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Relationship ROI

December 1, 2008
by Mark Hagland
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These days, St. Vincent's Health System is a part of the massive, 65-hospital St. Louis-based Ascension Health, the nation's largest Catholic health system, with $12.3 billion in annual operating revenues, and hospitals spread across the country. But when Tim Stettheimer, Ph.D., joined then-St. Vincent's Hospital more than 15 years ago, it was a standalone facility in Birmingham, Ala., with the resources and infrastructure of the average mid-to-large-sized community hospital.

Now, St. Vincent's itself is an 800-bed, four-hospital-ystem within a system in Birmingham. And when in 2004, Stettheimer — who is senior vice president and CIO at St. Vincent's — presided over a meeting about optimizing the tracking and management of patients and equipment, that meeting launched a fully commercialized IS solution with co-development at its core. Now known as Horizon Enterprise Visibility, a system offered by Alpharetta, Ga.-based McKesson Corp., the solution gives clinicians and staff members the capability to optimize flow and communications around patients and equipment through real-time clinical information.

And while Horizon Enterprise Visibility has 32 live and 14 contracted customer sites, it all came out of a discussion around a specific, individual need, Stettheimer says. “That product,” he explains, “actually came out of a meeting in my office back in 2004. I had contracted with another partner we have in Birmingham, ComFrame, and I asked them to go out and do a general market assessment and feasibility study on RFID development. Out of that came a brainstorming session, and out of that evolved what is now know n as HEV.”

Gary York, who was the principal of ComFrame back then, became the principal of a new company, Awarix, which was co-founded and co-financed by St. Vincent's and was acquired in August 2007 by McKesson. St. Vincent's co-owned the intellectual property that Stettheimer and his colleagues co-developed with Awarix. Even today the hospital continues to receive proceeds from the commercial sales of the now-McKesson product.

Would the average standalone hospital CIO have taken on such an ambitious project? Perhaps not. But, Stettheimer says, if a hospital organization has the right kind of culture — entrepreneurial in its focus and wit h senior executives and clinician leaders willing to take intelligent risks — co-development with a vendor on a new solution could make sense.

Above all, Stettheimer says, “You have to ask the question, why would you do it? You have to have a really good reason. Before you do co-development, you're going to look around and see what exists, even in other industries. Co-development is never the first answer; usually, it's the last. And you very much have to be protective and visionary in what you get out of it, not only in terms of products, but also intellectual property, meaning, you absolutely need to make a deal involving an equity stance or revenue sharing contract with the vendor; just getting software free isn't enough.”
Tim stettheimer, ph.d., svp and cio, st. vincent's health system, birmingham, ala

Tim Stettheimer, Ph.D., SVP and CIO, St. Vincent's Health System, Birmingham, Ala

C. eric hartz, m.d.

C. Eric Hartz, M.D.

Catherine bruno

Catherine Bruno

If executives can answer all these questions positively, co-development may be right for their organization, he says.

Common characteristics

The course that Tim Stettheimer initiated as a CIO, turning an idea into a commercialized product, is only one of a broad range of options that exist when it comes to partnering with vendors. Nationwide, hospital organizations of many different sizes and types are moving into this realm, working collaboratively with vendors to develop, produce, test, and optimize a rainbow of healthcare software products.

Some would argue that many of these partnerings do not precisely adhere to the strictest definition of “co-development,” which to some experts means more-or-less equal financial and resource investment. In fact, the range of provider-vendor partnerships defies strict categorization, which is probably to be expected.

So what do these partnerings have in common? All those interviewed for this article agree that the successful partnerships share the following characteristics:

  • They begin with an unmet IT need that cannot be satisfied by existing products in the marketplace.

  • They involve a very well-thought-out collaborative strategy between a provider organization and a vendor, with sound due diligence prior to the signing of any contracts.

  • They require, at base, an organizational culture on the provider side that is entrepreneurial in spirit and open to thoughtful risk-taking.

  • What's more, they require a fit between the two cultures of the two organizations. Often this has already been established through an existing relationship. Some CIOs feel without such a relationship, the risk of failure is too high.

  • Industry experts agree the area of greatest concentration is that which bridges clinical workflow and operational efficiency concerns.