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Wiping the Slate Clean

January 1, 1998
by Alan Joch
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Try to grow an obedient LAN into a sprawling WAN to support an enterprise-wide scheduling system or to assimilate a merger, and you may start to feel like a real-life Perseus fending off Medusa.

"Managing communications over a WAN is intrinsically more difficult and expensive than over a LAN," says Steve Ditto, vice president of the network integration services practice for First Consulting Group, Long Beach, Calif. Part of the problem is that hospitals may need entirely new pieces of technology, like routers, to run enterprise-wide networks. Add to that the vagaries of telecommunications: IS people suddenly have to start dealing with telephone companies and their own arcane technologies, like frame relay and SMDS [switched multimegabit data service]. "Network management can become a huge problem overnight," Ditto warns.

Another challenge for IS results from computers being used increasingly for clinical applications rather than for pure administrative tasks. "Now that physicians are becoming big players with networked applications, IS needs to make sure users are satisfied with their computers," says Bob McNeill, executive vice president and chief operating officer for Daou Systems Consulting, San Diego.

With technologies getting more complex and users becoming more demanding, many healthcare organizations view outsourcing companies as technological white knights. Savvy hospitals can become more efficient, make hospital workers happier and end up with state-of-the-art computer systems. However, experts warn that not every hospital is right for outsourcing, and even those that are candidates need to choose carefully before trusting their mission-critical systems to strangers.

Three choices
While the overall concept of network outsourcing is straightforward--letting an expert third party take over your networking resources and perhaps even some of your IS staff to tame the complexities of data networks--hospitals need to understand the subtle differences among the three main outsourcing "flavors." With the oldest type of outsourcing, typified by the services offered by large systems integrators like EDS, Plano, Texas, a hospital turns over all its networking resources, including mainframes, servers and staff, to the outside company. This puts the responsibility for networks on another company’s shoulders and may be a way for a hospital to recoup some value by selling outdated legacy hardware to the outsourcing company.

A more recent trend sees hospitals farming out only specific network needs, like management of a enterprise application or an integrated delivery network (IDN). With this approach, a hospital doesn’t put all its communications resources in the hands of one company, but may take advantage of staffing and expertise that aren’t available in house.

A third alternative focuses more on strategic than tactical networking needs: An outside company handles the managerial aspects of running a network, including staffing, budgets, and growth--rather than the technical details of keeping communications up and running on a day-to-day basis.

Of these choices, the first two are garnering the most attention from network-weary hospitals today. How can you tell if you’re a candidate for outsourcing? According to Ditto, most hospitals that choose outsourcing do so when they realize they don’t have the resources to meet a new but critical clinical or business demand. Often, these are hospitals that may be behind the technology curve, with outdated networks perhaps built around a mainframe.

Once the need for enterprise-wide application or an IDN arises, network-challenged hospitals may find on-staff expertise lacking and attracting experienced outside staff difficult, as large organizations from every other market segment compete for the same people. "Hospitals need people with world-class project-management skills and leading-edge technology skills, to build intranets, Internet applications, direct centralized network management systems, and to implement Windows NT," Ditto says. "These skills are in high demand, and it’s hard for hospitals to recruit these people."

Outsourcing companies with skilled networking staff can jump start a besieged hospital. Unfortunately, not all outsourcing agreements are network Nirvana. Outsourcing works best when economies of scale are large, says McNeill. The threshold is 2,000 or more users. "Anything less just isn’t large enough to justify outsourcing," he believes.

Hospitals also shouldn’t expect outsourcing to be a short-term, cost-cutting measure. Consultants say outsourcing reduces long-term costs by increasing user efficiency and by consolidating technologies. "Especially hospitals that have merged facilities with another organization have a difficult time establishing technology standards," McNeill says. "We’ve seen as many as 10 different email programs in one organization."

Lack of standardization increases costs because the IS department must be able to fix multiple types of programs rather than concentrating on one, and because multiple programs need to be upgraded when new versions are released by software vendors. "Hospitals get frustrated because they end up throwing money at the problem, but user satisfaction stays low because IS is spread thin," McNeill says.

Outsourcing can help these companies by wiping the technology slate clean with a coherent set of software used by the outsourcing vendor.

What you’ll pay
Outsourcers often price projects after analyzing the hardware, software and networking resources already being used by the client. Outsourcing costs begin at approximately $40 per user, McNeill says, but can rise significantly above that price depending on the responsibilities of the outsourcing company.

Once the per-node price is established, hospitals can expect a quote for a fixed price based on the service a client needs. Basic service makes the outsourcing company responsible for fixing any technical problems with the network as well as getting new users up and running quickly, typically in five days or less. Alternatively, clients might request additional services, like outsourcing help desk functions, or network upgrading, where the service company is responsible for adding new hardware and software as revisions are released to keep the network technologically state of the art.

How to choose
Once you’ve decided that outsourcing is right for you, how do you select the right partner? Pay attention to four key areas.

1) Write a contract you can live with. "Most hospitals focus on the price of an outsourcing project, but hospitals for the most part don’t have a lot of experience developing good contracts," Ditto says. What should you hone in on? First, make sure the document clearly states your goals and objectives, along with how progress will be measured.

This may be more difficult than it sounds. The reason is that many facilities can’t define the level of service they need because they don’t know enough about their current operations. Relevant data points include: How many help desk calls does your IS department handle each day? What’s the response time for these calls? Expect glitches if answers to questions like these aren’t available. "You can’t manage what you can’t measure," Ditto asserts. Ultimately, you may wind up paying the outsourcing company for a resource audit because many service providers build into their price an extra amount to compensate for the lack of this kind of information.

2) Make sure the contract is flexible. Write in monthly or quarterly evaluations to assess how the project is evolving and to identify any adjustments that are needed. "In the healthcare industry today, no one knows what changes might occur over the life of a contract," Ditto points out. Your business may double, because of a merger perhaps. Make sure the contract spells out the costs if a fundamental change occurs. A corollary: Don’t sign any contracts five to ten years in length, precisely because change over such a period of time is too hard to predict. Instead, keep contracts to two to three years in length. If the partnership blossoms, you can renew the contract, however, if your needs change or if you have service complaints, you have a safety valve for finding an alternative outsourcer.

3) Structure the contract around total cost of ownership. Rather than specifying a total budget for hardware, software and services, agree on an annual price-per-PC cost for maintenance and administration. This helps assure that your goals are being met: You receive an agreed upon level of service for each user at a specified cost. Otherwise, you may find yourself being asked to purchase a steady stream of hardware and software. "Most outsourcing companies make more money the more they sell you," Ditto warns.

McNeill adds that if outsourcing projects revolve around performance levels and user satisfaction, the outsourcing company has a built in incentive to educate users and maintain their satisfaction. "It becomes a win/win situation for the outsourcing company and for the client," he says.

4) Investigate your potential partner. According to McNeill, healthcare facilities should investigate the technical resources of potential outsourcing companies. Check references and talk to past clients to make sure the company has the expertise to deliver what it promises. Similarly, ask for proof of financial stability. This company may be responsible for your mission-critical operations for three years or more; you need to be confident the company is strong enough for the long haul. Finally, check out its relationships with hardware and software vendors. If an outsourcing company has preferred partner status with technology vendors, usually because of the volume of products it purchases annually, you can negotiate to have a portion of those volume discounts passed on to you.


Alan Joch is a contributing editor of Healthcare Informatics.



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