Solvency Matters

Gary Baldwin, for HealthLeaders News , August 21, 2007

When it went shopping for a new information system, Oaklawn Psychiatric Center could not afford a mistake. Like most healthcare provider organizations, the Elkhart, IN-based medical center does not enjoy a lavish IT budget. So its search for a new, integrated inpatient/outpatient clinical and billing system--which came to an end in early 2006--was a high-stakes venture.

Its final agreement exceeded $1 million.That's why the center conducted a rigorous vendor search. The subject of July's "Deal" column in HealthLeaders magazine, Oaklawn offers a great case study in how to scrutinize potential software vendor partners. It brings to mind the late President Reagan's philosophy about dealing with foreign powers: "trust, but verify."

Oaklawn considered 16 vendors for its new system, which is now being deployed across its four locations. Karen Demarest, the director of information technology, was quite candid with me about the rigorous line of questioning she and her crew put these software companies through. What struck me was the level of detail in the RFP about the vendors' corporate management and financial solvency.

Oaklawn wanted to know not only who held top executive positions among the potential vendors, but also how long they had been on the job. Beyond that, the psychiatric center asked probing questions about annual sales, net profit, and total debt.

In previous years, the center had hired a vendor that went belly-up in the midst of implementation.Because the center wanted an integrated application that spanned both the clinical and financial sides of the business, it asked a number of questions around product development.

One question asked: "Is any part of your system written by a third party? If so, what applications? Who wrote it? Who supports it? What is your company's relationship with the third party?"

These are great questions to ask any software vendor, particularly those touting "integrated" packages. These questions intuit one of the thorniest factors in clinical applications for hospitals and medical groups: software origins and company stability. So many healthcare IT companies, both large and small, have grown by buying other companies, rather than developing their software on a compatible platform.

It's hard to know who owns what and who developed which product. The merger and acquisition activity that characterize this field only make the job harder for potential customers like Oaklawn.

Gary Baldwin is technology editor of HealthLeaders magazine. He can be reached at

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