Case for selective ICT outsourcing : South West Alliance of Rural Hospitals

This paper explores the links that have been successfully forged between the small independent Rural Health Service Providers in Victoria’s South West as a result of the establishment of the South West Alliance of Rural Hospitals, one of Victoria’s 14 voluntary regional health groupings. We examine the published research on Information and Communications Technology (ICT) Outsourcing and use this as a framework through which to examine the successful initiatives implemented by the South West Alliance of Rural Hospitals. The paper summarises the decision to establish the hospital network and to appoint a CIO with responsibility for the region and the impact this had on the ICT strategy that emerged. Since there was no formal ICT infrastructure in place that was shared by the independent service providers in the region when the voluntary network, SWARH, was established it was felt from the outset that the provision of shared services would provide the key to establishing regional cooperation. The delivery of ICT services in this environment has its own challenges. Challenges that the new CIO decided to address using ICT Outsourcing right from the beginning. This decision was aimed to reduce the perceived risk while at the same time to leverage the opportunities available from a relatively modest budget. The paper briefly describes the communications network that emerged between 1999 and 2001, what is now in place and looks at the future vision held by those within and without the SWARH group. It pays some attention to the implementation challenge but rather than dwell on the implementation problems the paper examines the agreed benefits. In the end the message is clear— sharing ICT resources leads to overall benefit for all players. Further the notion that the strong can and should support the weak is not a one-way resource shift. All partners in the arrangement benefit as the whole becomes greater than the sum of the parts. New initiatives previously thought impossible are emerging in South West Victoria as a direct result of the initial success and the model is being actively implemented in other Victorian regions as well as being examined in other states. The emergence of the truly virtual health care network in Victoria’s South West supported by external service providers but managed and coordinated by a small but powerful central ICT team holds a number of useful lessons for the delivery of rural, regional and remote services. Some of these lessons mirror the classical ICT Outsourcing findings while some may well be unique to rural service providers. Rural Health Service Provider Sharing Information and Communications Technologies W G Hewett & Garry Druitt 2 The Authors Bill Hewett, an academic in the School of Information Systems at Deakin University, has been actively involved in the ICT industry for over 35 years, working in both ICT consulting/service organisations and companies applying technology to smooth business processes. Since joining Deakin in 1991 Bill has maintained his involvement with commercial applications of Information and Commucicationa Technology by acting as a consultant specialising in the evaluation of services delivered and more recently in the evaluation of eCommerce initiatives. Garry Druitt, the Chief Information Officer of the South West Alliance of Rural Hospitals, has also had a long career in the ICT industry working variously in development, consulting, service delivery and strategic planning both in public and private sectors. Garry is the Victorian state Representative on the DHS ICT Steering Committee, he is a member of the DHS CIO Advisory Committee and a member of Ministerial Rural & Regional Health Advisory Group Services & Communities Issues Panel. Garry was designated “Speaker of the Year 2001” by the Australian Computer Society Professional Development Board as a result of the paper he presented at the ACS National Conference in March 2001 and he has toured Australia preaching the message of the benefits to be delivered by “Taking the Risk” and Investing in Frontier Technologies. Background to the case The continued growth in the availability and power of information technologies empowered by a parallel explosion in communications technologies has resulted in the radical reshaping of business strategy and the shape of organisations addressing these new strategies. Mindful of this in 1997 the Health Department of Victoria (DHS) felt that some action was needed to ensure the Acute Health sector was appropriately structured and making appropriate use of ICT. KPMG was engaged to prepare an ICT strategic plan, which had the prime objective of identifying if a significant investment in ICT could reduce the costs of delivering Health services. The KPMG ICT plan as presented to the Victorian State Government in 1997 proposed a capital injection of $400 million with the aim of saving 3.5% of the Healthcare Budget per year within four years. The strategy split Victoria into 14 health regions (5 Rural and 9 metropolitan). Each region would have a CIO appointed with a clear charter to implement the strategy in that region. In practice only $100 million was made available over the four years but immediate operating budgets were cut on average by 1.5% on the expectation of the planned savings. So this initiative was never fully funded, but it was locked in by the assumed operating savings factored into hospital budgets. Despite the lack of the full financial commitment recommended, DHS did launch the strategy. It established a strategic group called I2T2 1 within the department with the responsibility to initiate and coordinate the process. The immediate outcome was the establishment of the 14 health regions and the appointment of a CIO to each region with the requirement to establish and implement a five-year ICT strategic plan. Unfortunately no State focused ICT policy and strategy emerged and there remains a lack of a satisfactory audit process to measure actual achievements against the original targets. Thus the outcomes vary across Victoria, with success dependent on the personal strengths of CEO’s, the level of cooperation established within the regional boards of management and the vision of the CIO’s appointed by those boards. This paper examines only one of the 14 groups established, the South West Alliance of Rural Hospitals (SWARH). However, the model established in the south west is being adopted or examined closely by most of the other rural groups in Victoria and the SWARH model is also being examined by other state Governments as a potential model for their initiatives. The SWARH group was established in late 1997 as a direct result of the KPMG report to the Victorian State Government. The South West Alliance of Rural Hospitals is a voluntary network of health providers concentrated in the south west of Victoria stretching from Melbourne west to the South Australian border and reaching as far north as Balmoral. The region SWARH covers is 55000 square kms. the distance between major sites ranges from 30kms. to 100kms. while the distance of SWARH from Melbourne ranges from 150kms to 450kms. Within this area there are 11 Public Acute Health Agencies each with a CEO and Board of Governance. Further there are 33 separate campuses across the South West Region of Victoria. The total annual operating expenditure around $150 million and SWARH employs approximately 1800 effective full time staff. It was possible from the outset that the initial capital injection provided by Government may be a one time event. Therefore, it was agreed that the funds should not be used to support capital investments 1 Information, Information Technology and Telecommunications Rural Health Service Provider Sharing Information and Communications Technologies W G Hewett & Garry Druitt 3 without a long-term self sustainable plan. Thus the ICT Investment strategy developed to support SWARH needed to be economically sound and deliver recognized business process efficiencies in order to deliver hard cost savings that would ensure the implemented systems and infrastructure could expand and evolve. SWARH — the challenge and the driving vision The challenge was to deliver change to people, processes and procedures across the network using limited resources and under an imposed time frame. But above all it must result in a sustainable corporate structure. The CIO appointed by SWARH (and the co author of this paper) felt that it was important to establish a shared vision of the future across the 11 independent institutions and to use this vision as the focus for any change. There needed to be a clear commitment to delivering the cost benefits possible through regional integration of health services. And there needed to be broad agreement that the required regional integration could be delivered using information and communications technology as a mechanism of improving service delivery. To achieve this it was first agreed that the SWARH infrastructure investment should be implemented in an “inclusive” way to enable other health services to participate in the SWARH group at the marginal cost. This would require a commitment towards regional standards to enable the region to develop a capacity to deliver complex IT strategies and to ensure the whole region is able to benefit from any investment made. This vision has been an outstanding success and has been acclaimed around the state of Victoria, indeed it is recognised across Australia. SWARH is now in the unique position where it has established credibility for innovation and implementation. As a result others who are keen to participate in the enhanced service delivery model are joining the initial members of SWARH. It is expected that another 40 smaller health care centres will eventually join the SWARH group. To sell the vision to the SWARH Steering Committee the CIO concentrated on the business priorities of the 11 CEOs in the original network. Distan