SPOTLIGHT
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Transitioning from on-premises to cloud-based systems requires careful planning, but thebenefits and access to innovation are worth it.

Shifting Horizons in Digital Transformation:
Navigating the Transition to Cloud-Based
EHRs and Health IT
January 2024

Written by: Mutaz Shegewi, Research Director, Provider IT Transformation Strategies

Introduction
Large healthcare provider organizations and integrated delivery networks(IDNs) face labor shortages, changing consumer preferences, financial
constraints, and aging IT systems, driving them toward transitioning tocloud-based health IT. IDC predicts that the healthcare industry will
experience a significant shift to the cloud, with 70% of healthcareorganizations adopting industry clouds by 2025. Industry clouds differ fromtraditional clouds because of their vertical integration, modularity,
collaboration options, and ability to generate network effects. Industry
clouds are most popular in healthcare; 59% of providers and 66% of payers
use them today — more than any other industry.

AT A GLANCEKEY STATS» 70% of healthcare organizations will adopt
industry clouds by 2025.

» 59% of healthcare providers use industry
clouds today.

KEY TAKEAWAYS» Healthcare is moving to cloud-based
solutions due to labor shortages, changing
preferences, finances, and aging systems.
» Digital-forward strategies, access toinnovation, and increased agility areoutcomes driving the transition.
» Moving to the cloud, especially in the caseof EHRs, requires careful planning andshould consider factors like TCO, ROI, andregulatory compliance.

Moving from on-premises systems to cloud-based solutions present
significant economic benefits, particularly where large health IT initiatives
such as electronic health records (EHRs) and enterprise medical imaging
are concerned. It reduces the financial burden of maintaining andupgrading physical IT infrastructure, enables more scalable and flexible
resource usage, and improves data interoperability. This transition alsoaligns with the increasing demand for telehealth and virtual carecapabilities, providing a more cost-effective and efficient way to manage healthcare data. By adopting cloud-based
solutions, healthcare providers can reduce technical debt, respond quickly to market changes, and improve patient carethrough better data accessibility and integration.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT

TrendsThere are several key trends to consider when making the move to cloud solutions. These include the following:» AI everywhere: The adoption of AI within cloud-based EHRs stands as a catalyst for progress. Leveraging generative
AI can autonomously drive accurate and meaningful clinical documentation, enhancing patient care experiences
and streamlining healthcare IT operations. However, this integration presents challenges, including potential biases
and privacy concerns. To capitalize on AI's benefits in cloud-based EHRs, C-suite executives must implement strict
regulatory measures to ensure ethical use and data security, thereby facilitating improved personalization inpatient care and fostering innovation.

» The drive to automate: The shift toward automation is crucial in healthcare, particularly integrating it with cloudbased solutions. Automating data management and analysis in the cloud can significantly enhance operational
efficiency and drive innovation in care delivery. This move is especially pertinent in addressing workforce shortages
and privacy concerns. Automation in cloud-based environments allows healthcare organizations to efficiently
navigate the evolving challenges of healthcare, offering new growth opportunities and enhanced patient care.

» Cybersecurity and risk: The transition to cloud-based solutions amplifies cybersecurity risks due to increased
interconnectivity. Protecting sensitive healthcare data against sophisticated cyberattacks, such as ransomware andAI-generated phishing, becomes paramount. Implementing robust cybersecurity measures in cloud-based EHRs is
essential. The challenge is intensified by the shortage of skilled cybersecurity professionals, necessitating that
healthcare organizations develop stringent policies and invest in advanced security technologies to ensure data
privacy and protection in the cloud.

» The digital business imperative: For large healthcare providers and IDNs, integrating digital technologies into
patient care is essential for competitiveness. The transition to cloud-based EHRs is critical to digital-forward
strategies, streamlining clinical and operational processes. This shift not only aims to enhance patient engagement
and experiences but also improves the efficiency and effectiveness of healthcare delivery, focusing on patient
outcomes and operational resilience.

» Dynamic work and skills requirements: The COVID-19 pandemic has underscored the need for flexibility inhealthcare models, necessitating investments in cloud infrastructure and technologies like AI for virtual and homecare. This means aligning employee skills with strategic goals to efficiently manage complex, automated patient
data management and service delivery processes. The transition to cloud-based systems requires a workforce
adept at navigating these advanced technologies, emphasizing the need for continuous training and skill
development.

» The shifting tech regulatory landscape: The rapidly evolving technology regulatory landscape, influenced byadvancements in AI and cybersecurity concerns, has significant implications for cloud-based EHRs. Healthcareorganizations must navigate these regulations, ensuring compliance while fostering innovation and investment incloud technologies. Compliance with these evolving regulations is crucial for safeguarding patient data andpromoting ethical use, benefiting both patients and healthcare providers. Understanding and adapting to theseregulatory changes is key to leveraging the opportunities presented by cloud-based solutions.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT

Benefits
There are several benefits to be reaped in shifting to EHR and health IT cloud-based solutions:» Cost efficiency: Cloud-based solutions shift the financial burden from capital expenditure (capex) to operational
expenditure (opex), reducing the need for large up-front investments in hardware and infrastructure. Subscriptionbased models provide more predictable ongoing costs, aiding in accurate budgeting and financial planning. In
addition, the responsibility for system maintenance and upgrades shifts to the cloud service provider, reducing theinternal costs and resource allocation for these tasks while keeping technology current.

» Scalability and flexibility: Cloud solutions offer easy scalability, allowing organizations to scale up or down based on
demand. This flexibility in resource allocation is particularly beneficial for large IDNs that experience fluctuatingneeds. Resources can be reallocated quickly and efficiently in response to changing operational demands,
improving overall responsiveness.

» Data security and compliance: Cloud providers typically offer advanced security measures that may be morerobust than an individual IDN can implement. In addition, cloud providers ensure their systems comply with
relevant healthcare regulations, such as HIPAA, reducing the compliance burden on the IDN.

» Access and collaboration: Cloud-based EHRs provide remote accessibility from anywhere, enabling telehealthservices and remote work. In addition, the enhanced data-sharing capabilities of cloud-based EHRs improve
collaboration across different facilities within the IDN, ensuring seamless and efficient communication among
healthcare providers.

» Access to innovation: Cloud-based solutions in healthcare enable rapid deployment of advanced features, crucial
for areas like predictive analytics and ensuring EHRs can evolve and introduce next-generational capabilities overtime. Regular updates by cloud providers ensure access to the latest tools, offering scalable, flexible platforms toaccommodate fluctuating demands and large data sets. These solutions also promote interoperability, facilitating
seamless data sharing across healthcare systems, thus improving care coordination and patient outcomes.

» Disaster recovery and data backup: Cloud services typically include robust data backup and recovery processes,
ensuring data integrity and continuity in case of local failures or disasters.

» Focused growth: With a reduced need to manage IT infrastructure, IDNs can focus more resources on patient careand organizational growth. Cloud solutions provide a platform for seamlessly integrating new technologies andinnovations, keeping pace with industry advancements. Therefore, IDNs can shift their focus to core competencies
and embrace innovation and adaptation to enhance patient care.

» Data consolidation and optimization: Cloud-based EHR and health IT solutions offer centralized data
management, which is crucial for large IDNs and healthcare provider organizations. This centralization improves
data accessibility and integrity across multiple locations, enabling advanced analytics for informed decision-making
and enhanced patient care strategies. In addition, cloud computing reduces costs and IT overhead, allowing
organizations to pay only for resources used, aiding in cost efficiencies.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT

Strategic Planning for Cloud Transition
Assessing the current IT infrastructure is crucial for large healthcare provider organizations and IDNs transitioning tocloud-based solutions. This evaluation primarily focuses on existing EHRs and other associated health IT platforms,
systems, applications, and resources. It is essential to ensure that these systems and resources are compatible withcloud-based solutions and can be seamlessly integrated to achieve optimal results. The assessment has significant
economic implications. Many IDNs have deployed on-premises EHR systems, which involve a lot of capital expenditureand sunken costs, including in the EHR itself, as well as hardware costs, maintenance, and a dedicated IT workforce.
However, the shift to cloud-based EHRs brings about a move toward operational expenditure models. This transition
allows IDNs to utilize scalable, flexible, and often more secure IT infrastructure, potentially reducing overall costs andimproving financial predictability.
To determine the best solution for their organization, executives should consider comparing the long-term costs of onpremises infrastructure with the subscription-based cloud services model. Factors to evaluate include the total cost ofownership (TCO), return on investment (ROI), cost per user or application, and up-front costs versus ongoing costs. Other
costs to consider include those for maintenance and upgrades, power and cooling, scalability and flexibility, security andcompliance, downtime, and the labor and expertise required to manage the infrastructure. Cloud solutions forhealthcare data must meet strict regulatory compliance, privacy, and security standards due to the sensitive nature of theinformation involved. Therefore, cloud solutions catering to the healthcare industry must adhere to stringent regulatory
standards, such as HIPAA in the United States, to maintain the confidentiality and integrity of patient data. Developing acomprehensive road map for transitioning to a cloud-based solution is a strategic imperative that should involve a clear,step-by-step strategy that aligns with the organization's specific healthcare IT needs and economic objectives.
For executives, planning for and delivering the economic advantages of cloud adoption, such as operational efficiency,
scalability, and innovation potential, is vital. These advantages often translate into improved patient care outcomes andoperational agility, vital for large healthcare provider organizations.
Key considerations include:» Phased implementation: Breaking the transition into manageable phases reduces operational disruption,
particularly important for large IDNs where abrupt system changes can impact patient care and revenue cycles.

» Cost-benefit analysis: Transitioning to cloud solutions can have significant financial benefits, including increased
ROI and improved patient revenue streams. A detailed analysis is necessary to understand these benefits fully.

» Stakeholder engagement: Involving clinical IT leadership (e.g., CMIOs and CNIOs) in the planning process ensuresclinical workflows are enhanced, not hindered, by the transition.
Shifting from on-premises to cloud-based EHRs requires thoroughly analyzing existing IT infrastructures and a wellplanned road map. This transition not only aligns with the latest technological advancements in healthcare but also
contributes to the economic and operational efficiencies crucial for these large-scale healthcare providers.
Challenges in Migrating EHRs to CloudMoving from on-premises to cloud-based solutions in large IDNs, especially in relation to EHRs, involves a careful balanceof economics. The long-term benefits of scalability, operational efficiency, and enhanced data management must be
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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT

overseeing IT, finance, and clinical informatics must adopt a strategic and holistic approach to navigate these transitions.
This approach should align the technological capabilities with organizational goals and regulatory requirements:» Data security and compliance: Moving to cloud solutions raises significant concerns, particularly for healthcare
providers. Given stringent regulations, cloud providers must offer robust security measures, such as advanced
encryption and intrusion detection systems. It is also critical to ensure compliance with regulations and address
data sovereignty issues, as noncompliance can lead to significant legal and financial consequences. While cloud
solutions can reduce up-front costs related to data security infrastructure, ongoing investments in compliancemanagement and data protection measures remain necessary for economic reasons.

» Integration with existing systems: Ensuring seamless operation during and after the transition to cloud-based
EHRs poses a significant challenge. The new cloud systems must be interoperable with existing healthcare
applications and databases to ensure continuity and efficiency of care. This can be particularly challenging in large
IDNs operating on complex, heterogeneous IT environments, often including legacy systems that may not easily
integrate with cloud solutions. The costs associated with achieving this integration, including potential upgrades orcustom solutions, must be carefully balanced against the possible long-term savings and operational efficiencies
cloud solutions offer.

» Downtime and data migration issues: Transitioning to a cloud environment requires meticulous planning, as it
involves critical aspects that can significantly impact patient care and revenue streams if not executed properly.
There are risks of operational disruptions that can cause downtime, which can be minimized through acomprehensive migration plan with contingency strategies. This plan requires close collaboration between IT,
clinical stakeholders, the organization's core EHR and application providers, and the cloud provider. Efficient data
migration is essential to ensure data integrity and security while transferring sensitive patient data. This process
involves additional costs related to data cleansing, migration tools, and the potential need for parallel systems
during the transition. In addition, ensuring that staff are adequately trained and supported during the transition isvital to minimize operational disruptions.
Best Practices
Large healthcare provider organizations and IDNs must follow industry best practices to transition from on-premises tocloud-based solutions. This is particularly essential for C-suite executives who oversee IT, finance, and clinical informatics.
While navigating the complexities of healthcare IT, it is important to remember that the cloud is not merely a destination
but a continuous journey of adaptation and improvement. With the right cloud strategy, strong leadership, and a focus
on best practices, healthcare providers can transform their operations, improving patient care and operational
excellence. Organizations should look to the following best practices for a successful transition:» Perform market research: Thoroughly research and compare various cloud service providers, focusing on thosewith expertise in healthcare-specific solutions.

» Define clear SLAs: Negotiate specific service-level agreements detailing uptime, support, and security measureswith the chosen provider.

» Create customized training programs: Develop training initiatives tailored to different user groups to facilitate
effective use of new cloud-based systems.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT» Set up continuous support and feedback mechanisms: Establish ongoing support and encourage staff feedback
for system improvement and adaptation.

» Adopt blended learning strategies: Use diverse learning methods to help staff adapt to the new cloud-based
technology.

» Implement regular system performance reviews: Utilize key performance indicators for consistently monitoringand evaluating cloud systems.

» Conduct frequent security audits: Regularly assess system security to safeguard against evolving cyberthreats.
» Plan for imaging solutions' unique needs: Recognize specific requirements for cloud-based imaging solutions, suchas storage and access speed.

» Ensure scalability of solutions: Select cloud services that can accommodate the organization's growth and evolving
needs.

» Achieve seamless system integration: Ensure new cloud solutions integrate effectively with existing EHRs and IT
infrastructure.

Considering Kyndryl and Microsoft
Kyndryl is an IT infrastructure services provider specializing in designing, running, and managing modern, efficient, andreliable technology infrastructures. The company has become a significant player in supporting mission-criticaltechnology environments across the globe. Microsoft is a world-renowned technology and innovation leader that has
played a pivotal role in transforming various industries with its cutting-edge technological solutions. With decades ofexperience, Microsoft has become a trusted partner for businesses and organizations all around the globe, including thehealthcare sector. The two companies have formed a partnership to support cloud-based healthcare technology
initiatives.
Kyndryl's expertise in specialized and tailored services for the healthcare sector, such as hybrid cloud solutions, network
services, and essential applications, will complement Microsoft for Healthcare. Working closely with hospital operators,
revenue cycle management firms, and supply chain advisors, Kyndryl aims to enhance patient experiences, reduce costs,
and improve workflows. Meanwhile, Microsoft's advanced technological solutions aim to streamline healthcare
operations, elevate patient care, and enable healthcare providers to make better, data-informed decisions. Together,
Kyndryl and Microsoft can integrate cloud-based approaches with value-added technology and services to help
healthcare organizations improve efficiency and outcomes.
The partnership between Kyndryl and Microsoft brings together several synergistic strengths:» Cloud computing: Kyndryl's cloud services for healthcare organizations and Microsoft Azure cloud solutions can
support effective patient data management, infrastructure modernization, and core application support while
offering secure and personalized experiences for patients. Together, these offerings can enable healthcareorganizations to manage large data volumes securely, supporting hybrid care models through the cloud.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT» Data and AI solutions: By combining their expertise, Kyndryl and Microsoft can help enhance predictive analytics
and personalized medicine approaches. Kyndryl's AI technology extracts valuable insights from healthcare data,
including EHRs and imaging systems, while Microsoft's tools process and interpret this data. Together, these canunlock the potential of healthcare data to drive better patient outcomes.

» Digital work model: Kyndryl's digital workplace and security solutions work in concert with Microsoft Teams for
Healthcare to create a seamless and secure communication platform for healthcare professionals. With a focus onstrong cybersecurity measures, these solutions work in tandem to protect sensitive healthcare data fromcyberthreats.
Kyndryl's effectiveness is highlighted in its work with healthcare clients facing critical challenges. For a large IDN, Kyndryl
said it improved availability to "six-nines" for mission-critical applications with significant automation and discipline
including change control. For another large IDN, Kyndryl is working with Microsoft with a commitment to quality as theimperative. Leading with improving clinical experience, Kyndryl and Microsoft are migrating applications to Azure, which
will also improve their IT architecture and resiliency.
The partnership between Kyndryl and Microsoft is set to drive innovation and the development of joint solutions thatleverage the strengths of both companies. By integrating Microsoft's Azure cloud-enabled products with Kyndryl's
expertise in application migration and modernization, this partnership can help provide healthcare providers with moreversatile and robust cloud solutions and EHRs, enhancing operational efficiency and the delivery of healthcare services.
Challenges
The healthcare industry is a complex and highly competitive market, with a variety of players offering IT infrastructureservices. Technology constantly evolves, particularly when it comes to the cloud and AI, which require continuous
adaptation. For Kyndryl and Microsoft, staying ahead of the game in the industry can present challenges, especially inlarge provider organizations and IDNs. Integrating advanced technologies such as Azure cloud services and AI platforms
with the legacy systems still prevalent in many large provider organizations and IDNs marks a complex landscape thatboth Kyndryl and Microsoft must navigate through their partnership. Seamless integration is essential to ensure
reliability, efficiency, and scale. Also, Kyndryl, having spun off over two years ago from a large technology company, is still
establishing its identity in the health IT market to a degree, while Microsoft must continue to showcase the advantages of
its healthcare solutions and position them distinctively against established competitors, ranging from other vertical health
IT players to other tech giants. Finally, healthcare is highly regulated, requiring constant adaptation to compliancestandards. Keeping pace with these evolving regulations presents a persistent challenge to technology suppliers andbuyers alike.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT

Conclusion
The healthcare industry is increasingly adopting cloud-based IT solutions to tackle
challenges like labor shortages, outdated IT systems, and financial constraints. IDC
predicts that by 2025, 70% of healthcare organizations will have industry clouds thatoffer better scalability, flexibility, and data interoperability, which is critical for
improving patient care and operational efficiency. However, transitioning from onpremises to cloud-based solutions requires careful planning, particularly assessing
current IT infrastructure and ensuring compatibility with the cloud. Therefore, themove to cloud-based solutions in healthcare demands meticulous attention to factors
like cost, return on investment, and regulatory compliance, given that there is noroom for error. Kyndryl's partnership with Microsoft to provide cloud-based solutionsin healthcare highlights the potential for both innovative and efficient cloud-based
solutions, especially for EHRs and related health IT areas. This collaboration shows
promise by offering integrated services and technological capabilities that position thetwo companies to take advantage of the growing demand for cloud-based health IT
solutions, indicating a significant opportunity for success in this evolving market.

The move to cloudbased solutions inhealthcare demands
meticulous attention
to factors like cost,
return on investment,
and regulatorycompliance, giventhat there is no roomfor error.

About the Analyst
Mutaz Shegewi, Research Director, Provider IT Transformation Strategies
Mutaz Shegewi leads the Worldwide Healthcare Provider Digital Strategies research practice at IDC HealthInsights covering topics of most relevance to healthcare provider organizations looking to digitally transformand become more digitally native than their competition. Mutaz advises the executive, clinical, and technicalleadership of the world's foremost health information technology supplier and buyer organizations byproducing data-driven research and thought-leadership insights that help to navigate strategic challenges inhealth information technology and transform complexity to clarity in decision-making that would decrease
costs, enhance quality, optimize access, improve patient safety, and champion patient experience.

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Shifting Horizons in Digital Transformation: Navigating the Transition to Cloud-Based EHRs and Health IT

MESSAGE FROM THE SPONSOR
Meeting you where you are on your healthcare IT modernization journey
Kyndryl offers a unique vantage point working with some of the largest organizations in a complex healthcare
ecosystem, and we recognize that proper planning and details are paramount to success. Kyndryl and Microsoft
partner to deliver state-of-the-art solutions in a practical way to help our healthcare customers accelerate hybrid cloud
adoption, modernize the delivery of EHR and ancillary applications and processes, support mission-critical workloads,
and enable seamless and intuitive experiences for caregivers and patients: https://www.kyndryl.com/us/en/contactus.

The content in this paper was adapted from existing IDC research published on www.idc.com.
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