Healthcare Providers Paying Too Much for IT, New Survey Says

According to a new whitepaper from NET(net), healthcare organizations pay more for technology than any other industry. Of the 30 industries sampled in the survey, “healthcare organizations pay an average 17% more than that of the other 29 industries…and 33% more than the industry with the lowest average costs,” according to the authors.

These overpayments appear to take place for all types of technology involved in the modern delivery of care, from software, servers, and laptops to the vertical applications more specific to healthcare providers’ unique technology needs. According to the authors, this indicates the added premium for these technological services is not just for certain forms of technology specific to healthcare, but rather for all technology sold to healthcare providers.

So why are healthcare providers overpaying by such a wide margin? The paper narrowed it down to 12 main reasons:

  • Healthcare organizations place a strong emphasis on addressing issues related to patient care and safety, which means that the majority of healthcare initiatives focus on improvements to care and mitigation of risk. The importance of investing in high performing technology to help achieve these goals shifts focus away from a seemingly justified high cost and toward the overall value of improved patient care to the organization.
  • Many healthcare providers are non-profit organizations, and success is measured differently than in other more financially-driven businesses.
  • Healthcare is a highly regulated industry that is difficult to automate, which often results in inefficient processes. This can extend to the technology decision making, spending, and implementation process.
  • Healthcare organizations tend to rely on expert consultation and opinion without independent evaluation of market prices or alternative optimization options, which can result in a lack of diligence for pursuing negotiation strategies.
  • Many healthcare organizations invest in vertically integrated technology solutions that commit them to increased supplier influence over their technology spending decisions. This practice can create a monopolistic pricing situation between providers and suppliers.
  • Organizations often purchase single-purpose technology solutions that bundle all elements from new hardware to required training, making margins more difficult to identify.
  • Some technology suppliers have created products marketed specifically for the healthcare industry at an added premium, though evaluation and comparison between industry-specific and commercially available offerings revealed a disproportionate increase in the price compared with actual design differences.
  • Organizations are not leveraging strategic sourcing strategies effectively, but instead often continue to follow a commodity-based purchasing process that is ineffective in the IT market.
  • Healthcare organizations tend to only collaborate with other industry organizations, lacking the benefit of cross-industry perspectives on the technology market.
  • Government incentives do not currently work to align providers with the most cost effective technology solutions.
  • Significant economic and legislative changes for the healthcare industry have necessitated investments that will help providers to create sustainable businesses.
  • Technology developed for the healthcare industry is among the most complex, and organizations have large staffs due to inefficiencies despite the fact that providers spend less on IT staff than other industries. Enterprise-wide operational integration is not currently feasible with the current diversity of technologies in use.

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