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Chartis Group Leaders: It’s Time to Talk about IT Cost Rationalization

May 23, 2017
by Mark Hagland
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The Chartis Group’s Parrish Aharam and Greg McGovern share their perspectives on the subject of IT cost rationalization

Recently, Parrish Aharam and Greg McGovern of the Chicago-based Chartis Group spoke with Healthcare Informatics Editor-in-Chief Mark Hagland about the important topic of IT cost rationalization in patient care organizations. Aharam is a principal in the Informatics and Technology practice within The Chartis Group. He has almost 15 years of experience in consulting with a focus in both the provider and payor sides of healthcare. His range of experience includes large-scale IT implementation program management as well as strategy and planning initiatives and advisory service efforts. Before joining The Chartis Group, Aharam provided strategic IT consulting services with Deloitte Consulting, serving large, complex healthcare organizations. McGovern is also a principal with The Chartis Group. For more than 20 years, he has led and advised leading integrated delivery networks and hospitals. He has spent the last several years advising executive and IT leadership on the development and execution of IT strategy and performance to support organizational strategy and growth. Before joining The Chartis Group, Mr. McGovern was the chief technology officer at the Roseville, California-based Adventist Health, representing 20 hospitals and more than 5,000 providers. While at Adventist, he was responsible for designing and delivering an integrated clinical care network, and developing provider connectivity and eHealth strategies. Below are excerpts from that interview.

When you look at the subject of cost rationalization in healthcare IT right now, what does the overall landscape look like to you?

Parrish Aharam: This has been a really fun area for us to focus on, for a number of reasons. Essentially, what’s been driving a lot of this work is a few things. First, everybody went full-bore on their EHR [electronic health record] implementations. And now that those implementations are done, people are saying, ‘I thought those implementations would drive costs down, not raise them.’ And second, everyone’s really tightening their belts, based on reimbursement changes and market competition factors. At a high level, that’s why a lot of our work these days on IT planning is focused around cost reduction.


Parrish Aharam

Greg McGovern: And we always think, what is the headline in this? And ours would be around the IT investment paradox. We see the organization struggling with how they squeeze the costs down because of slowing reimbursement, and market factors, but at the same time, they’ve got this value-add, high-quality IT shop, and their work comes at a price. Still, the IT dollars stand out; so folks ask, how can you contribute? The conversation is switching. You start the conversation with the CFO saying, how many FTEs does it take to screw in this IT lightbulb? But you have to be careful not to cut off your nose to spite your face. And the analogy I like to use is that IT has become the fuel for a jet aircraft, not a car. So how many wings do I have on my plane? Because IT is fueling change now.

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Here's an example. We had finished the implementation of one leading EHR, with a client; we had a great budget. And they asked, how come I still have these 100 IT folks still standing around who did the implementation? But the reality is that the organization needs a certain number of people to do the upgrades and maintenance. So the real effort now that we’re seeing is to sit down with the IT and the business together and figure out the actual need, and how to quantify that need in terms of FTEs and resources, and really get down to brass tacks as to what the training need is for the organization. That’s sort of the “Cadillac” question; but if we go to the “Chevy” version, you could increase physician dissatisfaction. And what are the means of delivering on the need? Is it a centralized IT capability? Or is it more through distribution of resources? And are there some service methodologies that we can use to tackle this program with, including self-learning apps? And make it a bit more self-service? A great concept, but what does that look like, and what will it cost? So the challenge is moving the discussion away from purely, ‘how many FTEs?’ as the question being asked.


Greg McGovern

So this needs to be a broad c-suite discussion rather than not a chop off heads discussion, right?

Aharam: Yes, that’s exactly right, and one of the reasons we keep getting called in for this. And many of the executives not on the IT side, they just don’t understand the total cost of adding a new application—the infrastructure, the support—so that’s one of the important aspects of this, explaining the infrastructure and the cost. And a lot of the times, the drivers of the cost come from the business.

So there’s a dynamic CFO-CIO discussion that has to occur, within the broader context of IT cost and resource utilization in patient care organizations, correct?

McGovern: Yes, but let’s move that dynamic a bit further. The gap that is there and that needs to be overcome is what’s needed is what we call enterprise IT governance. And that’s not the old IT governance of guys thinking up business strategy and then throwing it over the wall to the IT people. So it’s not enough if it’s just the CIO and CFO, but the CAO, the CEO, etc. What will it take to activate a strategy, and to get into an agreement that the business strategy is worth the cost? A lot of folks look at IT costs episodically. So it’s really important to look at ongoing organizational costs, so let’s make sure we can get there.

What are the smartest organizations doing on this journey?

Aharam: It does depend on the organization. I’ll give you an example of one organization that has really transformed how they think about spending from an IT perspective. Two years ago, this organization would approve every project and use consultants and contractors to get it done; there really was no filter. And the CEO last year said, this is all you’re going to get. And last year, they did what Greg just mentioned, enterprise IT governance, they implemented. So they looked at portfolios, such as an ambulatory IT portfolio, with x dollars and x human resources. They implemented it, and made it work.

McGovern: Parrish said it well. And it’s the same everywhere—I’ll counterbalance it with the question, what are the organizations not leading this transformation, but who are shooting themselves in the foot, doing? Those organizations that aren’t strategic are seeing disruptions and dissatisfaction, and having to revert and turn back. Parrish is right—every organization that we’re working with now is incorporating IT and understanding that it’s embedded in their business, and talking about IT as part of their business, not as a department anymore. But one key point that Parrish brought out is important, is this notion of an investment ceiling. So if we’re going to set cost controls, let’s do it at the highest level. So, here’s how much we’re willing to invest in ambulatory, because we have to set that amount aside for a physician investment, and that works so well.

What do CIOs need to do to understand this phenomenon?

Aharam: CIOs need to be transparent. They need to be transparent on what IT costs, and they need to make it clear what the implications are for a particular business decision. Too often, there isn’t enough good communication between and among the CEO, CFO, and CIO.

McGovern: I think that’s exactly right. And our message to CIOs who are still stuck on the other side of the divide, is that it’s really true that the CIO is stuck until he brings himself up in his own education to realize where he needs to be, and then he needs to work with his team. We are generally brought in from the CXO level, and handed over to the CIO. So one of the things the CIO can do is to start modeling his behavior and for his team. CIOs need to be part of working through the problem and finding a solution. Really, the CIO needs to model transparency, and stop the divide. But the CFO needs coaching as well; the CFO really needs to be saying, CIO, I need you to come over here, and let’s talk turkey. I don’t just want to tell you to do, I need your help. So there needs to be a bridging of the gap; the two need to pursue each other, until they’re wedded at the hip.

When the CIO is at the true c-suite level, that’s when some of this happens, correct?

McGovern: Yes; it’s time for the CIO to speak a different language. It’s not about telling the c-suite about blockchain. So it’s language, absolutely.

Given that the landscape of the future will involved straitened reimbursement and restricted resources, how will CIOs and other healthcare leaders be able to optimize and maximize the resources available to them?

McGovern: This is why benchmarking—not just IT benchmarking, but business benchmarking—is so important, and so important to talk about together, in all of this. For example, you need to look at the organization’s operating revenue increase, year over year. Is it going up 6 percent a year? What about IT organizational expense? Is that going up at the same level? And when the organization realizes and is budgeting for a shortfall in revenue year over year, and they’re seeing a 0.1-percent increase in revenue, can you stay in line with that? You need to figure out how to keep the IT expense in line with that.

Aharam: You summed it up very well, Greg. Per your question, Mark, I think the days of handing out multimillion-dollar capital to IT year after year, that’s done. Over the next five years, the majority of health systems will see a slowdown in IT capital expenditures, and will be looking at how to economize, for the next five years.

 

 


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The Modern Healthcare CIO, CMO, and CTO

December 10, 2018
by Lori Williams, Industry Voice, vice president of fulfillment, Gigster
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Disruption in the healthcare space comes primarily from the expansion of data’s role in the industry, and the healthcare C-suite’s familiarity with that expansion will help drive company and industry success

For the healthcare C-suite executive, the industry has never been more complex—nor has it ever contained so much potential. Emerging technologies mixed with political uncertainty has created an environment where incredible amounts of healthcare data are revolutionizing how patient care is handled, but patients remain uncertain about the future of their own health. With better data and the means to draw insights from it, healthcare CIOs, CMOs and CTOs are in a position to help address patients’ uncertainties and make hospitals and clinics more accessible and effective than ever before.

Here’s a look at how the role of the modern healthcare CIO, CMO and CTO is changing:

The Modern Healthcare CIO
The modern healthcare CIO’s role has evolved to become more innovative. No longer a title reserved strictly for engineers and IT professionals, today’s healthcare CIOs are focused on information science instead of simply setting up network infrastructure or providing back-end support. The trend towards a more data-centric role began as hospitals rolled out electronic health records, equipping individuals with better access to healthcare provider data. Through enterprise data warehousing, CIOs are becoming masters of data management, governance and predictive analytics, and passing along the many benefits of those knowledge bases to patients.

The Modern Healthcare CMO
The confusing healthcare landscape makes the role of a healthcare CMO more necessary than ever before. Thanks to ongoing regulatory changes, uncertainty surrounding the Affordable Care Act, and shifting consumer expectations for on-demand services, healthcare CMOs are responsible for helping patients navigate their way through a complex and opaque industry. As patients continue to assume the role of consumers, carrying out comparison shopping as they would for any other industry, CMOs must be adept in crafting a healthcare provider’s brand and messaging.

At the same time, CMOs must also ensure that healthcare providers offer a modern online experience, ensuring websites are mobile-optimized and social media accounts are generating engagement. This also means CMOs need to help move marketing efforts into the 21st century, transitioning away from direct mail or billboards towards digital marketing and CRM tools. Because if they don’t, there are plenty of med tech startups that will promptly eat into their market share.

The Modern Healthcare CTO
Unlike healthcare CTOs of the past who remained siloed off from the rest of the organization, today’s modern healthcare CTO is fully engaged with healthcare providers and their technology stacks, utilizing new software and hardware to improve daily workflows. The CTO is enabling the transition to patient-oriented self-service operations, enabling patients to carry out administrative tasks like scheduling appointments or refilling prescriptions over the internet. Because medical data is often stored in a variety of different sources, it’s critical for the CTO to be able to keep these systems interoperable with one another. For hospitals riddled with legacy software, CTOs should expect to continue employing middleware solutions to bridge the gap between old and new.

Members of the healthcare industry C-suite have the power to transform lives, and the CIO, CMO and CTO have roles that directly affect a provider’s ability to carry out positive change. With better data from the CTO’s tech stack, the CIO can use better analytics to help providers determine the best solutions for their patients, marketed to consumers by the CMO through modern platforms in clear, easy-to-understand language.

Lori Williams currently serves as Gigster’s vice president of fulfillment. Prior to joining Gigster, Lori was the general manager for Appririo.


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What Does Your Magnum Opus Look Like? A Few Operatic Thoughts

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I was given the privilege and pleasure recently of presenting, for the second year in a row, a lecture on Richard Wagner’s “Ring” cycle, as the leading opera company in my city, a world-class opera house, has been putting on, in yearly succession, the four operas of the “Ring of the Nibelung” cycle by German composer Richard Wagner (1813-1883). Last year, the second opera in the tetratology, “Die Walküre,” was performed; this year, the third opera, “Siegfried.” After the concluding opera, “Götterdämmerung,” is performed, the entire cycle will be presented in festival format, always a major cultural event. I spoke on “Siegfried.”

I’ve been fortunate to have seen six complete “Ring” cycles in live opera houses in different cities, and I can tell you, it’s a life-changing experience, as this four-opera work (16 hours of music altogether), sits at the absolute summit of western art. Richard Wagner was a hideous human being himself, but spent numerous years working on something that changed the course of classical music and redefined opera.

What’s more, from the summer of 1848, when Wagner wrote a first sketch of the libretti, or texts, of the operas, until their true compositional completion in 1871, more than 23 years were to pass; and it would be another five years before the tetralogy was fully presented, in a purpose-built new opera house in the Bavarian town of Bayreuth. It was a herculean feat to create the entire text of these four long operas, and compose 16 hours of music that would completely redefine the concept of opera. Indeed, when the crowned heads of Europe, the great living composers, and the 19th-century European intelligentsia and glitterati, gathered at the new Festspielhaus in Bayreuth in 1876, many were so overwhelmed by what they saw and heard, that they were rendered speechless. Even now, 142 years later, first time Ring-goers are overwhelmed by the breadth and sweep, the musical and dramatic audacity, and uniqueness of the “Ring” operas, with their story of gods, giants, dwarves, flying Valkyries, Rhinemaidens, one huge dragon, humans, gold mined from a river, magic swords and spears, and of course, a gold ring whose possessor can control the world and its fate.

Even just looking at the third opera, “Siegfried,” Wagner struggled mightily. For one thing, being essentially a grifter and a cad, Wagner borrowed/took money from everyone who would lend/give it, and often had affairs with the wives of the patrons bankrolling his compositional work, leaving his life in constant chaos, as he fled from one city to the next. One such wife, Mathilde Wesendonck, inspired the opera “Tristan und Isolde,” groundbreaking operas that Wagner wrote during a 12-year hiatus in his composition of “Siegfried.” And “Tristan” itself changed the entirety of classical music, its tonality-challenging chromaticism.

Well, no one is expecting anyone to match the unique creativity of Wagner’s “Ring” cycle. But the leaders of U.S. patient care organizations are doing a lot of important things these days, including using formal continuous improvement methodologies to rework core patient care delivery processes in order to transition into value-based healthcare. What’s more, as our Special Report on Leadership outlines, the entire role of the CIO is being rethought now, as the demands for leadership and strategic capabilities are catapulting that role forward; and patient care organizations are beginning to make real headway in advancing equality for women and people of color among the ranks of healthcare IT leaders and managers.

So while no one is expecting anyone to create an operatic tetralogy that will change the face of music, there are plenty of heroic endeavors open to anyone willing to envision the healthcare system of the future. The opportunities are as limitless as the imagination.

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Using Performance Management to Scale

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Performance management is so much more than just a year-end performance review
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Performance management and goal setting have always been part of my DNA. It’s like a compass that tells us we are steering the ship in the right direction or gives us a chance to course correct if we wander off track. It’s hard for any organization to determine how they are doing unless there are clear measurable objectives. CIOs and their leaders need monthly, quarterly and annual goals to measure how you and your team are doing against the plan. I also firmly believe they should be S.M.A.R.T. goals: Specific, Measurable, Achievable, Relevant and Time-based.

Once the goals have been established, you need a written plan. I like three-year rolling plans so you can look into the future and describe your vision of what your organization will look like 36 months out. Then you can work back to the second year, and eventually the first year, to give you the framework for what you need to accomplish in the next 12 months. I suggest you do it with your managers. It makes them accountable to the organization since they are involved in the formation of the plan.

Your plan must be a living document to be used frequently during team meetings throughout the year to see how you are performing as a team and individually. This is not a process you invest in to review at year-end to see how you performed. By then it’s too late. It must be reviewed on a consistent basis to make sure everyone is on track. Performance management is so much more than just a year-end performance review. If there are individuals who are not performing against the plan, you can use the plan as a tool to performance manage them to re-engage as an important member of the team. 

I just returned from the Scale-up Conference in Denver and learned so much about taking goal setting and performance management to a whole new level by adopting the "Rockefeller Habits," as written by Verne Harnish. After reading the book, everything changed for me in the way we will be doing our planning, goal setting and performance management forever. It’s so brilliant and easy to understand. Here they are:

Rockefeller Habit #1: The executive team is healthy and aligned

Rockefeller Habit #2: Everyone is aligned with the #1 thing that needs to be accomplished this quarter to move the organization forward

Rockefeller Habit #3: Communication rhythm is established and information moves through the organization accurately and quickly

Rockefeller Habit #4: Every facet of the organization has a person assigned with accountability for ensuring goals are met

Rockefeller Habit #5: Ongoing employee input is collected to identify obstacles and opportunities

Rockefeller Habit #6: Reporting and analysis of customer feedback data is as frequent and accurate as financial data

Rockefeller Habit #7: Core values and purpose are “alive” in the organization

Rockefeller Habit #8: Employees can articulate the key components of the company’s strategy accurately

Rockefeller Habit #9: All employees can answer quantitatively whether they had a good day or week

Rockefeller Habit #10: The company’s plans and performance are visible to everyone

Accountability is no longer hard to measure since the entire plan is visible to everyone throughout the organization. Each part of your team should have key people accountable for every functional part of your organization. No more guessing is required. I’ve read countless books about leadership, performance management and goal setting, as I’ve been an avid student on the subject for decades.

These ten habits, once adopted and measured regularly, can change any organization that wants to grow and scale, and keep everyone accountable along the way.

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