The CIO Role in Healthcare IT Outsourcing | Article

outsourcing relationshipPerformance-based compensation is spreading among top-management positions, and chief information officers’ (CIOs) compensation now is frequently tied to successfully aligning an organizations information technology (IT) infrastructure with corporate strategic objectives and goals. Sure, they still have to deal with the lopsided challenge of accomplishing more with less money; but the CIO role has morphed beyond managing technology operations and investments into one of providing strategic vision and leadership on an enterprise-wide basis.

The knowledge and skills necessary for today’s CIOs to meet their companies’ IT challenges and strategic initiatives that are enabled by IT is nowhere more crucial than within the healthcare industry, where the approach to IT decision-making often is fragmented – and sometimes even detrimental.

Some CIOs’ actions are mostly palliative – that is, they focus on the task at hand, deploying IT solutions to relieve symptoms. Others operate from a position of strength, with a potent capacity for effective action on an enterprise-wide basis, impacting both the task at hand and the big picture. The business outcomes achieved by these two approaches will be very different.

The Integral Component

The evolving CIO role is now one of skillful masterminding to solve broad dilemmas. In a hospital for instance, the need to invest in enterprise-wide IT solutions to improve patient safety and satisfaction is now greater than ever.

The barriers to acquiring IT solutions that enhance patient safety are not bounded by technology. Just ask Mark Zielazinski, CIO of El Camino Hospital in the Silicon Valley region of California. “The issues that have stopped hospitals from implementing technologies to provide better patient care and to do it more efficiently are all on the organizational side – they are cultural and business process kinds of issues,” claims Zielazinski.

To be an effective hospital CIO, he continues, one must know how that hospital’s organizational changes occur and how to drive those changes so that the hospital will reap the efficiencies and improvements from its IT solution.

It requires strong team-building skills with the CIO’s peers at the executive level. In fact, being able to champion change tops the list of capabilities for today’s winning CIOs, for change management is a crucial, make-or-break component of successful implementation of technology. This has motivated hiring chief technology officers (CTOs) in many organizations throughout a variety of industries over the past three years. In a hospital, for instance, Zielazinski states a CTO’s job would be to manage the day-to-day operations of the IT functions and the building of the IT foundation so that the CIO can use IT to drive change through the organization.

Close Cousins

But what happens to an organization’s CIO if it decides to outsource all IT infrastructure and IT human resources? Is the CIO’s optimal effectiveness as a member of the buyer organization’s management team? Is it more strategic to transfer the hospital’s existing CIO to the service provider’s organization – or even to sanction the service provider’s provision of one of its own to become the hospital’s new CIO?

At The Community Hospital in Springfield Ohio, the CIO is now an employee of the service provider, Eclipsys Corporation, and formerly was the hospital’s information systems director. From the beginning of their outsourcing relationship, says Terry Williams, vice president of Eclipsys’ Business Solutions Group, “We have worked with them to ensure the things we do aren’t simply focused on IT but are focused on improving outcomes in the organization.” Instead of just providing information systems and processes, he says, “We ensure the buyer’s leaders are equipped to lead differently so that the improvements brought by IT solutions will be sustainable.”

The outcomes of that strategy are of greater benefit to the hospital because of the CIO’s ability to innately leverage the Eclipsys knowledge base, even where the hospital does not request it. As an Eclipsys employee, this CIO is better able to tailor workflow and create data and decision-support content that is more meaningful and powerful to the hospital’s physician groups than she would have been able to accomplish as a hospital employee.

Service provider Eclipsys, for example, has turned around the hospital’s emergency room (ER) department. Williams recalls that the hospital had “incredible amounts” of information in its decision support system, but it was not being used to optimize processes and drive change in the ER. To achieve those goals, he explains, a CIO must have a clear understanding of change management; and the hospital’s management team and decision processes must have the expectation of driving sustainable improvement in a very systematic, embedded way.

Kendall Stanley, product marketing manager for Services at Eclipsys, believes a CIO who is employed by the outsourcer “can listen to all of the hospital’s business issues, discuss all the nuts and bolts and help in ways the buyer hasn’t dreamed about.” That’s what’s happening also at Spring Hill Hospital in Mobile, Alabama, where the CIO is an Eclipsys employee.

If the outsourcing arrangement is a true partnership where the service provider is responsible for the deliverables, Stanley believes, the solutions will be more beneficial to the hospital if it shares strategic information with the service provider’s employee serving as hospital CIO.

Recruiting and retaining clinicians, nurses and pharmacists, for example, is not an IT issue but is a priority strategic item on many hospital decision makers’ agendas. A service provider’s employee in the position of hospital CIO, who participates in hospital executive or board meetings, can bring an IT solution to such a discussion. Surveys show that 30 to 50 percent of a clinician’s day is spent on activities other than core clinical activities. In an instance where this fact lands on the strategic agenda (not the IT agenda) and the service provider-based CIO is included in that meeting, the CIO could not only suggest an IT solution but also optimally shape the solution to focus on setting up the processes to accomplish a better working environment.

El Camino’s CIO believes the value of having a non-hospital employee attend board or executive meetings is that “they have a view that allows them to be a little bit more objective. The crux of the ultimate value of their advice depends on their experience base, which is not necessarily better as an employee of the hospital or the outsourcer,” says Zielazinski. “But the outsourcer-provided CIO will have fewer allegiances to political things going on in the hospital, and that allows them to have a different view to present to the board and executive team.”

The Loyalty Chasm

But there are issues to resolve in such circumstances where the service provider is the CIO’s employer – especially the question of loyalty or divided interests.

Tom Ague, chief operating officer of St. Clair Hospital in Pittsburgh, Pennsylvania since 1991, says his hospital has done it both ways. When they originally outsourced in 1997, the hospital’s IT staff and CIO were transferred to a vendor that owned the clinical information system the hospital was running at that time. Their concept then was hinged on a plan to make that outsourced group become a service provider for other hospitals, running the equipment from the St. Clair data center. Subsequently that software vendor was acquired, and the St. Clair strategy took a sharp turn in a different direction, with “true” outsourcing, where the service provider owns and controls the services provided to the hospital.

Ague says that prompted a change about four years into the arrangement. They wanted to “ensure there is a member of the hospital’s management team who has technological background and knowledge.” So the hospital decided to hire its own CIO.

“We wanted our CIO to be somebody who has the hospital’s best interests at heart,” recalls Ague. “We feel we can trust that person more than an outsourcer’s employee. He has to juggle the interests of the various information systems vendors whose products we use, but his main loyalty and interest must belong to the hospital.”

A CIO whose employer is the outsourcer can still attend hospital board meetings when requested to do so, Ague says. “But as a matter of rule,” he continues, “the CIO should not be one whose bias would be toward the outsourcer. We expect a more objective review of systems we’re evaluating for implementation.”

St. Clair Hospital, claims Ague, has always been a best-of-breed hospital, using and interfacing many different pieces of software from various companies. While St. Clair has extended its outsourcing agreement with Eclipsys to run the hospital’s software and data center, Ague states that his hospital’s CIO position is politically oriented with the hospital’s board, and loyalty must reside with the hospital. “We run the Eclipsys E7000 system, along with their financial system and their Sunrise Decision Support Manager system. So we do have significant and very important Eclipsys software systems here, but we also run other companies’ systems in various places in the hospital.”

Despite the fact that Ague remains very enthusiastic about the cost benefits and opportunities available to the hospital because of the service provider’s expertise, he says, “We would have written the contract a little differently and not have given up our CIO,” if they had known the hospital’s original outsourcing strategy to become a service provider itself would change.

At the outset of its outsourcing arrangement, El Camino Hospital was relying on a strategy employed by numerous hospitals – its CIO was a consultant on contract with a hospital management team. Then, when the outsourcing arrangement began, the management company’s CIO left. That was a problem for El Camino, which then requested that its service provider, Eclipsys, provide a CIO.

But unless the expectations are clearly set, this doesn’t always work. Zielazinski says it difficult for such a CIO because he or she must manage the contract, the relationship and the IT staff with loyalty to the outsourcer while driving changes and efficiencies throughout the hospital – which will impact the IT services the hospital is paying for. For hospitals whose outsourcing strategy is to manage their costs in an efficient and effective way over time, there can be an imbalance in the outsourcer-based CIO role, because the outsourcer is looking to generate a deeper margin.

Frame of Reference

So which “employer strategy” is the best way to go to ensure the highest and best use of a CIO? Both Zielazinski and Williams point out that it can be done successfully both ways.

Zielazinski says, where the outsourcer provides the CIO, “the expectations must be clearly set that the CIO’s role is to be a change agent for the hospital.”

The bottom line is that a hospital outsourcing to achieve enterprise-wide value and business transformation, and a service provider focused on achieving those business outcomes, must be aligned. The balance between cost-lowering efficiencies and deepening margins can, in fact, be an enhancement to an outsourcing arrangement, with the savings shared between both parties.

Eclipsys’ Williams agrees, adding, “What’s important is to structure the CIO role to drive creativity and maximize value to the organization.” The key function in a CIO’s role, he believes, is moving the decision-making from one of technical feature comparisons to what drives change and demonstrably improves business outcomes.

Lessons from the Outsourcing Journal:

  • Despite which organization employs the CIO, it’s important that the CIO’s role is not focused on cost and risk minimization. Such a position actually hampers the creativity that the buyer seeks in an outsourcing arrangement.
  • The CIO should be the single point of awareness and continuity between what the buyer organization expects to get out of its IT systems and its process improvements. The buck stops with the CIO in understanding the applications and how they should impact business value.
  • Where the buyer’s CIO is an employee of the service provider, it’s best that the buyer establish clear governance over processes. In addition, it’s important to select a service provider with client references and a transparent process around its selection of IT products.

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