Team mix can smooth information system acquisitions

Healthcare Financial Management, June, 1991 by Mark H. Biddle, Mark H. Feingold

About the authors Mark H. Biddle, JD, is a partner at the law firm of Gollatz, Griffin, Ewing, & McCarthy n Philadelphia Pa. He represents healthcare institutions in computer systems acquisition and dispute resolution and is a member of HFMA's Metropolitan Philadelphia Chapter.

Mark H. Feingold, JD, is a staff attorney at the University of Pennsylvania Medical Center in Philadelphia.

Through effective planning and preparation, a healthcare organization can avoid bad experience in acquiring an information system. While outside consultants may be helpful in considering a proposed computer system, resources needed for successful system acquisition mail be found among an organization's stiff members. An acquisition team of employees with expertise in financial management, information systems management, clinical matters, operations, and legal issues can help a team leader acquire a system that balances the needs of each department.

While healthcare information systems are becoming more important and more complex, some institutions experience less than positive results after a system is installed:

One hospital that acquired a turnkey system later discovered that most of its software was vapor ware- - software yet to be written. After a legal battle lasting many months, during which it became apparent that the hospital had signed a contract without prior legal review, the hospital threw out the installed part of its system and started its system acquisition process over again.

Another hospital sought to move from a computer service bureau environment to an in-house financial system and found itself unable to send out patient bills for many months. Subsequent review of the situation revealed that hospital administrators and outside consultants had overlooked some fairly obvious issues, such as the fact that the large corporate parent of the thinly capitalized vendor had not guaranteed the vendor's performance. This issue, of course, surfaced when the vendor company was "spun-off" by the parent after the vendor's system performance problems became known.

* Another hospital arranged a strategic partnership for software development with a healthcare systems vendor only to have the vendor repudiate the royalty arrangements in the parties' agreement when it became apparent that the developed system would be commercially successful. Eventually, a hospital board of directors' committee was appointed and spent many months trying to extricate the hospital from what had appeared at the beginning to be a mutually profitable alliance. In the end, the situation proved only embarrassing and costly for the hospital.

Although hospital-based financial and clinical computer systems sometimes seem several times more complex than computer systems in other industries, healthcare institutions frequently acquire computer systems with no more caution and preparation than the average person uses in purchasing an automobile.

Common inadequate approaches to acquiring a healthcare information system include:

* Going it alone. A single department may purchase a complex computer system solely on the basis of its appraisal of its needs or the institution's needs, without input from other areas in the organization. In a variation on this theme, a department may involve other department managers for a superficial review as a purchase nears completion;

* Keeping up with the joneses. An institution sometimes acquires a system that it had decided from the outset it should procure. This often occurs because an institution has seen a system operate well at another institution;

* Putting price above all. A purchase may be made solely on the basis of up-front cost; and

* Letting a supplier make the decision.

An organization sometimes acquires a system because it has let a supplier define the needs of a department or institution.

These and other conventional approaches cannot be adequate because they fail to take into account an institution's overall needs and the complexities of a computer system acquisition.

A healthcare organization acquiring a complex computer system should not ignore the knowledge and expertise available among its own employees. But preoccupation with up-front costs or other conventional issues previously mentioned frequently blinds individuals responsible for system acquisitions. When an institution's leaders focus almost exclusively on short-term costs and other issues that vendors' representatives emphasize, legal and other risks usually are ignored.

Interdisciplinary approach

The best results from a healthcare organization's computer system acquisition process can be obtained by assembling an acquisition team of individuals with a variety of business, technical, clinical, and legal skills. A well-prepared team can carefully and systematically assess the needs of an organization, identify and communicate with prospective vendors, and conduct negotiations.

An interdisciplinary acquisition team is best formed at the beginning of an acquisition process and should be empowered by senior administrators to take the steps and time needed to select vendor finalists, handle business, technical, and legal questions appropriately during negotiations, and select the appropriate computer system through a careful weighing of pertinent factors. Critical to the success of a venture is a team leader who can manage and direct an organization's acquisition process and report to and communicate with senior administrators.