Information System costs have increased significantly as the industry has expanded its primary focus beyond the acute aspects of healthcare into the physician, outpatient and risk arenas.  Costs have also been significantly impacted by the number of applications. The computer has become an integral part of business and clinical processes rather than primarily financial applications limited to a small number of users.

Although the size of an organization can result in some economies of scale the basic number of applications does not increase proportionately with organizational size. In addition, the more integrated solutions can be more cost effective than a “best of breed” approach.

The biggest factor impacting IT costs is the number of “bolt-ons” and the degree of customization made to the solutions provided by the vendors. Organizations need to periodically assess the functionality of their applications to determine if the functionality of a core application has matured to a point where the bolt-ons may no longer be needed and determine when a core application is functionally good enough. Avoiding idealism and thoughts of “the system needs to do it the way we have always done it” are key to optimizing the cost effectiveness of IT solutions. Workflow should be reviewed in the light of the approach designed into the application.

To sort these questions and arrive at a cost effective IT solution requires a mature IT governance and oversight processes. The governance process should reflect the overall strategy and culture of the health system, provide value, manage risk and result in measurable performance. Guiding this process should be a senior IT governance committee that has clear oversight of the capital and operating budget with authority to allocate funds to the various projects and initiatives within parameters set by the board and/or executive team. Major projects over a certain dollar amount should be specifically authorized by the board and/or the senior executive team and reported back on a regular basis to those forums. This oversight committee should be chaired by a key executive such as the COO and have a membership representing the customer base. Finally, process should also incorporate PMO best practices and reporting.

This all comes together via an IT strategy that has a 5-year, 3-year and 12-18 month perspective. The alignment with the organization’s strategic plan should be robust enough to be directionally correct so as to not have significant changes in IT priorities in a 12-18 month period.

An in depth understanding of the IT costs, optimizing each application, focusing on integrated solutions and avoiding idealism are key factors in optimizing a cost effective IT solution. This requires a mature IT governance process led by a dedicated leader with membership representing the customers of information systems to guide the Chief Information Officer and his/her team.

Jim Gravell, Director & Sr. CFO Consultant