Chris O’Neal is Managing Partner at KATALUS Advisors. KATALUS Advisors is a strategic consulting firm focused on the healthcare vertical. We serve healthcare technology vendors, hospitals, and private equity groups in North America, Europe, and the Middle East. Our services span growth strategies in new and existing markets, M&A due diligence, market analysis, and advisory services. www.KATALUSadvisors.com
Most hospital CFOs we have worked with readily acknowledge the fact that it is extremely difficult for them to find the time and manpower necessary to build an entire 10-year cost projection for an enterprise IT project. Accounting for every external and internal variable that could affect the total cost of ownership (TCO) is a monumental task and can easily take many weeks and cost tens of thousands of dollars’ worth of internal resources to do so adequately.
While seemingly overwhelming, the additional benefits and possible penalties around EHR purchases should make such a task imperative, especially for cash-strapped hospitals which have no time or financial room for a misstep of such gravity.
In research our team recently conducted on how hospitals estimate TCO for EHR purchases, we found that the real surprises in required cash outflows often come years down the road and outside the scope of traditional cost-estimation models which only reflect near-term purchase and implementation costs. For example, major upgrade (or version upgrade) costs can be a large differentiator in TCO projections. When looking at these upgrades as a percentage of upfront contract value, it is easy to see the importance of having a comprehensive, long-range TCO model which accounts for future costs:
Have you experienced financial “surprises” of your own with unexpected costs?