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Healthcare CIOs’ Power over IT Purchasing Decisions in Free Fall

The power of healthcare CIOs over the IT purchasing decisions of their organizations has virtually evaporated, according to a newly released survey by Black Book Research.

healthcare cio

Source: Thinkstock

By Fred Donovan

- The power of healthcare CIOs over the IT purchasing decisions of their organizations has virtually evaporated, according to a newly released survey by Black Book Research.

Three years ago, healthcare CIOs controlled 71 percent of IT purchasing decision, but that power has been in a free fall, plummeting to 8 percent of IT purchasing decisions this year, the survey of 247 CIOs and 1,305 non-IT C-level and senior management leaders found.

That power has shifted primarily to line-of-business (LOB) management teams.

“Traditionally, CIOs called the shots in IT purchasing after aligning with the department on its need, but digitalization is making a permanent change to the health systems IT purchase process,” said Black Book Managing Partner Doug Brown. “As healthcare organizations transform work processes through digitalization the department leaders involved must logically uphold the authority of those processes.”

Around 45 percent of respondents said they expect that more than one-third of all dollars spent on IT will originate from outside the IT department next year.

A full 90 percent of healthcare CIOs surveyed report they were bypassed by LOB management when making technology investments in 2018, as compared to 17 percent in 2016.

Eighty-eight percent of non-IT hospital leaders see the demand for their technology expertise intensifying, while the role of CIO is markedly shrinking as the shift toward decentralized tech management moves to department heads and LOB executives, the survey found.

More than one-quarter of CEOs surveyed judged that their CIOs are not strategic enough to navigate their way through complex healthcare business systems to spur financial success. By contrast, 81 percent of CIOs surveyed identified themselves as having a transformational role as opposed to a tactical or functional role.

For 84 percent of hospitals, the CIO’s traditional role of IT project delivery, service, and support is on the decline. The digital ecosystem is exploding, and strategic decisions are being made by others than the CIO, according to Black Book.

Perhaps reflecting this shrinking role, hospital CIO turnover is the highest it has been in 13 years, with an average tenure of 3.2 years, compared to an across-industry average of 4.5 years. Three-quarters of hospital CEOs said that recruitment of CIOs from outside of the healthcare industry is the preferred approach because the CEOs don’t think there are enough transformational healthcare CIOs out there.

“The CIO job isn't going away as an infrastructure executive, but the most exciting positions in healthcare business technology will be in creating value outside of IT, where new technology will transform operations,” said Brown.

Healthcare IT investments are primarily being made to improve business initiatives, such as improving patient experience, transforming revenue cycle management and financial processes, increasing hospital operational efficiency, and growing the health system’s revenue and the loyalty of healthcare consumers, the survey found.

Around 82 percent of CIOs balked at outsourcing their IT operations to a managed services provider; however, operations and financial executives feel differently. Ninety percent of CFOs and 84 percent of CEOs recommended outsourcing be considered if service levels can be maintained or improved at the same or less cost to the organization; 81 percent of LOB and departmental leaders say they are frustrated with the autocratic IT divisions and believe outsourcing would resolve these issues.

Most CIOs surveyed expect their roles to shift or be remixed due to digitalization. Skills most highly sought after for new healthcare CIO include: (1) innovation as a critical element of success, (2) connectivity to engage as a leader in the flow of all organizational information, and (3) communication leaders in an era of medical and financial data driven cultures.

“Clearly the success of the 2019 CIO will be measured not on what they have built in infrastructure, but what they orchestrate between services, IT systems, and what business goals have been integrated,” concluded Brown.

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