August, 1996 Healthcare's top priority: Developing an effective information strategy By Robert Smallwood, Principal, Image AssociatesThe healthcare delivery model has changed. Managed care versus on-demand. Capitation versus fee-for-service. Integrated delivery networks (IDN) versus standalone provider and payer entities. Large physician groups or management services organizations (MSO) versus sole practitioners or small group practices. The competitive landscape of healthcare delivery and management is altered forever. The pace of information technology change has also quickened. There have been more changes in the last five years than in the previous 30. Imaging. Workflow. Document management. Groupware. The Internet. Intranets. ATM. Object-oriented tools and databases. The electronic patient record (EPR). The computer-based patient record (CPR). Clinical repositories. Managers in healthcare have to apply these technologies in a methodical, integrated way to support achievement of an organization's fast-changing business objectives. Strategic analysis of business and technical factors To begin a strategic analysis of the business and technical issues healthcare managers face, we must first assess the business environment, isolating factors which healthcare organizations have the most control over and can directly change. Since many hospital and physician services costs are highly regulated, one key area is that of internal administrative costs. This relates directly to the business of billing and getting paid for goods and services. The objective is minimizing costs while at the same time maintaining or improving the standard of patient care. This is a serious task: reducing the quality of care can mean the loss of human lives. No other industry has to face such daunting consequences to management decisions. According to the Office of National Statistics at the Health Care Finance Administration (HCFA), administrative costs have been climbing at a faster rate than hospital care costs, and this trend has accelerated since 1990. In 1980, administrative costs compared to hospital care costs were 11.5%; in 1990, they were 15%; and in 1994, 17.3% (See Figure 1). Healthcare operations and IT managers must attack and reverse this trend, if they are to be successful in lowering costs, thereby increasing profits. But these cannot simply be one-time reductions. To gain a sustainable competitive advantage (that is, advantage that cannot easily be replicated by competitors and can be maintained over an extended period of time), organizations must operate an overall lower cost structure (systematically lower costs for all administrative services over time), compared to competitors. The only way to achieve this is through the optimum application of information technology. Simply put, it must do things differently than its competitors. There are three ways: 1. Invest more dollars than competitors in information technology; 2. Apply these technologies more rapidly than the competition, and gain "first mover" advantages (without taking excessive risk by moving too early); and, 3. Roll out this complement of technologies in an integrated and logical way to reduce IS support costs over the long term. Healthcare organizations, compared to other industries, spend little on information technology. The largest investments in IT (measured as a percentage of operating expense) are made by the banking industry--more than seven times that of the healthcare industry. So, clearly, IT spending in healthcare needs to increase. This conclusion has been recognized by CIOs and, in a recent survey by Coopers & Lybrand, information systems spending is planned to increase by more than 10% in the next three years by over 42% of healthcare organizations (see Figure 2). More significant, spending will increase by more than 20% for 23% of the organizations surveyed. Integrating your imaging system decision with IT infrastructure Many times healthcare organizations select the document imaging software that looks best in the demonstration, without a serious analysis of how this will affect the overall IT infrastructure and what the ongoing support requirements. To demonstrate this point, what if the demonstration showed all the nice bells and whistles, but it operated only on an Apple Mac platform? This would require deploying hardware and software that is not found in many healthcare organizations from a vendor that has lost favor in the marketplace. It may be the best application fit, but it is not the best system fit overall, given the support and integration issues overwhelm the application fit. Clearly, operating systems, relational databases (RDBMS), graphical user interfaces, peripheral support and other technical issues must also be considered. If your organization has standardized on Sybase as an RDBMS, it is not likely to be a good use of your time looking at a product which only supports Gupta. It is twice the training, twice the support and integration issues that can be avoided are created. Streamline information systems. Avoid adding to the disparate, heterogenous nature of existing systems by aligning your technology decisions into a cohesive strategy for the entire organization. Which vendor is best for your organization? It depends on your business objectives, existing information technology (IT) infrastructure, and level of risk the organization can accept. Most organizations will end up with more than one software and hardware provider to achieve the total solution. The companies that contributed to this white paper are among the premier vendors of healthcare information systems. Establishing a pilot First, establish your business mission, goals and objectives. The analysis of the business processes currently in place, called "process mapping," will graphically show what steps any particular workgroup takes to accomplish its tasks. Then, process redesign or reengineering must occur in an environment of total quality management (TQM). Non-value-added activities such as checking, approving or verifying must be eliminated or minimized. Redundancies must be eliminated--"doing it once, doing it right" leads to reduced costs. A pilot area must then be selected. It should be an area big enough to show a financial impact, but should not be so large so that the pilot implementation takes more than a year. A strong corporate sponsor is essential and the project plan must be adhered to. Many hospitals have selected the business office/patient accounting area and have seen the payback in terms of reduced accounts receivable days and headcount reductions of 10%-20% due to the increased automation. Other organizations may select a lower risk, document archiving function to test the technology and allow support staff to gain expertise. Areas such as ER records or lab requisitions have been good candidates for in archiving applications. Still other organizations attack the heart of the clinical system--health information. Whichever is your choice, the personnel effort (and time) should not be underestimated. A good rule of thumb is to take your initial time and cost estimates and increase them by 50% or more. The vendor selection process should have been a cross-functional, collaborative effort, and the Project Team is typically an extension of the system evaluation team. A project plan should then be developed with the assistance of those experienced in implementation, to help point out the caveats and pitfalls which are learned only from experience. Attempting to implement in too quickly is as inadvisable as too long of a timeframe. Usually six to 12 months is appropriate, although the complete rollout into other organizations may take 24-36 months. Why start now? Document imaging technology has been around for 15 years. Most of the risk lies not in the technology itself but in business issues of vendors (e.g. previous successes, financial health) and the actual implementation of the technology. Projects fail because of underestimation of effort, incorrectly applied technology and lack of planning. They do take time. If your organization begins a year ahead of its competitors, and successfully implements an imaging, workflow and document management system, the competition cannot catch up overnight. It simply takes six months or more to define needs, evaluate vendors and negotiate contracts and six months or more to conduct an initial implementation. So, with "first mover" advantage, your organization can build a sustainable competitive advantage through a more efficient, lower cost structure, while at the same time becoming more adaptable to the changing business and regulatory environment. Robert Smallwood is a principal at Image Associates Consulting, a document imaging, management and workflow consultancy and Healthcare Technology Transfer Partners, a consulting firm dedicated to technology knowledge transfer to healthcare organizations. Smallwood is a member of the board of directors of the Association of Information and Image Management (AIIM) International and contributing editor to IW magazine. He is a frequent author and speaker on imaging, workflow EPR and related topics and editor of "Inside Imaging in Healthcare Newsletter" and may be reached at 1-800-679-8758 or 102077.315 @ compuserve.com.
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