As the healthcare industry continues to face economic hurdles, cost management remains a strategic imperative. To support business priorities, Ascension Information Services (AIS), a subsidiary of Ascension, the largest nonprofit health system in the United States and the World’s largest Catholic health system, like many healthcare IT organizations, has shifted from being viewed as a cost center to a value-added service provider by steadily concentrating its efforts on increasing business value through targeted, non-labor cost reduction and service improvement initiatives.
Transforming the AIS operating structure to include an expense reduction component also positions our parent company, Ascension, to deliver on the quadruple aim of high quality improved outcomes, with high patient and provider satisfaction. Decreasing our expenses, enables AIS to rebate non-budgeted operating expense savings to the hospitals that pay our costs. In turn, the hospitals can use these savings to provide more direct patient care services.
An attainable savings strategy hinges on a thoughtful, programmatic approach and focuses on value creation in the same way it delivers IT services and solutions.AIS launched its cost management approach three years ago and has found great success through formulizing an aggressive cost reduction program to accelerate savings realization.
Study, Strategize, Implement
The AIS savings story begins with a comprehensive IT expense study that involved comparing our expenses and related metrics to healthcare industry benchmarks and discovering that we had a substantial opportunity to improve our cost structure. A cross section of AIS leaders collaborated to outline specific cost reduction and service improvement plans designed to:
► Align IT priorities with the organizational business strategies, mission and values.
► Identify specific gaps and opportunities.
► Improve business enablement and increase IT operational efficiencies.
► Identify proficiencies AIS could potentially offer externally to generate revenue.
We added an executive-level leader to manage the new program and tie organizational goals and IT leaders’ performance incentives to achieving cost reduction targets. We also assigned program owners to oversee each savings opportunity. To hold program owners accountable for defined value realization, the executive-level leader established a portfolio management methodology, which includes regularly tracking and reporting on the program benefits and return on investment. The team then began their work by seeking the low hanging fruit– those opportunities that would generate immediate savings and require minimal investments and resourcing.
Through the vendor contract renegotiation program, AIS has continuously reduced total cost of IT ownership by seeking increased discounts, improving rate cards, adjusting payment terms and reducing annual software maintenance increases.
For both programs, AIS has consistently exceeded financial and service improvement goals.
Along with securing quick wins, the team defined a strategy to focus on longer-term savings opportunities that required upfront investments. The strategy incorporated defined initiatives, outcomes and performance measures to realize substantial, long-term results. AIS leaders prioritized initiatives based on their respective value, risks and estimated implementation costs.
For longer-term initiatives, AIS program owners developed business cases to determine the potential for operational improvement and cost savings. The owners also outlined financial and performance measures, such as leading indicators to track progress for longer-term opportunities, and established contingency plans that can help achieve or maximize savings goals.
AIS’ long-term programs that show early savings and operational improvement success include transformational initiatives like application rationalization, data center consolidation and service delivery model redesign. These initiatives, while complex undertakings, will offer tremendous gains and help sustain a culture of ongoing cost management and process optimization within AIS.
► Through our expense study, we discovered AIS spends 51.5 percent of our budget on application costs, compared to 34 percent spent by healthcare provider benchmarks. The application rationalization goal is to cut application vendor, product and support costs by reducing variation, minimizing duplication and promoting standardization.
► The goal of AIS’ data center consolidation project is to reduce our data center footprint by creating remote, vendor-hosted data centers and improve contract and lease terms while providing consistent service quality.
► Through service delivery model redesign, AIS is creating an efficient, scalable model for day-to-day IT services by using best practice ITIL (IT Infrastructure Library) processes and newer and more secure technologies to deliver services to our customers.
Collaborate for Savings Success
To meet cost reduction commitments, AIS leaders assign key IT associates responsibilities for implementing savings initiatives. Engaging associates in this way has allowed them to better support the business strategy, while acquiring new skills and contributing to the organization’s growth. Because sweeping transformation generally requires cross-functional partnership.
“An attainable savings strategy hinges on a thoughtful, programmatic approach and focuses on value creation in the same way it delivers IT services and solutions”
IT often has innovative ideas waiting to be uncovered, so AIS encourages associates to identify cost saving and service improvement opportunities within their day-to-day roles. In the program’s third year, the executive-level leader assembled an idea generation team, and pooled their talents and knowledge to advance strategic objectives. Seeking the team’s expertise in determining the most feasible and investment-worthy solutions helped AIS reach its savings targets for a third consecutive fiscal year.
Communicate Early and Often
To generate support for cost reduction efforts, AIS frequently communicates progress to its internal stakeholders. Also, consistent, transparent communications within the IT organization have helped AIS leaders ease fears, maintain morale and encourage commitment to cost savings plans.
As part of their program strategy, the executive-level leader collaborated with our communications team to develop a multi-channel communications plan that includes goals, timing and regular touch points, such as newsletter articles, intranet updates and town hall presentations. All activities welcome two-way conversation with associates since streamlining our IT processes require AIS team members to reprioritize existing projects and adjust to major operational change. As business goals are met, AIS celebrates accomplishments and recognizes employee contributions. We also celebrate our failures in the spirit of failing fast and learning fast.
Gain Additional Long-Term Benefits
Through our cost savings and service improvement success, AIS has boosted talent acquisition efforts. Healthcare organizations, after all, fiercely compete for talented IT professionals, so we must stay innovative to attract top candidates. Offering best-in-class, low-cost healthcare information technology ensures AIS maintains market competitiveness on multiple fronts.