How do you implement compliance solutions without severely impacting your IT budget? How do you know if you’re spending too much? What are the common mistakes made in the IT purchasing process? Jon Winsett, CEO of NPI Financial, answers those questions and more. NPI provides spending management consulting services and helps companies reduce IT costs while organizing their IT budgets.
HCITS: What are you doing to help healthcare CIOs control IT costs?
Winsett: IT spend management in the healthcare industry is critical—more so than it’s ever been before. Compliance pressure is causing the industry to buy new solutions that many CIOs have little experience in purchasing—EMRs, HIE, etc.—and these new applications are, in turn, driving infrastructure upgrades—in some cases, unanticipated and rushed. The conditions are ripe for overspending.
NPI reviews thousands of IT purchases each year. We have benchmark data that enables us to determine what’s a fair price and what isn’t. Because we’re intimately familiar with vendors’ behavior and contracting tactics, we know how to optimize the contracting process for the buyer. All of this knowledge typically translates into a 20 to 30 percent reduction in an IT purchase price.
HCITS: Given the nature of your business, what is your relationship with healthcare IT vendors?
Winsett: Our responsibility is to protect our clients from overspending, but that doesn’t mean we’re ‘anti-vendor.’ In fact, we take great care to respect our clients’ vendor relationships. When we advise healthcare CIOs through the purchasing and contracting process, we make sure that we’re creating a win-win for everyone. It’s not in our clients’ best interest for their IT vendor not to be successful. We just want to make sure pricing, terms and conditions are fair. Because of that, NPI has earned the respect of IT vendors.
HCITS: How prevalent is IT overspending in healthcare?
Winsett: Extremely. NPI has found that healthcare organizations typically pay 20 percent too much for the average hardware, software and telecom purchase. For a large McKesson implementation or Microsoft Enterprise Agreement, the difference can be in the seven figures. That savings can fund other initiatives, preserve jobs or go straight to the bottom line.
HCITS: What reaction do you get from CIOs when you tell them they’re paying too much?
Winsett: Most healthcare CIOs are diligent in the IT purchasing process so they’re surprised to learn the extent to which they’re overpaying. We have to remind them that this isn’t due to sourcing or IT’s oversight. The average IT or sourcing department only sees a handful of new, large-scale purchases each year. We see thousands. With that comes real-time, objective pricing and contracting insight that they could not possibly acquire on their own. We arm our clients’ sourcing professionals with data and vendor-specific expertise that makes them more effective.
HCITS: In your experience, what is the single most common mistake made in the technology purchasing process?
Winsett: The biggest mistake is not benchmarking pricing for their existing vendors. Healthcare companies are deeply entrenched in their incumbent vendor relationships. They don’t often take the time to compare Microsoft’s pricing against an alternative solution because they could never imagine leaving Microsoft. If they did, they would realize that they could gain leverage that would help them negotiate down their licensing agreements and improve their incentives and discounts.
Another mistake is buying bundled offerings. At NPI, we like to tell our healthcare CIOs to “beware of the bundle.” Oftentimes, it’s a slippery slope that leads to buying more product/service than you actually need.
HCITS: Where will healthcare CIOs overspend the most in 2012?
Winsett: NPI has identified seven IT purchases that are ripe for overspending in the coming year:
1) Coding and billing Systems
2) EHR/EMR
3) Storage and archiving
4) Business intelligence
5) Security
6) Ethernet
7) High availability
In nearly all of these areas, there is a major compliance or business driver that is increasing demand for these solutions—which, in turn, gives vendors more leverage in pricing and terms.
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