In a contributed piece for Forbes, Kristi Matus, executive vice president and chief financial and administrative officer of Watertown, Mass.-based athenahealth, writes total cost ownership models are an inefficient, over-costly approach to technology investments. Ms. Matus cites prominent hospitals such as Wake Forest Baptist Medical Center in Winston-Salem, N.C., whose rating was downgraded partly due to extravagant costs related to operating software.
In healthcare technology, total cost ownership models encompass hardware, implementation, licensing, software upgrades, training and security, Ms. Matus writes, but new technology offerings such as cloud computing allow hospitals to bypass many of these in-house functions. “Ten years ago, hosted software was the only option for hospitals. That business model has since experienced substantial disruptive innovation,” she writes.
Ms. Matus writes the health IT industry is projected to reach $31.3 billion in total spending by 2017, which indicates the need to change the way hospitals and health systems approach their business practices.
“To shore up the strength of our healthcare institutions, healthcare organizations need to redefine the prevailing model of total cost of ownership to account for results and the opportunity costs of an underperforming system,” Ms. Matus writes. “When they do, they will find that the total cost to operate and deliver results is a far more accurate forecast of how their technology purchases will serve their organizations’ bottom lines.”
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