Hospitals Remain Cautious about Hiring Third-party IT Services

But tight budgets are causing demand for superior electronic information storage to uphold patient privacy, federal laws

But tight budgets are causing demand for superior electronic information storage to uphold patient privacy, federal laws

Palo Alto, CA — December 16, 2003 — Healthcare organizations have traditionally operated their functions in-house with minimal third-party interference, and the institutions continue their reluctance to outsource IT services, according to new research Frost & Sullivan, an international growth consultancy.

The firm's analysis revealed that revenues in the healthcare industry totaled $4,239.5 million in 2002, and they are projected to reach $5,246.4 million by 2006.

"Community-based hospitals have viewed outsourcing as a threat to internal jobs, and directors responsible for purchase decisions seem to shun technology implementation fearing operational change and associated technical difficulties," said Frost & Sullivan Research Analyst Vivek Subramany.

Another factor impeding the adoption of outsourcing IT services has been the lack of returns from former IT investment initiatives, largely due to the isolated, non-dynamic nature of those IT applications.

The lack of incentive from IT investments has been even more evident due to the sluggish economy, which has been an additional deterrent to the healthcare IT services market.

"Weary from the IT spendthrift times of the late 1990s and the associated costs accrued, healthcare organizations are now showing extreme caution as well as skepticism toward investing critical healthcare capital in innovative technology applications," noted Subramany.

Frost & Sullivan commented that a positive effect of the financial drain is that tighter budgets demand superior methods of electronically storing and accessing increasing volumes of patient healthcare-sensitive information to uphold their privacy and integrity in keeping with federal laws.

The severe penalties associated with Health Insurance Portability and Accountability Act (HIPAA) breaches are forcing hospitals to ensure compliance regarding the safety and integrity of medical records, thus spurring demand for outsourced IT services.

Hospitals are now beginning to opt for the method of third-party regulatory compliance monitoring services, which enable healthcare professionals to concentrate on their own mission critical core competencies, rather than the IT.

Such dependency on outsourced IT services is expected to be a strong driver in this market, ensuring steady revenue growth and greater profit margins over the forecast period, Frost & Sullivan reported.