Utility model key to hospital

The woes of Canada’s health care system are at the centre of attention these days, but less is known about how hospitals keep their IT departments up and running.

At a recent presentation to a group of Communications and Information Technology Ontario (CITO) members, the CIO of one of Toronto’s largest teaching hospitals explained how it made the most of its tight budget and how its experience could help those in other industries.

John Wegener, the vice-president of corporate resources and CIO at St. Michael’s Hospital in Toronto, said health care today is full of funding constraints, including a lack of investment, staff shortages and increasing system complexity.

Because hospital funding is on the decline, IT most often takes a back seat to higher priority investments such as MRI machines and CT Scan units.

“It’s very hard to make people understand the need for wires in the walls,” Wegener said, noting that Ontario’s Ministry of Health and Long Term Care has a policy in place that refuses the support of any IT investments through its funding. Currently St. Michael’s Hospital operates on a yearly budget of $350 million. Of that, approximately three per cent is allocated to IT.

Wegener estimated that 6.5 per cent would be a more reasonable piece of the pie.

While Wegener cited many hospitals that have implemented systems, he noted that many have moved ahead without creating a strong foundation that will be able to sustain future endeavours.

“In my view, when a lot of health care folks do planning they’re unrealistic in thinking about what they really need and where they’re going. Besides, it’s easier to fund bells and whistles than a network,” he said.

Two years ago the IT environment at St. Michael’s Hospital was grave, according to Wegener. Applications had been implemented without business process redesign, the network infrastructure was in a dire state, information was housed in department silos and there was no strategic information management plan – crisis management was the hospital’s norm.

Wegener and his staff recognized that the situation needed to change and set to work in determining how to fund it. The three options available were to fundraise, use hospital capital or tap into operating dollars. According to Wegener, because patrons would rather see their donations go towards research instead of wires and because of the restrictions of hospital capital, their only real option was to incur deficits through its operating budget. However, it was imperative that this deficit was kept to a minimum.

With this in mind, the decision was made to install the hospital’s network using a utility outsourcing model, which according to Wegener, provided a unique method of financing. The concept of the utility model is derived from the telco industry, he said, which provides basic service to the business with pricing based on the number of outlets and lines used. The total monthly charge is the sum of basic service plus additional services selected.

St. Michael’s ended up with a new network with a performance level of 40MB per second that it didn’t pay a cent for.

“They own the cables in the walls. We pay per port, but capacity doesn’t count. We only pay for what’s lit up,” he said, noting that the performance level is written into the service level agreement, so that if performance drops the provider faces a significant penalty.

According to Wegener, a cost benefit comparison was done, and it is estimated that the hospital has saved approximately one and a half million dollars by using the utility model. Another benefit to the relationship is that it allows the hospital’s IT department to shift its focus from providing service levels to creating value.

Ming Chen, a technical lead at Partners Integrated in Toronto and an attendee at Wegener’s presentation, said this model could apply to industries outside of health care.

“It’s innovative for sure,” he said. “It was good to get some first-hand insight into the health care industry, which has yet to make use of the benefits of IT in terms of driving efficiencies and improving services.”

utility model versus traditional method

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Jim Love, Chief Content Officer, IT World Canada

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