Published in ehiEngage (now digitalhealth.net)
The Case for IT Cost Efficiencies, Outsourcing and Shared Services
With support from the business technology specialist ImprovIT, St George’s Healthcare NHS Trust and Kingston Hospital NHS Trust have completed a joint cost and performance benchmarking study to identify efficiency and performance enhancement opportunities in their IT operations. They also wanted to explore the feasibility of sharing services and whether or not it would be cost-efficient to outsource some or all IT services.
Sharing the same south London demographic community, the two Trusts are working more closely as part of a formal strategic partnership. Therefore, one of the principal aims of the study was to determine whether consolidation of any of their IT functions could lead to significant efficiencies.
Achieving ‘Lean and Mean’
Another two objectives of the ImprovIT study were A) to assess overall costs and associated service delivery of IT and B) to determine whether there was a business case for outsourcing some or all IM&T support services.
Stated John-Jo Campbell, Director of IT at St George’s: “The exercise was to assess the value for money of our IT services, but we also wanted to see what our options were and to identify opportunities for improvement.” Adds Anthony Brewer, IT Director, Kingston: “We needed to know if we were running ‘lean and mean’ – both in our overall operations and in the various service teams and departments. We also felt it was time to revisit the outsourcing question. Three years ago we had concluded it was not cost-effective, and the recent report confirmed this remains the case.”
The ImprovIT study involved an in-depth benchmark examination of St George’s and Kingston’s IM&T environments. The team took a horizontal and vertical approach, drilling into each service, including the service desk, desktop support, the systems and network teams, the project development group and training. Each was analysed against a matrix of parameters including cost, performance, service delivery quality and process maturity. The individual Trusts were first compared against a reference group of cross-industry and healthcare-specific peer organisations of a similar size and complexity and from this analysis, discrete areas were identified where sharing showed promise.
In order to assess the advantages of consolidating IT functions, the study then modelled the services of the two IT departments as if they were a single combined operation and compared this larger entity with a different yet corresponding set of similarly sized, multi-site peer organisations to obtain an “apples-to-apples” comparison. Brewer points out: “The approach was very forensic. Indeed, we chose ImprovIT, after an extensive competitive tender process, because of their scientific approach – we were interested in solidly grounded facts, not facile suppositions.”
15% more efficient than the NHS average
The report’s verdict on cost efficiency was that both St George’s and Kingston’s IT operations were running at some 15% more efficient than the average for benchmark peers (despite a few variations for some services in each trust) – plus they demonstrated considerably greater efficiency than the outsourcing alternative.
As Campbell points out: “This kind of third party evidence is extremely useful in reassuring our management that IT is delivering “value for money”. I was also particularly interested in having an expert pair of eyes identify the variations in inefficiency between departments and [for them to] offer advice on where things can be fine-tuned. Again, it’s quite useful having these suggestions come from an independent expert as the results speak for themselves when you present them to your teams.”
One area of potential improvement at St George’s was related to the rationalisation of incident categories. ImprovIT recommended that fewer categories could streamline both response management and subsequent reporting processes – leading to an increase in efficiency and reduced overhead costs.
In terms of the trusts sharing services, the study revealed that while efficiencies were indeed possible in some areas, there were also numerous complexities which made benefits difficult to determine or achieve. For shared services to be effective there needs to be a degree of similarity in systems, processes, priorities and time-scales. In terms of similarities, the trusts both use the same electronic patient record platform, Cerner Millennium – a fact which has enabled them to collaborate closely on numerous application development projects, like new e-prescribing and theatre management systems. However, significant differences in implementation, management and maintenance had a bearing on the level of benefit that could be achieved by sharing services.
Case by case collaboration
There are important similarities but there are also some major differences in how the two Trusts’ IT environments operate. Says Brewer: “Take IT maintenance in clinics, for example. St George’s provides clinic support from within their operational divisions, whereas Kingston has a central team. It would require a large upfront investment to reconfigure our infrastructures and methodologies, which in the short term isn’t worth it.”
Campbell agrees with Brewer: “Sure, the time may come when the business case for sharing our IT services becomes compelling – but that’s something that should be reviewed on a case by case basis. Of course we need to ensure that one hand always knows what the other is doing and in that sense we are committed to ongoing open communications and knowledge sharing. Our approach is to continue close collaboration on a project basis – taking advantage of opportunities as they arise and where external evidence can confirm the benefits.”
Key learning points
So, what have St George’s and Kingston learned from the study? Says Campbell, “We are clearly already well ahead of the cost efficiency curve among our peers, that yes, there is room for improvement and we (now) know where and how; and that we shouldn’t dive head-first into sharing services which needs to be assessed on a case-by-case basis. As for outsourcing, it’s very useful to find out upfront that it’s not cost-efficient before spending a lot of time and resources on a feasibility study.”
Using Virtual ‘What If’ modelling
For many of ImprovIT’s clients, both in the public and private sectors, the question of staffing plays a central role when it comes to cost containment, mainly because it typically accounts for the largest element of a budget. Under pressure to cut, the temptation for CIOs is often to slash headcount, yet this can have unintended consequences and lead to a degradation of service quality. To avoid this trap, ImprovIT has designed a virtual modelling service that is designed to determine the optimum combination of staff, productivity and quality service delivery.
The aim is to work out the impact of staff cuts and identify the ‘camel’s back’ point at which services suffer. For example, an organisation has an average of 200 user calls a month and their target is to resolve 90% of these issues within an eight hour period using a support team of X number of staff. If this target is recalibrated to a sixteen hour solving time, or if the incident resolution average is deemed to be acceptable at 80%, what head count would be required to support this workload? Or coming at it from the other direction: what is the optimum combination of call volume and response that balances the needs of service quality and cost efficiency? The advantage of using this kind of approach is that a whole range of variables can be explored without actually impacting the live operation.
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