Reason #11 Why Healthcare Providers Pay Way Too Much for IT: Unprecedented Change and Mandate for Business Sustainability
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 this blog series, we outline why we believe Healthcare providers pay way too much for information technology.
Reason #11. Unprecedented Change and Mandate for Business Sustainability
Compelling economic and legislative events are driving unprecedented change in all sectors of the Healthcare industry. These organizations need to make significant investments not only to achieve compliance, but also to build a sustainable business. Technology is getting even more complex than ever. To build sustainable businesses, these organizations must maximize the value of their capital investment both now and in the future. Freeing up capital from existing technology suppliers to redirect to strategic initiatives is one opportunity.
Healthcare providers should focus these strategic initiatives on new market pressures (i.e. Accountable Care Organizations, meaningful use, transition from ‘fee for service’ to ‘fee for performance/outcomes’, etc.), new lines of business, and other new revenue streams. These strategic initiatives are the necessary activities for Healthcare providers to create sustainability amidst this unprecedented change.
The Other 11 Reasons:
12. Healthcare IT is Oversimplified – read blog post here
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 technological investments in order to power critical patient care, as well as manage organizational decisions. However, we do not expect the difference at this level or at this scope. 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 future posts when we go into specifics on the other 11 reasons, 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.
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