Strategic Management of Information Systems in Healthcare
Strategic Management of
Information Systems in Healthcare
Gordon D. Brown, Tamara T. Stone, and Timothy B. Patrick
STRATEGIC MANAGEMENT
OF INFORMATION SYSTEMS
AUPHA/HAP Editorial Board
Frederick J. Wenzel
University of St. Thomas G. Ross Baker, Ph.D. University of Toronto Sharon B. Buchbinder, R.N., Ph.D. Towson University Caryl Carpenter, Ph.D. Widener University Leonard Friedman, Ph.D. Oregon State University William C. McCaughrin, Ph.D. Trinity University Thomas McIlwain, Ph.D. Medical University of South Carolina Janet E. Porter, Ph.D.
University of North Carolina at Chapel Hill
Lydia Reed
AUPHA
Louis Rubino, Ph.D., FACHE
California State University–Northridge Dennis G. Shea, Ph.D. Pennsylvania State University Dean G. Smith, Ph.D. University of Michigan Mary E. Stefl, Ph.D. Trinity University Linda E. Swayne, Ph.D. University of North Carolina–Charlotte Douglas S. Wakefield, Ph.D. University of Iowa
STRATEGIC MANAGEMENT
OF INFORMATION SYSTEMS
Gordon D. Brown
Tamara T. Stone
Timothy B. Patrick
Health Administration Press, Chicago, IL
AUPHA Press, Washington, DC
AUPHA
HAP
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Library of Congress Cataloging-in-Publication Data Strategic management of information systems in healthcare / Gordon D. Brown, Tamara Stone, and Timothy Patrick, editors. p. cm. Includes bibliographical references and index.ISBN 1-56793-242-8
1. Medical informatics. 2. Health services administration. I. Brown, G. D.
(Gordon D.), Ph.D. II. Stone, Tamara. III. Patrick, Timothy B. R858.S773 2005 651.5'04261—dc222005046103
The paper used in this publication meets the minimum requirements of American Na-
tional Standard for Information Sciences—Permanence of Paper for Printed Library Ma-
terials, ANSI Z39.48-1984. ∞Acquisitions editor: Audrey Kaufman; Project manager: Melissa Rompesky; Cover de-
signer: Trisha Lartz; Layout editor: Amanda Karvelaitis Health Administration Press Association of University Programs A division of the Foundation in Health Administration of the American College of 2000 N. 14th Street Healthcare Executives Suite 780One North Franklin Street Arlington, VA 22201 Suite 1700 (703) 894-0940 Chicago, IL 60606 (312) 424-2800
CONTENTS IN BRIEF
List of Figures and Tables xi Preface xiii Acknowledgments xvii
Transforming Health Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Gordon D. Brown, Ph.D.
PART I The Contribution of Information Technology to Organizational Strategy: Integrating the Clinical and Business Functions Introduction to Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Tamara T. Stone and Gordon D. Brown
3 Organizational Accountability for Clinical Outcomes:
The Coming of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . .51
Gordon D. Brown and Suzanne A. Boren
4 Information Strategy Empowers Organizational Strategy . . . . . . . .79 Tamara T. Stone
5 Managing Data, Information, and Knowledge . . . . . . . . . . . . . . . .99 Timothy B. Patrick
PART II Information as Enterprise Strategy: The Strategic Use of Information Resources Introduction to Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
6 Aligning Information Strategy and Business and Clinical Strategies:
Information as a Strategic Asset . . . . . . . . . . . . . . . . . . . . . . . . . .121
Kenneth D. Bopp and Gordon D. Brown C o n t e n t s i n B r i e f
7 E-Health and Consumer Informatics . . . . . . . . . . . . . . . . . . . . . .149 George Demiris
8 Genomic Medicine: Informatics Implications and Opportunities . . .171 Mark A. Hoffman
PART III Information Strategy: Managing Information Resources Introduction to Part III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .191
9 Investing in Information Technology . . . . . . . . . . . . . . . . . . . . . .195 Keith E. Boles and Michael J. Cook
10 Managing Information Technology Services . . . . . . . . . . . . . . . . .223
Anthony N. Duminski and Timothy B. Patrick
11 Information Security and Ethics . . . . . . . . . . . . . . . . . . . . . . . . . .237 Kenneth W. Lobenstein
PART IV Building a Healthcare Information Infrastructure
Introduction to Part IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25912 Conclusion: Managing Informatinon Technology in the Future . . .261 Gordon D. Brown and Jim Adams
Index 293 About the Editors 307 About the Contributors 309
DETAILED CONTENTS
List of Figures and Tables xi Preface xiii Acknowledgments xvii
Transforming Health Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Gordon D. Brown Information as a Transforming Technology, 2; IT in Healthcare Organiza- tions, 8; The Constraining Potential of IT, 17; Information Skills for Health Systems Leaders, 19.
PART I The Contribution of Information Technology to Organizational Strategy: Integrating the Clinical and Business Functions Introduction to Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Tamara T. Stone and Gordon D. Brown The Strategy Network in Healthcare Organizations, 32; Information Strategy Related to Enterprise and Organizational Strategies, 39; IT as a Social Good,
46.
3 Organizational Accountability for Clinical Outcomes:
The Coming of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . .51
Gordon D. Brown and Suzanne A. Boren Integration of Clinical Strategy with Business Strategy: The Coming of the Corporation, 53; Information Strategy: Clinical Decision Support Systems, 62; Aligning Information Strategy with Clinical Strategy, 71.
4 Information Strategy Empowers Organizational Strategy . . . . . . . .79 Tamara T. Stone
D e t a i l e d C o n t e n t s 86; Transforming Intangible Assets Through IT, 89; Commitment-Based Management and the Human Capital of IT Workers, 93.
5 Managing Data, Information, and Knowledge . . . . . . . . . . . . . . . .99 Timothy B. Patrick
Data, Information, and Knowledge: A Philosophical View, 100; Controlled Representations and Interoperability of Data, Information, and Knowledge, 101; Interoperability and Knowledge Management, 107; The Semantic Web, 109.
PART II Information as Enterprise Strategy: The Strategic Use of Information Resources Introduction to Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119
6 Aligning Information Strategy and Business and Clinical Strategies:
Information as a Strategic Asset . . . . . . . . . . . . . . . . . . . . . . . . . .121
Kenneth D. Bopp and Gordon D. Brown Value Migration in Healthcare, 122; Consumer Empowerment in Health Services, 131; Strategic Leadership in Healthcare Organizations, 138; The Coming Paradigm Shift in Integrated Health Delivery Systems, 143.
7 E-Health and Consumer Informatics . . . . . . . . . . . . . . . . . . . . . .149 George Demiris
Implications of IT for Empowering Individuals and Communities, 150; Review of Patient-Centric Systems, 152; Challenges for e-Health Applica- tions, 158; Success Factors for e-Health, 161; Considerations for the Fu- ture, 164.
8 Genomic Medicine: Informatics Implications and Opportunities . . .171 Mark A. Hoffman Genomic Medicine, 172; Current State, 172; Emerging Trends, 181.
PART III Information Strategy: Managing Information Resources Introduction to Part III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .191
9 Investing in Information Technology . . . . . . . . . . . . . . . . . . . . . .195 Keith E. Boles and Michael J. Cook
The Challenge of Delivering Value, 196; A Valuation Framework for IT, 200; Tools for Evaluating IT Investments, 207; Process for Evaluating IT Investments, 211; Behavioral and Other Noneconomic Issues, 218.
Anthony N. Duminski and Timothy B. Patrick
D e t a i l e d C o n t e n t s
IT Governance and Leadership, 224; Strategic IT Planning, 226; Individual Project Planning and Management, 228; IT Department Organization, 229.
11 Information Security and Ethics . . . . . . . . . . . . . . . . . . . . . . . . . .237 Kenneth W. Lobenstein
A Security Framework, 238; Aspects of a Basic Security Program, 242; A Zone-Based Architecture, 252.
PART IV Building a Healthcare Information Infrastructure Introduction to Part IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .259
12 Conclusion: Managing Information Technology in the Future . . .261 Gordon D. Brown and Jim Adams
The Seeds of Change: Transforming the U.S. Health System, 263; Develop- ment of an Integrated Information System, 274; Personal Health Record, 278; Clinical Information Networks, 282; Innovative Business Models, 283.
Index 293 About the Editors 307 About the Contributors 309
LIST OF FIGURES AND TABLES Figure 1.1
Future Sociocultural Business Systems
Sample XML Document
Figure 5.4
RDF Triple in XML
Figure 6.1
Sociocultural Network of Health Systems
Figure 6.2
Table 8.1
Sample HTML Document
Web Sites Providing Genomic Information for Clinicians and Patients
Table 9.1
Percentage of IT Projects Subjected to Formal Evaluation Process
Figure 9.1
Evaluation Framework for IT
Figure 9.2
Stakeholder Analysis Focus
Figure 5.3
Hospital Functional Design
Figure 1.2
Figure 3.2
Skills Needed by Health Systems Leaders for IT Decisions
Figure 2.1
Strategic Integration of Healthcare Organizations
Figure 2.2
Maxims for Information Technology
Figure 3.1
Five Coordinating Mechanisms
Clinical Guideline for Diabetic Retinopathy Screening and Treatment
Simple Web Document
Figure 3.3
Clinical Pathway for Asthma Management Involving Patient and Parents
Figure 3.4
Contemporary Integrated Health System
Table 5.1
Alternative Definitions of Knowledge Management Retrieved from Google.com
Figure 5.1
Figure 5.2
L i s t o f F i g u re s a n d Ta b l e s Figure 9.3
Table 11.2
Figure 12.2
CHI Initiative Data and Information Standards
Figure 12.1
Zone-Based Approach to System Protection
Figure 11.1
Forms of Intellectual Property
Development and Change-Control Security Issues
Stakeholder Matrix
Table 11.1
Sample IT Vision Statement
Figure 10.1
Example of EVA Sensitivity Analysis
Table 9.2
Risk Adjustments to Discount Rate
Figure 9.4
Healthcare Value Chain
PREFACE
his book explores how healthcare organizations can utilize advanced in- formation technology (IT) to achieve high levels of operational per- formance and strengthen their market position. It considers health in-
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formation systems from an organizational perspective, integrating the science of IT, medicine, and nursing practice within the context of complex adaptive systems. The book provides a conceptual framework for considering how IT can be used to fundamentally transform clinical work processes and integrate the clinical and business functions to achieve a coherent organizational strat- egy. The framework draws on a body of organizational and systems theory and incorporates evidence from information and clinical sciences. The book takes an application approach, drawing on current operational and policy issues and supported with a rapidly growing body of evidence on how IT can be used to transform health systems function and improve clinical and business perform- ance.
Because of its grounding in theory and research evidence, the book is well designed for use in graduate courses in health management, medical in- formatics, medicine, and nursing and other health professions. Practicing health professionals can use the book effectively as well, either as a general reference or by focusing on the conceptual and applied material as a frame- work for problem solving and strategy development. Starting with Chapter 2, each chapter features a case study drawing on actual situations to introduce and apply the concepts. Readers are encouraged to return to the case for ad- ditional insight as they read through the chapter. These chapters also include a problem solving scenario that draws on the case and applies and integrates material from the chapter.
The book is divided into four parts. Part I focuses on both business and clinical strategies and then considers them as an integrated organizational strategy. These chapters describe the structure of IT and how information can be used to structure and manage the clinical and business functions. This discussion includes how these functions can and must be integrated to achieve high levels of performance. The book focuses initially on clinical and business operations because the transformation must start with a redefinition of the traditional role of organizations in managing clinical processes and P re f a c e
being accountable for clinical outcomes. Information technology can enable this shift, but there is no evidence to suggest that IT alone will produce it.
Part II focuses on information strategy related to enterprise strategy, or how an organization uses information to position itself in a competitive market and respond to environmental change. The issues examined include the use of information as a strategic asset, and a number of applications are discussed. Specific strategies are selected and discussed in some detail, includ- ing knowledge management as an organizational strategy, consumer infor- matics, the role of e-health and web-based technologies, and the impact of genomic medicine on health behaviors and services delivery.
Part III focuses on managing information resources. The editors feel it necessary to provide a detailed discussion of IT from the perspectives of operations management in Part I and strategic management in Part II before addressing the specifics of managing information resources. The earlier chap- ters provide the essential context for considering the investment in and man- agement of information resources. This section includes chapters on the ef- fective management of information resources, investing in IT, IT structure and staffing, and information security and ethics.
Part IV provides a broader context for thinking about how IT might affect the health system in the future. It is policy oriented and includes a comparative analysis drawing on how information has been applied in other service industries and health systems in other countries. It considers how IT in health might spawn fundamentally new ways of thinking about the indus- try. Discussions include increasing entrepreneurial behavior in start-up com- panies and considering health information from a global perspective. In- cluded in the discussion is an assessment of current U.S. policy initiatives to develop a national health information infrastructure.
Information is recognized as an important technology and one of the latest technologies to be brought to the health system. This recognition has given rise to many clinical and business applications and is reported in the lit- erature. Information, however, is more than just the latest technology to af- fect the health system. It is one of the few resources that increase in volume and value as it is used. Its value is in its use, as with any resource, but by its use adds resource. Consequently, traditional models to explain the econom- ics and strategy of investing in a technology do not fit information technol- ogy. This book explores IT within a new paradigm applied to health organi- zations and systems.
The application of information technology has been considered his- torically in health institutions primarily from a technical perspective. The technology has been applied to existing decisions, work processes, and sys- tem structures. The complexities of clinical and business processes have posed major technical challenges that have taken time to resolve. Part of the
P re f a c e
of the conflict with traditional professional roles. The technical focus of early applications has included primarily information technologists and nursing and medical professionals.
This book builds on the foundation work in medical informatics to ex- plore how IT can be used to transform work processes and systems. The sci- ence and the complexity of the task are expanded to include how information can be used to facilitate change in complex systems and individual behaviors. Information enables organizations to restructure their work processes and systems. It also enables them to develop new strategic initiatives, some of which are based on information as an enterprise strategy. Such profound change draws on the fields of medicine and nursing, informatics, systems the- ory, organizational psychology, organizational strategy and structure, eco- nomics and finance, law, and ethics. These are the disciplines from which this book draws to understand the potential of this new technology.
ACKNOWLEDGMENTS
he editors gratefully thank our many academic and practicing colleagues for their insights and contributions to our understanding of the appli- cation of IT in healthcare organizations. Many of them provided feed-
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back and made useful suggestions on this manuscript. We also acknowledge and express our sincere thanks to Christopher R. Brink, Lillian C. Folk, Can- dace Garb, Linda Huether, Annamarie Mantese, and David Moxley for their considerable assistance in manuscript organization and preparation. Their contributions greatly improved the quality of the book.
This work was supported in part by the National Library of Medicine Biomedical and Health Informatics Research Training grant 2-T15-LM07089- 11 and the Center for Health Care Quality, School of Medicine, University of Missouri–Columbia.
1 CHAPTER
INFORMATION TECHNOLOGY IN TRANSFORMING HEALTH SYSTEMS
Gordon D. Brown
Key Terms
Chapter Outline
3. The Constraining Potential of IT
4. Information Skills for Health Systems Leaders
1. Understand the role of IT as it affects work process design and organi- zational strategy.
2. Understand the issues facing healthcare organizations regarding the ap- plication and use of IT.
3. Apply knowledge about IT to make informed operational and strategic decisions in healthcare organizations.
2. IT in Healthcare Organizations
5. Evaluate the potential and limitations of IT in a functioning healthcare organization.
The application of advanced information technology (IT) to improve health system performance has probably generated more hope than any development in the health system. Yet, somewhat perversely, IT has at the same time fre- quently failed to meet expectations. Those studying the problem define it in different ways and propose varied solutions. Some chief information officers
Business process redesign Clinical process redesign Healthcare value chain Genomic medicine Information vocabularies and databases Information architecture Clinical decision support systems Integrated delivery systems
1. Information as a Transforming Technology
Learning Objectives
4. Synthesize how the clinical and business functions in healthcare organi- zations are structured and how IT can facilitate effective business and clinical decision making.
Chapter Overview
St ra t e g i c M a n a g e m e n t o f I n f o r m a t i o n Sy s t e m s i n H e a l t h c a re
(CIOs) view it as a financial problem caused by underinvestment in IT by healthcare organizations. Others feel that it is a vendor problem, in that soft- ware vendors cannot deliver on their promises. Vendors claim that applying in- formation systems (IS) to the health field is difficult because of the exceedingly complex nature of health services delivery. Chief financial officers say the re- turn on investment is far below expectations at any level of investment. Chief executive officers (CEOs) observe that complexity and cost increase exponen- tially as the application progresses and that no end is in sight. They wish the problem would go away, but it won’t. Doctors, nurses, and other health pro- fessionals range from enthusiastic to indifferent to hostile when considering the application of IT to their work.
Which view of the IT world is correct? The fact that the problem touches almost everyone in the organization and is viewed so differently sug- gests that it is systemic in nature. The argument that applications in health sys- tems are more difficult because health services and health systems are so com- plex is probably true. The complexity of the system could explain the pace of development, but not the failure to apply and widely use systems that have been tested and proven. This suggests that the issue is not primarily in the new technology or how it is being implemented in healthcare organizations. These may be problems, but the issue is much more complex. It suggests a failure to understand or accept changes in business and clinical processes that are en- abled by IT. Information is an enabling technology. Its design and application in organizations must be consistent with the design of the work processes it is intended to facilitate. Lacking that, the technology will fail regardless of the level of investment, vendor, system capacity, computing speed, or size and qualifications of the IT staff.
The application of IT has demonstrated major positive outcomes in other industries (Andersen and Segars 2001; Chen and Zhu 2004; Oliner and Sichel 2000). Some encouraging achievements in the performance of health- care organizations have been credited to IT. The critical factor is the consis- tency between how IT is designed and managed and the design of the work processes it supports.
Information as a Transforming Technology
In his classic work The Third Wave, Toffler (1980) observes that only three fundamental changes have taken place in society in the history of humankind: the agricultural revolution, the industrial revolution, and the information and technology revolution. These profound social changes redefine the nature of civilization, including where and how we live and work, family structure, how we value education and health, and even the validity of well-established scien- I n t ro d u c t i o n : T h e Ro l e o f I n f o r m a t i o n Te c h n o l o g y i n Tra n s f o r m i n g H e a l t h Sy s t e m s
are based on the assumptions of the industrial revolution—the second wave— and thus may be irrelevant in an information and technology society. He ob- serves that although we are in the information and technology age, we still typ- ically function with the mind-set of the industrial revolution. Current and future organizations and systems, he proposes, need to be built on assumptions of the technology and information age. The problem is that we do not have good models for doing this. We know only that our current models do not work very well.
Financial and other sectors of society provide emerging examples of how the new age might be structured and function. The structures that have emerged are innovative but can be understood only within the context of the process by which they were derived. The process that led to the development of VISA as an organizational model is a good example. Early concepts of plas- tic charge cards were as extensions of existing banking institutions and processes. Individual banks envisioned incorporating new optical scanning and computer technology to develop charge cards as an alternative to writing checks. They were considered to constitute a limited market appealing to a certain clientele. Charge cards were designed to be unique to each bank and used as a means of differentiating them in the market. The application of charge cards was imposed over a traditional banking structure that never en- visioned the transforming potential of the information age. The hospital in Case 1.1 defined the problem as needing to automate an aspect of the billing system but installed software that was based on the assumption of a re- designed process of managing the revenue cycle.
Where the established banking industry saw the charge card as an alter- native to writing checks, some saw it as the basis for electronic banking and others as a basis for a totally integrated financing system. In order for the new technology to work, the industry had to develop fundamentally new processes and structures. Change theory describes this phenomenon as double-loop learning. New structures do not evolve from structures of the past but rather are innovative, based on new sets of assumptions. Banks could not differenti- ate themselves through their individualized charge cards and so would have to cooperate to develop an electronic system they could use collaboratively. VISA did not evolve from any previous structure or logic of the financial community but instead used its understanding of the transforming power of IT to envision a new order. The nature of organizational innovation and the demands it places on leaders is described by VISA’s founder, Dee Hock, as “chaordic,” combining chaos with order (Hock 1999). He concludes that organizations are built to bring order but must live and thrive in a world of chaos. If this is so, we must build organizations to perform in that environment.
Observing progress made by the health field in transforming itself might lead one to conclude that Toffler’s view was more science fiction than St ra t e g i c M a n a g e m e n t o f I n f o r m a t i o n Sy s t e m s i n H e a l t h c a re CASE 1.1
Health Valley Hospital had operated on a financial system from a minor software Health Valley vendor for many years. The hospital reviewed the cost and made judgments about
Hospital the system, deciding that it was not keeping up with the needs of the organization. Upgrades IT Management felt it was time for a new patient and financial accounting system.
System This action was taken to reduce costs and, more importantly, to improve the finan- cial performance of the organization and increase its sophistication in financial analysis.
After a thorough process of determining and documenting requirements, a multidisciplinary group of executives and managers evaluated all of the major healthcare software vendor offerings. They selected a well-known full-suite prod- uct of patient and general accounting, accounts payable and receivables man- agement, payroll, decision support, and electronic commerce. The application suite was installed primarily by the staff of the hospital with support from the vendor.
The implementation of the system was a technical success, but the ap- proach of the business leaders was to automate the current business processes with the new system. They did not fully evaluate the new system’s impact on oper- ations. The electronic commerce capability had advanced edit and screening capa- bility well beyond the capabilities of the prior system. This system checked the components of a bill against the billing system entries, against the medical records abstracting system, and finally against edits used by the Medicare intermediary that adjudicated and paid Medicare claims. The older system only checked for data integrity within the billing system and had no capability to replicate the editing done by the intermediary.
The implementation had an immediate and significant impact. Claims that used to go out the door to the insurers were now failing to pass the edit checks. No process was in place to reconcile the issues between the billing and medical records offices. The edits became more robust and caught claims at a more de- tailed level. Finally, claims that used to leave the organization and go to Medicare might be expected to be a leading sector in the third-wave transformation.
On the other hand, being an information-dominated industry might make the potential of change greater but the probability of change less. Evidence supports the fact that information organizations are difficult to change in part because the information infrastructure has been applied to existing processes and structures (Keen 1994). Toffler (1980) speculates that higher education, being in the information and technology business, controlled by profession- als, lacking strong competition, and steeped in tradition, would be slowest to change. He predicts that some universities would rather die than change, and so they will. This description might apply to healthcare organizations as well.
The Role of IT in Organizations Automation
There are two basic approaches to the application of IT to healthcare organ-
of existing
izations: to automate existing processes or to enable the transformation of
processes
I n t ro d u c t i o n : T h e Ro l e o f I n f o r m a t i o n Te c h n o l o g y i n Tra n s f o r m i n g H e a l t h Sy s t e m s
after a significant time delay if they were returned because of edit failures were being rejecting on site immediately.
The result of this process was a rapid growth in rejected claims, over- whelmed business office staff, and dramatically increased dollars in accounts re- ceivable (AR). Prior to conversion to the new system, the days in AR averaged in the mid-70s. This increased significantly as management tried to cope with the problem, until days in AR reached more than 110.
The approach taken to deal with the problem was to use a multidisciplinary, multilevel team assisted by outside consultants who reviewed and redesigned the entire business work flow. The software vendor was also brought in to help coordi- nate the work flow changes with the capabilities of the software system. New roles were created, new middle management was hired, and training in new processes was implemented. The linkages among the business, medical records, and regis- tration offices were dramatically strengthened with audits implemented to support the evaluation of data quality. Additionally, a change management committee was established to discuss, evaluate, and approve changes that needed to be made to business processes as well as computing systems. Effectively, the new integrated computer system forced the organization to behave more like an integrated system itself and less like a collection of departments.
The end result of the new system implementation along with the new busi- ness process improvements is impressive. Days in AR have dropped dramatically and now average in the mid-30s, close to best in class within the geographic re- gion. The charges billed and dollars collected have improved dramatically. Days of cash on hand have grown by 50 percent in less than two years. Finally, the organi- zation’s bottom-line profitability has improved.
Problem Solving 1.1 discusses the lessons to be learned from Health Val- ley’s experience.
—Lawrence Sharrott, CIO, AtlantiCare Health System, and president, InfoShare, Inc., Atlantic City, NJ
and outcome. Automating processes replaces back-office operations with computer applications such as payroll, billing, scheduling, and inventory con- trol. These functions characterized early business applications of computers in health and other organizations and resulted in increased processing speed and greater efficiencies. They were characterized as data processing functions and located in departments bearing this name. In hospitals, early information activities were located in finance departments because financial data were standardized, included repetitive processes, and were relatively easily auto- mated. This was an ideal application of data processing technology. Later business applications included patient scheduling and admitting. Applica- tions in healthcare organizations on the clinical side of the enterprise lagged and developed parallel to business applications. Early applications were typi- cally by functional department, applied to internal departmental processes. These included laboratories, pharmacy, and, later, radiology. All involved
St ra t e g i c M a n a g e m e n t o f I n f o r m a t i o n Sy s t e m s i n H e a l t h c a re
The application of IT overlaid how hospitals and clinics were structured and functioned.
Early applications in hospitals and clinics were designed to automate existing internal processes. Organizational leaders were reluctant to invade and alter the clinical decision process. In part this reluctance was because most leaders had been trained in and were oriented only to the business func- tion and it challenged hundreds of years of separation of the clinical function from organizational interference. The availability of information to assess clinical outcomes and improve clinical processes frequently exceeded the ca- pacity or commitment of the organization to use it in such a manner. Hospi- tals and clinics maintained their existing hierarchical functions or invested in clinical information systems seemingly under the assumption that new data systems would change clinical work processes. This assumption has not proven to be true.
Transformation
Nearly absent from the application of IT in healthcare organizations is the
of processes
management of the clinical process from the perspective of the patient and patient-centered care. The potential of advanced IT to enable the transfor- mation of clinical processes across professionals, departments, organizations, and systems is considerable but has generated little interest from organiza- tions or health professionals.
This book focuses on the use of IT as an enabling technology for transforming work processes. The application of IT in such transformations has been well developed in some product and service industries. In these in- dustries the application of advanced IT is viewed as an enabling technology supporting innovative process redesign. Evidence shows that IT investment by organizations has not been effective as a means of initiating or stimulat- ing business process design (Broadbent, Weill, and St. Clair 1999; Collins 2001). Such investments have resulted in information capacity that does not produce the anticipated outcomes or expected return on investment. Re- sponsibility for the failure is frequently directed at the software, CIO, IT staff, or underinvestment. The solution is frequently directed at one or more of these “problems,” but evidence suggests that none of these factors consti- tute the real problem. More likely, the problem is that the enabling technol- ogy was purchased without sufficient understanding of or commitment to work process redesign (see Problem Solving 1.1).
Work Process Redesign
The purchase of advanced IT without a commitment to work process redesign can be a wasted investment by the institution. The total cost to the institution might even be greater than the direct cost of the IT system itself. The applica- tion of IT to automate existing systems can act as a constraint to later attempts I n t ro d u c t i o n : T h e Ro l e o f I n f o r m a t i o n Te c h n o l o g y i n Tra n s f o r m i n g H e a l t h Sy s t e m s PROBLEM
In Case 1.1 it was only through the installation of a new software system and im-
SOLVING 1.1 plementation of new business process that outstanding results were achieved.
Health Valley The lesson to be learned from this experience is how to use new technology to
Hospital transform business processes without being forced to do so by poor outcomes. Upgrades IT
- The improvements noted in Case 1.1 could not have been achieved by the im-
System plementation of new technology alone. As a matter of fact, the new system highlighted and amplified the problems with the old processes.
- Implementing new processes without a new software system could not have produced the same results. Many of the processes now in place could not be provided or supported with the older system.
- The successful transformation of this complex business process involved front- line workers who understood the technical aspects and managers who under- stood how each work element contributed to an overall work process.
technology prior to process redesign can contribute to the failure of the re- design by further freezing current processes into place. Furthermore, change that occurs later will be much more complex and costly. On the other hand, acquiring IT as a means of producing the redesign is likely to fail.
Organizations committed to innovative work process redesign have found the investment in IT essential (Caron, Jarvenpaa, and Stoddard 1994). Those that have tried to pursue such a strategy without a strong IT infrastruc- ture designed to support it have failed or had limited success. Information technology has been found to be an essential enabling technology when closely integrated with the redesign of the business or clinical functions. When
IT is incorporated as an enabling technology in process redesign, issues of ac- ceptance and use are diminished. These institutions do not use IT develop- ment to overlay existing work processes but rather as the enabling technology to fundamentally transform them. This is the strategy of Wal-Mart (Furey and Diorio 1994), VISA (Hock 1999), and other companies using IT to support a transformation of previous business processes.
Considerable evidence describes how IT can be used to enable the fun- damental redesign of work processes that produce exceptional levels of indus- trial operating efficiency and strategic advantage. Scholars and executives, par- ticularly those grounded in management IS, have established a rich literature on innovative business process redesign as a means of achieving superior busi- ness performance. Process redesign is differentiated from process improve- ment, depicting fundamentally new ways of considering business functions. Process redesign has also been referred to as process reengineering, requiring vision and conceptual skills to develop innovative solutions for existing prob- lems. True innovation requires the conceptual reorganization of problem sit- uations (Shull, Delbecq, and Cummings 1970, 71–94). This assumption un- derpins the work of Deming, Juran, and others in using process redesign and 1 St ra t e g i c M a n a g e m e n t o f I n f o r m a t i o n Sy s t e m s i n H e a l t h c a re
The application of scientific principles and technological advances to fundamentally redesign business processes to achieve superior outcomes did not really take hold in the United States until the 1980s, although the sci- ence has existed for much longer. This lag occurred for two reasons. First, businesses enjoyed relative prosperity after World War II and did not perceive the need to reform their business processes. Second, the principles of scien- tific management were not emphasized in corporate leadership or business schools, which relied on tradition consisting of “myths, hunches, gut feel- ings, intuition and knee-jerk reactions,” instead of scientific evidence, to im- prove business processes (Spare 2000). Global competition changed the mar- ket and nature of the competition. Businesses using traditional management approaches and theories found they could no longer compete.
IT in Healthcare Organizations
Evidence of how advanced IT can facilitate work process redesign is com- pelling. The level of evidence over time and across a large section of the serv- ice and product industries provides considerable support for application of advanced IT to healthcare organizations. The evidence supporting the en- abling power of IT to improve work processes raises questions of why such a lag exists in the health industry. Are healthcare organizations more complex, resource rich, or poorly managed, or are there other factors to consider?
Healthcare organizations present a particularly difficult challenge be- cause of their traditional structure and assumptions about work processes, es- pecially clinical work processes. Patients enter the hospital or clinic based on a specific need, typically seeking treatment of some disease symptom. The pa- tient encounters the system, receives a service, and exits the organization. Health services are viewed by the institutions more as a commodity than as a continuing commitment. Services are evaluated on the basis of the quality of the given service and level of satisfaction reported by the patient. Patients, on the other hand, increasingly view health services as a continuous process be- cause of the increasing rate of chronic diseases and changing attitudes about healthcare. Under these conditions, information on health status, disease his- tory, treatment history, and health risks is shared among all health providers and with the patient. Healthcare organizations are institution-centric, which also characterizes their information systems. Physicians frequently become focused on episodic illness, probably in part because the information systems that support their decision making are designed in this manner.
Within hospitals and clinics exist an overall business function and a clin- ical function designed to support patient diagnosis and treatment. Hospitals, clinics, and other health services delivery organizations traditionally have been I n t ro d u c t i o n : T h e Ro l e o f I n f o r m a t i o n Te c h n o l o g y i n Tra n s f o r m i n g H e a l t h Sy s t e m s
The dominant business logic is based on the assumptions of economies of scale of equipment and personnel. This is the logic for centralizing invest- ments in functional departments. The actual clinical functions are carried out by health professionals working across functional units based on the needs of each patient during the episode of care. Physicians have been structurally sep- arate from the organization and are highly autonomous in working with the patient to determine service needs and the structure of the overall clinical process. The hospital represents a single stage of production, and the clinical function is structured around that stage of care. It is based on institutional care, not the patient, as the unit of analysis. The clinical function from the perspective of the patient is considered outside the purview of most health- care organizations. Information technology has been developed within the hospital around the clinical function, separate from the business function. The traditional structures of the business and clinical functions have defined the design of information systems to support them.
Transforming the Business Function Operational