IT has traditionally been thought of as a cost center in the enterprise, but one healthcare organization is changing that perception and, in the process, reaping substantial revenue.
The University of Pittsburgh Medical Center (UPMC) embarked on its journey to turn IT into a revenue source after doing some simple industry comparisons, according to Dan Drawbaugh, SVP and CIO of UPMC, who spoke at the InformationWeek Conference in Las Vegas on March 31.
"As a provider, 2 percent is the profit margin you make on healthcare," said Drawbaugh. "In the IT world, 46 percent is the average top tech company profit."
It was time for a transformation. "Our CEO said, 'No longer are we going to be only a healthcare company; I want us to become an IT company.' He said the IT organization must bring $100 million to the bottom line [in the first fiscal year] growing in our second fiscal year to $200 million."
Or, as Rebecca Kaul, President of the UPMC Technology Innovation Center and Drawbaugh's co-presenter on the session put it: "We aren't your mother's IT shop anymore."
By its fifth fiscal year, UPMC's IT operation is predicted to generate $300 million in revenue.
How are they doing it? One product at a time. According to Kaul, UPMC is leveraging its IT expertise and its clinical experience in a variety of ways, including:
- Providing advisory services -- helping other healthcare organizations implement electronic medical records, analytics blue prints and program design, virtual care, and natural language processing.
- As minority investors -– for example, the company is a minority investor in dbMotion. According to Drawbaugh: "The decision was that if we need this technology, so will others."
- Joint venture development -– the company is involved in developing new solutions in efforts with GE Healthcare, among others.
- UPMC companies -– the organization is creating its own companies, including Prodigo, Askesis, D3, Dialysis, and eBenefits.
According to Kaul, one of the joint venture development efforts is already bringing in $22 million annually, and it took only 18 months to sign 20 commercial contracts.
So, how does a CIO transform from running a cost-center to running a revenue-generating line of business?
Drawbaugh said he had to learn about development ventures and JVs, not usually the domain of the typical CIO. However, he said the biggest challenge/opportunity in healthcare came in realizing that the typical way of looking at healthcare vendors was skewed. Drawbaugh says the previous assumption was that the traditional vendors providing the products were bringing 80 percent of the value, while UPMC was bringing 20 percent with the clinical domain knowledge piece.
"We realized it's the opposite: Clinical domain knowledge and understanding the workflow of healthcare is really 80 percent of the value. Being committed to the project and then aligning the clinicians to work full time on that initiative has been truly the differentiator. Learning how to do that and how to structure it and how to align incentives has been the most important element" of UPMC's transformation, he said.
What do you think? Can your IT organization become a revenue stream? Is this kind of opportunity unique to the healthcare environment, or are other industries also missing out on an important earning opportunity? Share your thoughts in the comments section below.
— Susan Nunziata, , Director of Editorial, EnterpriseEfficiency.com