In the Advisory Board’s Annual Health Care CEO Survey, 183 c-suite executives rated 26 issues. Coming in at number two in that list was “Innovative Approaches To Expense Reduction.” That leads me to believe that there is an appetite for new opportunities to reduce costs and there is a growing recognition of where these opportunities may lie. It’s getting harder to improve margins through the usual cutting of FTEs or participating in buying groups, so the next big wave of expense reduction will have to come from new approaches.
In light of the need for cost reduction, healthcare organizations will have to find ways to reduce some of their costs without sacrificing value or negatively impacting outcomes. IT costs will get their share of scrutiny, begging us to ask the question, “Is there a way to reduce the spend on IT without impacting technology use and performance?”
IT Shared Services provides a way to lower costs and the spend on IT while not sacrificing technology use and performance. The concept goes like this: share IT resources such as labor, hardware, software, support, etc., between multiple organizations. Combining these resources means you can still have access to the expertise, skill sets and processing cycles that you need, while not having to staff and manage it all yourself. This provides the ability to lessen IT spend while still getting the expertise and value that you need.
Here is an example of IT Shared Services approach that we have been working on with two independent healthcare organizations that are fairly close in proximity, but not close enough to compete for patients. We are working to expand the number of facilities sharing services and early indications are showing that the savings grow significantly as we do so. Here is how we’re finding savings:
- Combining their two datacenters into one (reduces hardware, maintenance and support costs, as well as power and cooling costs)
- Designating some staff to each facility, combining some into a shared pool to pull expertise from, and reduce or redeploy and excess labor (note: there may need to be some reductions in staff, but to reach the most cost effective IT organization, organizations have to be willing to do this)
- Combining some common applications and delivering those as a managed service (reducing licensing, support and maintenance costs)
- Pursuing volume/multi-site discounts with vendors
The results of this model so far include a $1.9M in IT savings over a 5-year period from:
- Datacenter and infrastructure costs lowered by $150K
- Labor costs reduced by $1.35M
- Telecom costs lowered by $172K
- Printer and print management costs reduced by $275K
Innovation will lead to more opportunities. There continues to be exploration on savings within infrastructure as a service, interfaces as a service, and IT as a service.
Let us know if you’re interested in exploring how IT Shared Services could save your organization in future IT costs.