Healthcare CIOs Must Must Put On Their CFO And VC Hat
Covid-19 has impacted every industry globally, but the healthcare business is caught in the middle of an especially tough financial situation. Healthcare CIOs must put on their financial hat to focus on generating additional revenue or get creative in cost-cutting. Unfortunately, Covid-19 has deepened the financial challenges for hospitals in the U.S. due to the reduction in reimbursements from insurance payers, Medicaid, and Medicare.
Research has shown that health systems experienced a decline in operating margins between 2018 and 2019. Currently, hospitals have turned their facilities into Covid-19 facilities while delaying essential surgical procedures or other necessary healthcare services that generate badly needed revenue. Running a hospital geared to tackle the pandemic is expensive, which has resulted in a decline in revenue for health care institutions throughout the United States.
This is a prime opportunity for the CIO to step up and shine since IT departments often have one of the biggest budgets. CIOs will need to lead by example in several ways.
Use IT to generate revenue
It is time for healthcare CIOs to focus more on generating revenue by providing IT services to other organizations. Many rural and critical-access hospitals do not have the technology resources of larger health systems. This is a prime opportunity to offer healthcare IT as a service by extending electronic medical record systems and other healthcare-specific solutions. This will generate revenue in the short term while the long-term strategy can be built on establishing partnerships and affiliations that promote wellness and preventive care, thus leading to decreased utilization of costly emergency rooms.
Transform vendor management
Healthcare IT departments should pause all non-essential spending and prioritize only core expenses until hospitals’ finances are stabilized. They will also need to look for opportunities to renegotiate contract terms and seek alternative financing opportunities.
Some healthcare tech leaders are already putting suppliers under a microscope. “Our vendor partner ecosystem is always being evaluated for an opportunity,” says Aaron Miri, CIO of Dell Medical Center. “Those companies that closely partner and innovate together with us through thick and thin are those that we count on to deliver for our patients and for our clinicians when the stakes are at their highest.”
Other CIOs echo that sentiment. “We’re combining all vendors and procurement into an integrated ecosystem managed by an IT vendor management office, staffed with individuals who possess the skills to cultivate our strategic relationships, says Zafar Choudry, the CIO of Seattle Children’s Hospital. “ We believe this will help us manage our complex vendor ecosystem to drive innovation, cost savings, and efficiency gains.”
Adopt a VC mindset to investment
Tech leaders should also reevaluate their technology portfolios for duplicative solutions. Traditional IT focused on buying best of breed solutions, increasing the number of systems that departments have to support and also increasing expenses. That thinking needs to change—and fast.
The philosophy should be that if an existing product is good enough to deliver the outcome desired, then there should not be a need to buy another one that has a much broader range of features, many of which are unlikely to be used. Healthcare IT departments must operate with a venture capital mentality to ensure that every technology investment produces the highest return on investment at the lowest cost.
Historically, healthcare CIOs have been viewed as technologists with minimal business acumen. This is an opportunity to step up and lead with a relentless focus on helping the organization sustain its profit margins. IT executives who don’t rise to the pressing challenge may not be in the CIO seat for much longer.