KLAS Finds Partial IT Outsourcing On The Rise

Sixty percent of healthcare organizations that have engaged a firm for discrete IT services reported seeing more value for their IT dollars since outsourcing, according to a new KLAS report, “IT Outsourcing: Better Service In A Shifting Market.”

Not surprisingly, partial IT outsourcing is on the rise, according to Mike Smith, services research general manager at KLAS and author of the report. What’s interesting to note, however, is that some of that growth has come at the expense of full IT outsourcing arrangements. Smith says as many as 50 hospitals have either reduced or eliminated such arrangements.

“The reality is there are certain key areas that are very, very strategic–such as maintaining applications that are critical to achieving meaningful use–where, if they have the talent or can leverage their own resources to handle it, in certain instances, we are seeing those pieces brought back in-house,” he said.

To free up that in-house talent, some hospitals are outsourcing functions such as help desk and legacy application management. “Since meaningful use and ICD-10 are pulling resources, time, and focus, hospitals are looking to outsource certain pieces that are not strategic,” Smith said.

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CTGHS topped all other firms for partial IT outsourcing. CareTech came in first in the ranking for extensive IT outsourcing and second for partial ITO. Findings for Accenture, Allscripts (now Eclipsys), Anthelio, ACS, Cerner, CSC, McKesson, and Phoenix Health Systems were also included in the report. CareTech, Dell, and Siemens ranked in both the partial and extensive ITO categories.

Although there has been some movement from full to partial ITO, and even to no ITO (as some providers have taken all IT services in-house), the firms’ overall performance trends in almost all cases have improved since 2008, according to KLAS.

Smith said a key to outsourcing success is for both parties to strike a fair arrangement, put as much as possible in the contract, then approach the challenges that will inevitably arise during a multiyear relationship–especially those that fall outside the purview of the contract–in good faith and with good will.

He added that, especially when it comes to larger deals, customers expect the vendor’s executives to be available and responsive, while the vendor itself should share best practices gleaned from working with its overall client base.

“Clients expect service providers to offer good, thoughtful feedback to them and strategic advice,” Smith said. “Some are good tactically at keeping a box up and running, but not as good at strategy. If you can do both, while sharing with them what you seeing from other clients–things they should be doing for ICD-10 and meaningful use–satisfaction will he higher.”


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