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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.

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.

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