Outsourcing Excellence Award – Best Healthcare – St. Vincent Health System and Eclipsys
The IT infrastructure at a hospital is the lifeline for patient care. Doctors, nurses, and pharmacists all need to access the system to provide proper patient care. So does the billing department, to protect the financial health of the hospital.
What do you do when the hospital has a fiscal crisis and can’t staunch the bleeding? Some suppliers would cut off the air supply when the money ran out. But not Eclipsys. It lowered its monthly fees until the hospital recovered, putting patient safety before profit.
“Let me tell you, Eclipsys has been a real partner,” says Tommye Billing, CIO and Vice President of Information Technology. “I don’t know what we would have done if it hadn’t figured out how to maintain this relationship. If I hadn’t outsourced, we would have had to have a huge layoff, which would have impacted patient care.”
Here’s the story of an outsourcing relationship where the supplier went the extra mile for its buyer.
The Buyer’s Situation Before Outsourcing
Ten years ago, St. Vincent’s Health System, a four-hospital group located in Little Rock, Arkansas, realized its IT department “was totally out of control,” according to Billing. She says the department had several failed implementations. Its expenses kept rising like a fever. “We had to save money. But we also needed leadership,” says Billing.
Having never outsourced before, the faith-based hospital turned to its telecommunications supplier, ALLTEL Information Services-Healthcare Division, for help. The supplier agreed to expand its offering to include IT and infrastructure. “The hospital felt comfortable with them because we already had a business relationship and they had a local presence. It seemed like a good fit,” recalls Billing.
A new disease spread through the IT department: fear. Billing says the staff was worried they would lose their jobs. Actually, the supplier made everyone go through its hiring process and made offers to almost everyone. The supplier did change the IT leadership, though.
The patient flourished under the new leadership. “When they came in, things were a mess,” recalls Billing. “They had project management methodology. They had training. They moved us from a mainframe to a client/server environment. They moved our staff to a higher level.”
Working Things Out in Difficult Times
Then Eclipsys bought the supplier.
At the outset, there were challenges. Eclipsys, unfamiliar with the Arkansas market, instituted a pay scale lower than market wages. It suffered a high turnover rate as good people left for higher-paying jobs. “We told them they had to do a market adjustment,” says Billing. “They were very gracious about this because turnover is not good for our relationship.”
Stopping the flow of personnel “has been a win/win for both of us,” Billing says. This was just the first example of the supplier’s willingness to make the relationship work in spite of the cost.
When the hospital’s fiscal crisis hit, the administration sat down with Gary Trickett, Senior Vice President, Outsourcing Solutions, for Eclipsys, and frankly told him what they could realistically afford to pay. “We worked with them on a contract that worked financially for both parties and still enabled us to maintain the same level of service,” says Trickett.
Trickett, a former hospital CEO, says the supplier’s team had to decide whether it wanted to keep St. Vincent’s as a customer, given its financial challenges. The leadership decided St. Vincent’s was an important buyer because it was not using Eclipsys software. “We felt they had value because they proved our outsourcing team could maintain its neutrality when it came to software,” he explains. (Eclipsys sells its own proprietary hospital software.)
Outsourcing’s Business Benefits
Billing says Eclipsys has done whatever it takes in other areas beside financial. For example, it shared its project-management methodology with the IT department. The staff of the 1,064-bed hospital has used that methodology for non-IT projects. “Eclipsys even led some of the non-IT projects for us. That was above and beyond the contract,” says Billing.
The supplier also tracks patient quality and safety in its reports, even though this is not in its scope of service. This is important to the hospital because “our IT is tied to our corporate goals like patient safety and financial performance,” says the CIO.
And Eclipsys sent an integration analyst to the department. What’s remarkable was the supplier didn’t charge the hospital for his time. “This was beyond my FTE-based contract. They just sent him because they knew we had a real need,” says Billing.
The hospital has cut costs. Billing says its IT expense is less than two percent of its total budget; “the national average is well above that.” She adds the hospital’s capital budget does not have to continually provide PCs for the staff.
Trickett says Eclipsys typically spends more than $1,200 in training the employees who work on the St. Vincent’s account. “That’s more than most hospitals spend and certainly more than a hospital in financial trouble could afford,” points out the Eclipsys exec.
The hospital departments that IT supports are happy campers. In the final quarter of 2005, these internal customers voted IT the number one department in user satisfaction. St. Vincent’s treated the department to a pizza party to celebrate.
Then there’s an ephemeral benefit. “Our staff likes being part of something bigger,” says the CIO.
Although the contract is not based on service level agreements (SLAs), Billing reports Eclipsys takes the temperature of many metrics that would be included in the SLAs because its outsourcing quality management processes are ISO 9001:2000 certified (which is an international standard for quality). “I like that. I feel I can take advantage of something I don’t have to pay for in my contract,” says the CIO.
The contract does clearly delineate how the two parties handle disputes. But no one has tested that language. “In all this time, we have not had a single dispute,” says Billing.
The two parties talk daily and meet with the Eclipsys account manager weekly. There’s also an annual account review where both parties review where they’ve been and determine where they want to go in the coming year. In addition, Trickett visits at least every quarter.
Why This Relationship Works
Billing marvels that she’s “never had to push Eclipsys for anything. They stood by every commitment.”
Trickett says Eclipsys approaches each of its outsourcing engagements as a partnership. “Our buyers share their strategic goals with us. Then we map an IT strategy that tracks those objectives,” he explains. Billing adds, “I try to be as good a communicator as I possibly can so they understand the needs of our organization.”
Eclipsys participates in activities that are important to the hospital and the community it serves. For example, when St. Vincent’s has fund raisers, the supplier will make every effort to help out and also contributes. Eclipsys also forms teams that raise money for heart disease and diabetes walks.
She says the two parties have always made hard choices that end up as a win-win situation for both. “I can’t imagine anyone being better to us than they have been. I truly, truly can’t,” concludes Billing.
Eclipsys’s Top Ten List: 10 Things for Healthcare Organizations (HCO) to Consider When Outsourcing
- Flexible contract
In any outsourcing arrangement, both parties must clearly define what they expect of each other. The outsourcing provider must understand the healthcare organization’s expectations, and the HCO must clearly understand what the deliverables will be.The contract must also provide flexibility to accommodate changes that inevitably occur. Many outsourcing relationships go sour because priorities change, but rigid terms oblige the outsourcer to continue focusing on deliverables that have become irrelevant.
- Smooth staff transition
Once a HCO decides to outsource, inform affected IT employees as soon as possible. They need to understand what’s happening to rid themselves of the fear, doubt, and uncertainty associated with the outsourcing decision. When you meet with the staff early, they become part of the decision and acceptance will be more positive.
- Align IT plan with strategic goals
Does the outsourcer grasp the HCO’s key goals and issues? Before the parties sign the contract, has the supplier spent quality time visiting the organization and meeting with the executive team? In Eclipsys’s experience, it typically takes one to two weeks to dissect an HCO’s business operations and truly understand how to effect change within the IT organization and in the HCO itself.
- Defined price
Many HCOs outsource to control costs, either operational or capital. An outsourcing contract fixes both cost variables for a defined period of time. The supplier can only make changes to fees through a formal process, and the customer has to agree.
- Defined service levels
The outsourcing contract should clearly delineate for the customer the services it can expect to receive for the fee paid. It should contain service levels that are quantifiable and realistic from both parties’ perspectives. There should also be language that states what happens in the event of a service deficiency.
- Access to skilled resources
Many organizations outsource to gain access to resources they would otherwise not be able to access on their own. The supplier’s ability to tap into its resource pool and deploy resources to handle a given problem is a real asset.
- Best practices in service delivery
The outsourcing supplier should be able to demonstrate its commitment to service-delivery excellence. Its team should be able to deploy best practices to improve IT service delivery and ultimately end-user satisfaction. Ideally, the buyer should externally benchmark the supplier either through peer comparisons and/or external auditing.
- Governance model
The outsourcing contract should delineate the governance model to manage the relationship. Ideally the partners should form a steering committee with equal representation from both parties, whose purpose would be to openly discuss the relationship, review issues from both parties, and seek to resolve issues before they escalate. If escalation is necessary, the governance model should describe the process.
- Seamless integration
Once the outsourcer moves into the customer’s organization, it needs to blend with the culture and adhere to the customer’s policies and procedures. Becoming part of the organization–particularly a healthcare organization–can sometimes be challenging but, at the same time, rewarding.
- Mutual respect and shared trust
Both customer and outsourcer must understand what each other desires from the relationship, beyond the words of the contract. The relationship must be based on trust and respect. If both parties need to operate with the contract on the desk each day, then the relationship will not work in the long term.Managing an outsourcing relationship is more difficult than managing a traditional vendor/customer contract. The risks are far greater should either party fail; both need to understand this and work together to make it work.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].