Outsourcing Medical Technology John D. Cacciamani MD., MBA. Temple University Health System...
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Outsourcing Medical Technology
John D. Cacciamani MD., MBA.Temple University Health SystemConcurrent Session IMarch 7, 2005
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What is Outsourcing?Using an independent third party to provide services or infrastructure for a business with the anticipated gain of improved performance and/or reduced costs.
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Examples of Potential Outsourcing
Business Process Outsourcing (BPO)Information Technology OutsourcingData Center Management Remote HostingCall Centers
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Other Technology “Outsourcing”
Large Software AcquisitionsClinical Information Systems
Radiology Services (Night Hawk’s)Medical Device Management
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Market DriversNeed to Improve IT in Health CarePoor Investment Over Past DecadeLimited CapitalImprove Safety (IOM and Leap Frog)
SoftwareHardware
Government Pressure
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Potential Advantages of Outsourcing
Improved PerformanceReduced CostsReduced StaffLess OversightEasy access to difficult to acquire expertise
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RiskConsequence of total failure?OverchargesLoss of controlUnderperformanceLoss of customer good will
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Strategic AdvantageCore Business?Key functions which lead to market advantage
Consumer Driven Health Care InitiativesImproved Clinical Care
Strategic service functions that are dependent on technology
Customer Relationship ManagementPatientsPhysicians
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Physicians as CustomersCPOE Adoption IssuesConsequences of Failure
Loss IT investmentLoss of Revenue
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Value PropositionCore Competency vs. Extraneous Inefficiencies
QuestionsWhere does the task at had fit into this continuumDo we truly understand value?Time to reevaluate corporate focus, product, and sources of strategic advantage
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Needs AnalysisProcess AuditBenchmark Current OperationsValue ExerciseCurrent Deficiency AnalysisExpected Departmental ChangesNeed for Internal Monitoring/Interface after OutsourcingROI
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Additional ConsiderationsSWOT AnalysisStake Holder Mapping
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MatrixStrategic Non-Strategic
Strategic Competence
Don’t Outsource!
Non-Strategic Competence
Can but Need?New Opportunity?
Competence
Strategic Incompetence
Don’t Outsource!FIX
Non-Strategic Incompetence
Outsource!
Incompetence
Clemmons, Hitt; Jan., 1997
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Outsourcing CompaniesHistoryDue DiligenceEconomic ViabilityLegal AnalysisDemo: Operational or Dummy Confidence and Trust
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Other OptionsPortfolio Method of Risk Management
Two OutsourcersPartial Internal OverlapDuplication of Services Over Implementation PeriodInsurance?Buy or Partner with the Outsourcer or Control its Key Assets
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ContractsLine item expectations are difficult Provisions for changesNeed an expert lawyer teamDamages for losses
TimeServices
Additional gain for value added services
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ContractsExit Strategies Defined
Data OwnershipSource Code OwnershipTimeliness Actual methods of dispute defined
Arbitration vs. Litigation
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ContractsClearly Defined Payment ScheduleOversight ExpectationsClearly Defined License FeesNegotiate a “Third Party Source Code Escrow Agreement”
Hold up top date CodeDisclosed with failure to perform/bankruptcy
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Contracting Pit FallsPoachingShirkingContract Renegotiation
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PoachingVendor attempts to extract value without explicit permission
Selling DataTrending data and supplying it to competitorsAnalyzing data and selling it to companies in other markets
Similar Service or ProductsEntirely Different Companies
Actual use of data to take their market
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ShirkingNot Performing Tasks Adequately
Actual ServiceUpdating CodeServicing Equipment
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Contract RenegotiationOnce Operational Vendor asks for MoreUses Control as Leverage
Down TimeData PossessionCustomer RelationsEtc.
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Conclusion
Process Fraught with DangerKnow what you NEEDKnow what you can’t afford to LOOSEThe Contract can Make or Break the DealPortfolio Risk Management is Essential