Outsourcing wave hits New York hospitals

Hospitals in the New York area are seeing an unusually high number of IT outsourcing deals, due to a spate of recent mergers, plus the high cost of providing care in the area.

"Being in New York makes it very difficult to retain technology people, because we're competing with Wall Street," said Richard P. McGrail, vice president and CIO at Continuum Health Partners Inc., which operates seven facilities in Manhattan and Brooklyn. Continuum announced in January that it signed a seven-year, US$350 million deal with Paris-based Cap Gemini Ernst & Young.

Another problem, said Matt Duncan, a research director at Gartner Inc. in Stamford, Conn., is that "hospital organizations are loathe to disrupt their salary structure." Because of nursing unions, hospitals "can't pay Windows 2000 engineers twice what they pay a nurse," he said.

Earlier this month, St. Vincent Catholic Medical Centers in New York outsourced its IT department to Computer Sciences Corp. in El Segundo, Calif., in a seven-year, $200 million deal.

After merging with other health systems, it becomes complex to "operate as one enterprise," said Bernadette Kingham, a spokeswoman at St. Vincent, which was formed in August as a result of a merger among three hospital systems.

Outsourcing allowed St. Vincent to quickly implement technologies, such as online medical records and e-commerce applications, uniformly across its eight hospitals in Brooklyn, Queens, Manhattan and the Bronx.

Within the past year, hospitals nationwide have been under pressure from the federal government, corporations and consumers to deploy new technologies.

For instance, regulations affecting the privacy of health data, which are scheduled to take effect tomorrow, will require a major overhaul of many hospitals' systems.

Additionally, The Leapfrog Group, a Washington-based consortium of about 60 major corporations, is pushing hospitals to use computer physician order-entry systems to reduce medical errors.

When New York Presbyterian Hospital decided to outsource its IT department to First Consulting Group Inc. in Long Beach, Calif., in November 1999, that "set a new threshold in the IT world" for hospitals, said Ann Sullivan, CIO at Maimonides Medical Center in Brooklyn.

Following that "landmark" event, Maimonides officials knew its own medical board would begin asking why it wasn't considering the same option, she said. But the medical center decided not to outsource its IT systems because it didn't want to hand over such a strategic function as IT to a third party.

Instead, Maimonides this month turned its IT department into a for-profit application service provider.

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