficient and Difficult to Automate

2. Healthcare Organizations Often Lack a Profit Motive

1. Healthcare Organizations Focus on Patient Care and Safety

We do expect an information intensive industry, like Healthcare, to demand considerably more from their technological investments in order to power critical patient care as well as manage organizational decisions.  However, we do not expect a difference of this magnitude.  Healthcare organizations pay more for all types of technology, from Lawson financial applications, to Microsoft desktop productivity licenses, to Cisco networking equipment, to IBM servers, to EMC storage arrays, and so on.  These overpayments extend to the vertical applications for Healthcare like those provided by Epic, McKesson, Cerner, and others.  The breadth of scope of this “Healthcare premium” indicates that this is not an industry-specific difference for one type of technology unique to Healthcare, but rather a general premium that applies to all technology.

In future blogs, I will go into more detail on each of the other reasons outlined above.  If you cannot wait for details in future posts, click here now.

NET(net) helps Healthcare providers build better, more sustainable business partnerships with key technology suppliers, focused on value for the long-term.  NET(net) customizes our services to meet your specific and unique requirements.

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About NET(net)

Celebrating 10 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 1,500 clients around the world in nearly all industries and geographies, and with the experience of over 15,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client value captured in excess of $100 billion since 2002, NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact your NET(net) representative, email us today at, visit us online at, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and supplier relationships.

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