At the Helm

5 things CEOs need to know about IT


Welcome to the "CEOs Need to Know" series, where our top experts help hospital and health system CEOs understand the most pressing issues facing the members of their leadership teams.

In our fourth installment, Jim Adams, Executive Director of the Health Care IT Advisor explains what CEOs really need to know about IT.

1. IT is now essential to implementing and executing your strategy

In the beginning of the digital age, when computers were both expensive and limited in function, we saw IT as a cost to be minimized. As prices came down and the capabilities increased (e.g., through client / server computer architecture), we started seeing IT as an efficiency tool to reduce costs or improve quality.

Now IT is an essential part of enabling strategies. There will be no paper-based population health managers or paper-based customer-loyalty-inducing processes (e.g., registration, scheduling, pricing transparency, bill payments, or patient engagement). The broad reach of IT means that it’s not necessary just to spend more in IT; we have to spend smarter. IT spending that isn’t backed by a clear strategy, strong governance, and a common vision and IT vocabulary may hurt more than help.

We’re also in the early stages of IT-driven industry transformation. We can’t focus on just automating what we’ve always done; we’re using technology to help fundamentally change the rules of competition, both what we do and how we do it.

2. IT is changing even faster than the health care industry is

In the mid-1960s, Gordon Moore of Intel noted that the number of integrated circuits on a transistor had been doubling every 12-24 months. His observation eventually became Moore’s Law, which states that technology capacity grows exponentially, rather than linearly, and has done so for several decades.

We’re seeing Moore’s Law-like rates of advances in computing speed, storage capacity, and, significantly, in the sheer number of devices and technology domains (e.g. 3-D printing, robotics, artificial intelligence [AI], the Internet of Things [IoT], etc.) that are useful in health care. But while a generalized Moore’s Law can help us predict the rate at which the capacity of one technology domain will advance, it’s not so easy to predict how multiple domains will interact in the future or what capabilities they will enable.

For example, only a few years ago, most experts thought that self-driving or autonomous cars were a distant goal. But by combining robotics (i.e., the car), IoT (sensors and networks), AI (machine learning), and cloud-based computing and storage, we’ve seen remarkable progress—and some recent setbacks. In the same vein, no one could have predicted when the smartphone was introduced that it would eventually be used as an otoscope; a technology intended primarily as a communication device can now send images to the cloud and run advanced analytics to determine whether a child has an ear infection.

As much as IT has improved since the 1960s, our greatest period of IT growth could still be ahead of us, and that growth will apply not just to capability, but to complexity.

3. Expect the digital world to disrupt health care

Digital disruption has already occurred in a number of industries: books and retail were disrupted by Amazon, music sales by Apple, transportation by Uber, manufacturing by 3-D printing, and much more.

We can’t assume health care will be immune to this type of disruption. In fact, disruption is already happening in a series of small steps, despite regulatory and other challenges:

  • Business models: We’re building “electronic medical perimeters” (e.g., ambulatory EHRs, registries, care management systems, and health information exchanges) to reduce avoidable admissions rather than building new facilities intended to “funnel” patients to our hospitals.
  • Relationships with patients: We’re helping patients move from being passive recipients of care to active participants in their own health and health care.
  • Clinical processes: We’re moving from reactive, fragmented, “find it, fix it” care to proactive, coordinated, personalized care, and will continue moving toward “precision medicine.”

These types of disruptions are not driven entirely by technology but they couldn’t happen without it.

Incumbents must do more than just “weather the storm” and refocus on traditional or core lines of business. They also must be able to innovate new processes, new relationships with customers, and new value propositions. Given IT’s wide availability, relatively low incremental investment, flexibility, and potentially short time-to-value, IT-enabled innovation will be key to ongoing success for many organizations.

4. It’s difficult to establish 'apples-to-apples' IT benchmarks

Gathering detailed benchmarking data to assess the costs and efficiency of your IT department or to help determine if you are spending the right amount is complicated by several factors:

  • Organizations define and classify IT-related costs differently. For example, do you include HIM and BioMed as IT-related costs? What costs for departmental systems are included?
  • Even if two organizations classify expenses similarly, they may differ in sourcing strategy (e.g. hosted on premises, in a public cloud or by an outsourcer) or application portfolio (e.g., Epic hospitals versus MEDITECH hospitals), making comparisons less relevant.
  • Even if you can verify that costs for similar application portfolios are classified the same way, organizations could differ in size, complexity, strategy, stage of strategy implementation, or even how successfully the applications and technologies are being used.

High-level numbers such as IT-related operating costs as a percent of overall operating costs are more easily attainable—according to our most recent survey, most organizations were spending about 3-5% in—but less revealing. It still takes a lot of work to determine whether you compare favorably or unfavorably with other organizations.

5. IT is a 'team sport'

Success with IT-related matters is not just about the latest technology, the skill level of your IT department, or the size of the IT-related budget. It’s also about having a shared vision regarding the future of health care and IT, aligned business and IT strategies, strong governance, and a collaborative, accountable culture.

Across industries, digital transformation and disruption have become board-level topics, just as globalization did several years ago. One of our large, investor-owned members has a permanent board-level HIT committee focused on digitizing successfully, in which the CEO, COO, CFO, and CIO are jointly held accountable for outcomes. Moving forward, successful organizations will need to implement similar, team-based strategies to ensure they’re evaluating, investing in, implementing and operating the right technologies in the right ways.

 

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