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Healthcare IT: Buy or Build?

What are the drivers affecting buy and build strategies?

What are the drivers affecting buy and build strategies? What elements must be considered if a hospital is to grow and maintain its own applications, purchase an off-the-shelf product, or work with a team (outsource engineering) to build a product? Making the right choice is a challenge.

Let's look at scenarios in the (Philippine) healthcare market and discuss the answers.

IT TEAM SIZE
With smaller IT teams, the propensity to procure or acquire systems is higher.

Managing an engineering team can be very demanding -- and expensive. Challenges include finding and retaining people, establishing a robust development framework, setting up tooling and processes in place, getting the team trained and up-to-date on current technologies, and obviously, guaranteeing that the team delivers on what's expected.

Despite these challenges, many hospitals and healthcare institutions are still growing their IT teams. Take for example Kaiser Permanente Information Technology (KP-IT) in the US which has about 6,000 business and technology professionals under its team.

In the recent ComputerWorld CIO chatroom (formerly CIO roundtable) focused on IT Enabling Philippine Hospitals, we found out that IT teams of hospitals in the metro aren't as big as KP-IT's but their "technology-enabled" dispositions are nevertheless clearly distinct.

TYPE of SYSTEM
"Front line or core systems are build decisions," mentions Allen Bacallan, VP & CIO of Cardinal Santos Medical Center. It hasn't come to a point where the core systems have been commoditized as practices and workflows vary from one hospital to another (and from a hospital in the Philippines to that of in the US). An off-the-shelf fully integrated hospital information system that meets the specific needs of the hospital and fits the workflow of the Philippine healthcare setting is non-existent.

"We've to identify which systems are already commoditized," notes Dr. Mike Muin, CIO of The Medical City. "The assumption most often is that operation and accounting systems are commoditized, so these can be bought. If there are more than 2 vendors selling somewhat similar systems, then maybe it's a commodity. If it's not a new idea, then maybe it's a commodity." Back office systems are (mostly) buy decisions.

However, even commoditized systems can't be readily (and easily) bought...

COST
"Commoditized systems aren't often economical," affirms Jerry Rapes, CEO of Exist, Philippine-based software & technology services company with healthcare expertise. It should come as no surprise that off the shelf accounting and back office systems for hospitals are expensive.

Is it cheaper to buy or to build? "If you are willing to build, there are time considerations and your team must have the skills," shares Myrna Rabulan, CIO of Our Lady of Lourdes Hospital. At the end, it might not be cost-advantageous to build in-house. An outsourcing outfit can help and such engagement may play out more economically.

VENDOR FLEXIBILITY, LOCK-IN & SCALABILITY
Health care is more complex than any other industry. IT teams in healthcare have to manage both the clinical outcome and the money of the hospital.

Luis Sayo, CIO of St. Luke's Medical Center shares: most software vendors do not know the hospital environment; do not understand how complex and how mission critical its systems are. If a test case is switched and somebody that doesn't have cancer is diagnosed with it -- the implication is staggering. Compare this to: person withdraws money from ATM, sees his balance is 0, but knows that the value is incorrect. He can go to the bank and get this settled. It's not as easy in the case of an incorrect medical diagnosis.

Software vendors will tell you that they've a lot of installed bases already for a particular product. But what are the quality of those installations?

Licensed products follow a feature roadmap borne from the vendor's customers that have the bigger voice. As mentioned, the healthcare industry is very complex. And its complexity grows exponentially when there are more beds. The buy strategy always asks: will the vendor be able to support the hospital's growing needs? If not, can I integrate to it (the system sold by the vendor) or is there an ability to interface, maybe build on top of it?

Exist underscores that: service oriented architecture (SOA) plays a key role in enabling hospitals to become more agile and derive more cost value especially because there's a lot of integration (and remains a big challenge) for hospital IT teams.

Exist adds that, "If hospitals allow themselves to be locked in to a system -- at the end of the day, the hospital won't be able to do anything, and has no choice but to go to (or run after) the vendor."

A hospital goes through a round of major customizations that sometimes are open ended. At the end of the day, the hospital has to decide who'll support it. That practically becomes a build strategy.

Currently, there are several packaged (touted as commoditized) systems, but aren't flexible enough and completely "serviceable" in the Philippine healthcare setting.

Many systems also fail to scale adequately to the needs of the hospital.

Healthcare evolves very rapidly and now offers a multitude of treatment packages. Today, it's not just as simple as natural or caesarean child birth, is it epidural too? Can the system scale as the hospital offers more services, in # of beds, in reports?

Conclusion
Healthcare IT is mostly about compromise, so it's rarely a pure buy or a pure build issue. There's a need to keep a healthy balance between: privacy and practicality, standardization and flexibility, in-house and outsourced.

In other cases where there are fewer resources, it's really about making the most out of what are already in place.

***

Many thanks to Mediag8way for giving us the opportunity to sponsor the first CIO chatroom that gathered CIOs of hospitals in Metro Manila. More power to you!

A corresponding cover story of the chatroom is available in the September issue of ComputerWorld Philippines.

More Stories By Macel Legaspi

Macel Legaspi is a tech enthusiast, writer, and Director for Marketing at Exist -- the Philippines software powerhouse in Java and Ruby on Rails.