Irv Lichtenwald

Why Hospitals Should Outsource IT Support

May 19, 2020

Healthcare IT, IT Outsourcing 5 Minute Read

You’re probably not the least bit surprised when you go to your favorite restaurant and find that the personable, attentive server you had last time has moved on. Nor is it shocking when your favorite yoga teacher gets a better gig. In the service and retail industries, turnover is both high and expected.

You might be surprised, however, to learn that the American industry with the highest employee burn rate is not the retail and consumer sector. Instead, information technology takes the top spot with an average annual turnover rate of 31.2 percent, according to analysis by LinkedIn.

In healthcare specifically, there are 17 percent more IT job openings than qualified candidates, meaning 15 million current healthcare IT jobs will go unfilled. Overall, 60 percent of IT jobs remain open for more than 90 days. (Scroll down to see Medsphere’s infographic on technical jobs in hospitals.)

Of course, those working in IT know this already, even if they can’t site the exact percentage. They’re probably also unsurprised to hear that, within the technology sector, turnover rates for user experience and design, data analyst and embedded software engineer are at least 21 percent.

“Yes, the U.S. has a tech talent shortage problem,” says Mondo CEO Tim Johnson. “However, the constant headlines on the shortage of high-end tech experts stateside overlook a core piece of the puzzle: Even when companies effectively attract and recruit niche tech talent, they’re lucky if they retain them for more than one year.”

As the manager of an IT department, imagine losing 20 percent of your team every year. As a hospital administrator, also imagine losing 10 percent (the turnover rate for healthcare and pharmaceuticals) of your total staff in 12 months. Especially when your currency is human health, those are bedeviling challenges.

A crucial element in any conversation about IT turnover is the why. Why do people leave what appear to be lucrative, satisfying jobs? The answer is ambition, or inertia, or ennui, or whatever you want to call it. In short, the number one reason tech workers depart for greener pastures is because they are “concerned about the lack of opportunities for advancement,” as 45 percent of interviewees told LinkedIn.

Of course, this IT workforce reality presents differently in healthcare than in other industries. While turnover is always costly—the average recruiting cost for a hospital IT hire ranges from $11,000 to more than $20,000 per position— it carries more urgency for many healthcare organizations with very thin profit margins.

When it comes to the IT talent retention challenge, hospitals and health systems have two options: Make jobs too attractive to leave or outsource key positions and eliminate the headache of recruiting, hiring and onboarding essential staff at least once a year.

Faced with expensive turnover in positions across the board, many hospitals and health systems are making the first option a primary strategy.

“Stabilizing the workforce through minimum wage increases and some career advancement programs are actually saving us money because the churn and cost of managing turnover is higher than the cost of investing in these programs,” said Atrium Health VP Scott Laws. “This is actually alleviating some of the cost pressure.”

Administrators are not, however, one-trick ponies thinking competitive salaries are a surefire way to retain talent.

“Dollars alone won’t keep people for the long term,” said Kenneth Hertz, principal consultant with the Medical Group Management Association. Hertz say hospitals will have to offer better benefits, perhaps flexible schedules, to keep people for the long term.

Of course, the nature of IT makes outsourcing a more viable option than it can be for clinical positions. Indeed, while many healthcare organizations have both the resources and a robust talent pool from which to hire, hundreds of facilities, urban and rural, lack cash and sophisticated IT leadership, making thoughtful technical decisions an unattainable luxury. For these safety net hospitals that increasingly must deal with more stringent federal regulations, outsourcing is both the best and often only realistic option.

The good news is that outsourcing is now seen as a completely viable answer to the problem of both staff turnover and high costs. According to Black Book Research, the expectation that costs will have to be reduced by at least 24 percent before 2022 has led 98 percent of hospital leaders to explore outsourcing for both technical and clinical roles.

Will the outsourcing trend continue? In all likelihood, yes. In general, outsourced resources work for a firm that manages employee roles and benefits. These are not side jobs in the gig economy. And, outsourcing firms give hospitals the opportunity to focus on their core service—providing care.

The working hospital model is one in which a large organization retains numerous divisions that focus on specific aspects of the enterprise. Smaller firms with more narrow focus can provide the specialization and agility that healthcare systems are hard pressed to match.

Certainly, there are risks and downsides associated with outsourcing. Data breaches and privacy concerns are highest with business associates and third parties. Quality issues have to be carefully managed. All of which puts pressure on hospital administrators to make sure they choose a trusted and proven outsourcing partner.

With the highest turnover rate of any American industry and the immense pressure to reduce costs, healthcare will increasingly turn to outsourced services in the foreseeable future. The cons may be a source of frustration, but the pros are too tantalizing to pass up.

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