The Healthcare Provider that Outsourced IT After All

Meadowbrook, Pa.-based healthcare provider Holy Redeemer Health System knows that sometimes, patience and an open mind can be the most effective weapons a company can bring to bear at the bargaining table. "At first we were not interested in [outsourcing] at all," said Mark Jones, the hospital's executive vice president and chief operating officer. But, he said, as time went by and negotiations advanced, "it just began to make much more sense." In November 2004 Holy Redeemer signed a 10-year, $115 million deal with Siemens Medical Solutions to outsource all of its IT operations. The deal also involved the purchase of major new software applications and medical scanning and diagnostic equipment. Although Mr. Jones said he is happy with the agreement, he said he would never have guessed it would turn out like it did.


This article share four tips we culled from the experience Holy Redeemer went through in the course of signing that 10-year agreement.

–> TIP #1: Unhappy with what you're hearing from a potential service provider? Then don't rush into the deal.

To understand Holy Redeemer's change of heart you have to go back to 2000, the year when the company was looking to replace some of its aging healthcare equipment and systems. The hospital — which at the time was content with its internally managed IT staff — was in the market for new healthcare gear including diagnostic imaging equipment, radiology information systems, picture archival and communications systems and updated clinical and financial applications.

To upgrade its equipment, Holy Redeemer first turned to German industrial conglomerate Siemens AG. The company had recently acquired healthcare computer systems provider Shared Medical Systems Corp., which had been one of Holy Redeemer's primary equipment suppliers. However, Siemens would only offer a standard "commitment and concession" contract. Under the terms of the contract, Siemens would give Holy Redeemer a discount on the price of the equipment based on how much the hospital was willing to commit to buying.

"It just didn't work," Holy Redeemer's Mr. Jones explained. "It wasn't flexible enough."

One of the main sticking points in the negotiations was the need for extra IT service and support to install and maintain the new equipment. The cost of such advanced IT know-how was tough for Holy Redeemer to swallow. The hospital declined to give financial specifics.

"It became apparent to us that we needed to continue to gain access to new technology…while continuing to reduce capital outlay," Mr. Jones said. "It's a real problem controlling costs in that scenario."

So if you're not satisfied with the way your negotiations are progressing, try taking a breather. Holy Redeemer did — a breather that lasted more than three years. During the interim, Siemens fully integrated SMS into its extensive medical business. Holy Redeemer — a 300-bed healthcare facility with a staff of more than 500 primary care physicians and specialists — decided to bide its time until it could score a better deal. The hospital offers long-term and residential care services as well as home care services throughout its service area.

–> TIP #2: Things getting too complicated? Invest in some help.

In February 2004, Holy Redeemer resolved to try again. But this time it enlisted the help of Innovative Health Strategies. The consulting firm acts as a third-party negotiator between healthcare providers and outsourcing vendors. Mr. Jones said the group, which has had experience advising other healthcare providers in high-tech matters, helped the hospital broaden its outlook and keep an open mind.

Stephen Boochever, an executive with Innovative Health Strategies, said the firm helps health care providers develop specific goals and metrics for outsourcing arrangements. He said some companies enter into outsourcing agreements without nailing down all the particulars, which can sometimes result in unexpected — and therefore unwanted — surprises. Mr. Boochever said Innovative Health Strategies helps healthcare providers write down exactly what they want from their outsourcing vendor.

So if you're not sure which "t"s to cross and which "i"s to dot, take Mr. Boochever's advice and enlist the help of an experienced advisor.

Mr. Boochever also advises his clients to set up a clear chain of comment in any outsourcing agreement they end up signing. He said it helps to have a single point of contact for any problems that might come up — on either end. A healthcare provider should have one executive to oversee its outsourcing partners, and its outsourcing partners should offer up one executive who can field high-level questions and concerns.

–> TIP #3: Worried about your IT staff? See what they have to say for themselves.

In getting ready to reopen its negotiations, Holy Redeemer decided to conduct a survey of its own IT staff to find out what they felt about their jobs and what they expected for the future. Anne Searle, the hospital's vice president and chief information officer, conducted the survey. Ms. Searle was hired to supervise the hospital's technology discussions, and oversee any resulting agreements. Through the survey the hospital discovered that most of its IT staff didn't intend to turn their jobs with the hospital into a career, but instead expected to move on to other positions in the IT field within the next few years. Mr. Jones said the main reason was salary, as well as chances for professional advancement and technical skill development.

"Because we're a healthcare organization and not a technology company, we'll always struggle with competing demands," Mr. Jones said.

Mr. Jones said the survey opened his eyes to the reality of IT. Such a survey might be a good way for you to test the IT waters before making a major decision.

With its IT survey in hand, Holy Redeemer reopened its negotiations with Siemens for the new machines and software. It was Siemens that first brought up the issue of IT outsourcing as a way to counteract the high costs of equipment installation and service.

"They brought a different strategy to the table," Mr. Jones said. "It was a hard deal to walk away from."

–> TIP #4: If you're going to go, sometimes you just have to know to go BIG.

When Holy Redeemer went back to the table with Siemens, things went much different. Siemens presented a package that included the new diagnostic equipment, radiology system and picture archival and communications system, along with the necessary IT services and maintenance. The company would also transition Holy Redeemer's clinical and financial applications from the hospital's existing Invision platform to the new Soarian platform and would cover the associated IT issues. Mr. Jones said transitioning the hospital's clinical and financial applications to the new Siemens Soarian platform ended up costing less than maintaining the hospital's old platform under the Siemens maintenance contract.

As part of the agreement, Siemens offered around-the-clock technical support — a key element for an always-open hospital. Holy Redeemer had previously worked with a business-hours-only help desk for its equipment.

The deal also included preferred pricing on future purchases, as well as routine performance reviews and incentive-based guarantees. And Siemens will be held accountable for missing its commitments. Even more notable, Mr. Jones said the terms of the agreement — including the prices — are set out in advance for the duration of the 10-year contract. (Without knowing the terms of the agreement, it's difficult to say whether the long-term nature of this contract will prove truly cost effective for Holy Redeemer in later years. advises organizations to build in flexibility and some form of industry benchmarking to address the dynamic nature of IT pricing.)

As part of the equipment and software package, Siemens offered to take over all of Holy Redeemer's IT operations. The company agreed to take on all 30 of Holy Redeemer's IT staff as part of the deal, employees who would remain at the hospital but would receive their paycheck from Siemens. Ms. Searle, Holy Redeemer's CIO, was put in charge of managing the relationship with Siemens. Mr. Jones said having an upper-level executive involved in the day-to-day management of the agreement would give Holy Redeemer a direct link to its outsourcing partner.

Holy Redeemer declined to provide financial details on its IT outsourcing agreement, including financial costs and savings. A Siemens spokeswoman said the company has been offering similar outsourcing solutions for years now. Due to its size, the company can offer a variety of services from IT to medical equipment — which means that potential customers need only visit one spot for a variety of needs.

"It's not just an outsourcing deal," Mr. Jones said. "It only made sense to outsource with the whole package."

Mr. Jones said Holy Redeemer discovered that a little patience and a willingness to listen to new suggestions led to a more effective deal. So if you're getting ready to look for an outsourcing partner, don't be afraid to listen to what they have to say rather than telling them what they need to do.

Holy Redeemer's deal with Siemens includes several highlights. The hospital made sure to wait until Siemens could offer it the kind of deal that it could sign; the hospital didn't get pushed into a deal it wasn't satisfied with. When it felt the timing was right, the hospital then made sure to enlist all the help it could with the inclusion of consulting firm Innovative Health Strategies. And, when the hospital wanted to know more about its IT options and situation, it did the easiest thing and simply asked its staff what they felt about the whole thing.

And now, Holy Redeemer has a major new agreement that covers not only its new equipment but also its entire IT operations.

So if you're in the market for a new outsourcing partner, remember: bide your time, and keep an open mind.

Useful Links:

Holy Redeemer Health System


The Siemens press release about the Holy Redeemer agreement:

Innovative Health Strategies