Data Is the New Margin: Tech-Driven Visibility for Hospital Financial Leaders

In this episode, Ovation Healthcare experts break down how intentional technology management can uncover hidden savings, reduce risk, and support sustainable financial resilience. We’ll discuss how IT Cost Management helps organizations understand and control technology spend, how Cloud Resource Optimization ensures you’re only paying for what you truly use, and why Cybersecurity and Compliance are essential to protecting both financial stability and patient trust.

To learn how Ovation Healthcare can support your Health IT journey, please contact info@ovationhc.com. 

Transcript

SPEAKER_00 0:00

Welcome to the Invation Healthcare Learning Institute podcast, where we explore the strategies and solutions that help independent hospitals thrive in today's challenging healthcare environment. As a partner to hospitals nationwide, Ovation Healthcare brings together executives, policy experts, and innovators to discuss practical ways to strengthen financial sustainability, optimize operations, and preserve access to care. Subscribe for actionable insights and proven practices to guide your organization's future with confidence.

SPEAKER_01 0:45

I'm your host, Kelly Verme. Today's episode is titled Data is the New Margin: Tech-Driven Visibility for Hospital Financial Leaders. We'll be discussing how intentional technology management can uncover hidden savings, reduce risk, and strengthen long-term financial resilience. From gaining clear visibility into IT spend to optimizing cloud resources to protecting your organization through strong cybersecurity and compliance, technology plays a critical role in protecting the margin. I'm pleased to be joined by John Mason, our president of technology services at Appalachian Healthcare, who brings deep expertise in helping healthcare organizations improve financial visibility and operational performance through smarter technology strategies. John, thank you for being here with me today.

SPEAKER_02 1:33

Thanks, Kelly. It's really good to be here.

SPEAKER_01 1:35

All right, let's dig into it. John, to kick things off, I love the title of this episode, Data is a New Margin. It really captures how the financial landscape has shifted. From your perspective, what does that phrase mean and why is it so relevant for hospital leaders today?

SPEAKER_02 1:52

Yeah, that's a that's a great starting question, Kelly. You know, um, as you think about um technology, especially in the healthcare space, you know, margins in healthcare overall are under a lot of pressure, uh, whether it be from labor, uh, supply costs, reimbursement challenges. Um, and and frankly, technology is a major expense category now. Um in the past, it wasn't necessarily the top spin, but it's way up there. Um and you know, it often lacks some transparency. What I find is traditional cost reduction um really isn't enough anymore. Um, you really have to be able to dig into your costs at a much deeper level and use the data to let it provide some visibility into where your inefficiencies are, where your waste is, uh, where your duplicative spend is. And so organizations that can use that data strategically, they use that data, they can uncover savings uh that often doesn't impact care traditionally, but it can impact care to the good, right? So the whole idea of data is the new margin really centers around this idea that understanding what you have and using the data that's available to you, you really can use that to drive margin in a much better way than you used to be able to in the past.

SPEAKER_01 3:20

Yes, I totally appreciate that. And hearing you say visibility, transparency, you know, you hear those words often, but maybe we could dig into a little bit more of where do hospitals tend to lose sight of their actual spend? Where does it get lost and how do you lose that visibility?

SPEAKER_02 3:36

That's a great question. And you're right, Kelly. Uh, hospitals do lose visibility, and and part of the reason they tend to do that is technology decisions are often happening across multiple departments and organizations within a single entity. Um, so as an example, the various departments make decisions on technology they need, and instead of what would be in a more ideal state where technology, the technology organization itself, helps drive the decisions, manages the budget, um, those are still dispersed across the organization. So you really don't get any single source of truth for all those technology expenses. For example, when I go into a hospital, one of the questions I often ask is, I'd like to see your last two years of IT spend. Uh, what I typically get back is only what came out of the technology department. The reality is there's a whole nother portion of spend in an organization that happens outside of IT. So for me to get a true picture of IT spend, I have to collect data from all the various departments. Um, what that leads to is things like duplicate tools, overlapping solutions, uh, applications that do the same thing uh in multiple departments. Um, you may pay for licenses or services that you don't use. For example, you may hire a vendor to do a particular kind of service, but because you don't have one person overseeing that, um, they over time you're spending on that vendor, but yet no one's watching to make sure you're getting delivery of your of what you've asked for. Uh, and then finally, you know, part of what causes this is just limited reporting. Uh connecting the IT spend to the overall financial performance of the organization, it's often segregated out and it's not brought together. So all of those things really um is what makes people lose sight of their technology spend.

SPEAKER_01 5:27

Yeah, absolutely. And I think through the years, a term I've heard several times is um what do you call it, uh duplicate IT or shadow IT. Shadow IT. Yes, yes, exactly. So once organizations recognize the gap, right? Someone like ourselves or others come in, somebody realizes this is happening, the question becomes, what do you do about it? And we talk about IT cost management. Can you explain what really happens in practice?

SPEAKER_02 5:53

Sure. Yeah, we do this quite a bit. And it's uh it's it's actually a there's a process to it. But you know, in in a in a broader sense, what happens is you you really start with, you really have to get a true comprehensive view of all the IT expenses across the organization. And like I just mentioned, uh, you can't just stop at give me the IT spend because you're gonna miss a big portion of IT spend uh that's happening in that shadow world in outside of the the spotlight of what IT covers. So you have to really get that comprehensive view. Um, the second thing that we often do is you really have to create a true inventory of all systems, licenses, vendors, um, circuits, anything that is an IT spend, but you really have to see it all. Um, because if you don't, there's gonna be that outlier that you're gonna miss, and that could be something that's truly a heavy expense for the organization. Once you do that, you really have to start also looking at utilization versus cost. So um I'll give you a quick example of this. I've been in a hospital just not long ago where they had an application that did something specific for a department, but that capability was also available inside of their electronic health record. Um, they just chose to allow that department to have a one-off. Well, the problem is they never really understood how much that was being utilized uh in that one-off area. Wasn't really, it wasn't really being utilized as heavy as they wanted. And so the cost uh was really just wasted. They could have used what was in the electronic health record, it functioned just as well. Um, but now they're paying an extra cost to have a one-off application. And so the utilization really wasn't where it should have been to justify the cost of that application. Um, you also have to identify inefficiencies, you've you've got to look for places where you're being inefficient. Um, a lot of times that comes down, frankly, to staffing. A staffing inefficiency can be there. Organizations over time develop this kind of IT bloat where internally they start to increase staffing to help manage a project or a special strategic initiative. But then over time, those those staff don't go away. They just stay around. And so it builds and builds. Uh, so you have to look for inefficiencies and you have to start looking where you can optimize. Um, and and frankly, finally, you really have to you have to help develop a process for better financial planning and decision making. Um, governance is really critical in the IT space. Um, you need to be able to meet the needs of your providers and your patients and the organizational's goals, uh, but you need someone and you need some process by which you're going to uh interlace that with the budget, with the strategic plan, and with the technology needs uh for future growth. And so you have to be smarter in how you plan it out. Um it I always use the the old phrase that I heard once, which is every tub on its own bottom, every project on its own bottom sounds fine, right? But when you really bring it all together, you have to weigh the pros and cons. So that's really how you go about cost management within the IT space.

SPEAKER_01 9:11

Sure, sure. And it's it's complex. It sounds like there's a lot in the middle of all of that. Um, you've given some examples of you know where you could find some real world savings opportunities and level of visibility. What kinds um beyond the you mentioned the software, what are some other common areas where hospitals can uncover savings?

SPEAKER_02 9:33

Sure. So I'll just give you some real world ones, right? Um eliminating unused or duplicate software, uh doing what's called an application rationalization process, really looking at all your applications, rationalizing why you have them, looking at what's duplicate, and getting rid of something, right? Oftentimes you have a pet application that one small department needs, or one particular provider or physician says, I have to have this application, but the cost far outweighs the actual revenue that comes in from that. So you have to be able to go through that and eliminate those unused things. Another area, uh consolidating vendors, uh, you know, taking you might have three vendors doing similar things, pitching them against each other to see if they might pick up more capability, find your better performer, and consolidate some of the vendors and the platforms that are using. Uh, another area where real practical, real world um savings come in is renegotiating contracts. You know, there are so many contracts I come across over the years that have been around for 10 and 15 years, and nothing's ever been renegotiated. They've never, uh the organization never stepped back and said, are you still doing what it is we need you to do? Um, are you performing at the level we expect? And are we getting value for that? Um, you know, and look, these vendor organizations love that because they ride their once-a-year annual increases and they just continue to renew and renew. Uh, and over time, those end up costing you money because you never renegotiate. Um, I mentioned kind of consolidating and eliminating applications, retiring things is another one. You know, you really it's time to retire certain applications. Um, try to find out where else you could use that same functionality, redundant systems uh that you often don't need. And then, frankly, lastly, optimizing your infrastructure and support costs, right? Uh, the infrastructure itself is a is a hidden cost because once you put it in and you spend the money, it kind of runs in the background and nobody's necessarily watching it on a regular basis. So you really have to look for how can I optimize the infrastructure? Do I still need uh that kind of application architecture or that infrastructure uh for what we what we're doing today and for what we're gonna do in the future? Um, and you want to get rid of things that the op the support costs are going up. Um so as technology um runs its course and it starts becoming outdated, keeping the people around to support that uh becomes more expensive because there's fewer people to do it. So optimizing that infrastructure is really important. So those are the kinds of things I think um those are common areas where where I see hospitals uncovering savings.

SPEAKER_01 12:21

Sure, sure. I haven't heard you use the word cloud yet. Sometimes there's opportunity and risk associated with cloud. It's another area that's growing rapidly in healthcare. And I certainly am aware it offers some flexibility, but it can also introduce new financial complexity. What are you seeing when it comes to cloud cost management and the approach with cloud?

SPEAKER_02 12:41

Sure. You know, cloud, there there was a in the heyday, cloud was everything needed to go to the cloud. You know, let's let's cloud if cloudify everything we can. Uh, some applications you can't, but there was a real push towards moving everything to the cloud. And and it and on its surface, it makes a lot of sense, right? Less physical hardware in what in your location. Uh, you're basically running your applications on someone else's hardware and you're just paying to rent that space. Uh, so there's some great things from it. Uh, the ability to expand up in hardware and down as you don't need as much. But, and there's a big butt to this, it is very easy to overspend in the cloud space. Um, because the way the model works, once you start storing things and as you continue to grow, those cloud costs continue to go up. Um, and it's very easy to quickly overspend because you stop looking at um how the growth in that cloud, cloud storage and cloud spend is is growing. Um, example of that is oftentimes as you introduce a new application, there's certain things you want to move to the cloud, and there's some default things that happen. For example, log files, real minute detail example here. Log files, you may or may not need. And if all the log files are being pushed to the cloud and it just grows and grows and grows, and your costs go out the roof, and you didn't really need that anyway, um, then you've just really wasted money. So cloud is an easy thing, but it's easy to overspend. Um, and I would say many organizations tend to overprovision resources, they tend to assume they need more than they actually need because they don't want to be caught short. Um, but what you're doing is you're paying for unused capacity. Uh so you're basically paying for the ability that you might need it. Um, so I think there that is another thing that when you see cloud cost management, you really have to look at those things. So there's no ongoing monitoring, there's no optimization, so there's no cost savings. So, from a cloud perspective, you're right. I didn't mention it. It is a place where you can find savings, um, but it is also a cautionary tale to jumping into the cloud everything uh mentality because those resources are expensive and they can quickly get out of hand.

SPEAKER_01 15:02

Eric. And as I hear you talk about, you know, focusing on this topic, it really makes me think of moving from reactive to proactive. That's certainly something we do um normally, but it's hard to do when you're putting out fires on a day-to-day basis. Um, how do you recommend you shift from reacting to cost to managing them proactively? And how can organizations start making that transition?

SPEAKER_02 15:26

That's great, great question. Um, I think first you've got to implement monitoring and reporting, right? And many organizations don't have it. They don't have any kind of monitoring of costs. They look at operations, typical KPIs of uptime and average speed of answer and all those other capacities around uh IT operations. But what they don't do is a lot of monitoring around spend. Um, because most organizations feel like, well, I have a budget this year. As long as I don't go over my budget, I'm good. But you have to start looking at continuous monitoring, you have to do the reporting, and you have to put it on your plate and put it on your goals to drive down costs. If you don't do that, um, then it will continue to grow. So that's the first. Second, I would say you really have to establish governance around your decisioning. Um, I highly recommend organizations continue to try to push things to IT. Um, now there's some CIOs out there, you know. I being a recovering CIO myself uh from many times, uh some CIOs have the of the mindset they like to disperse that because it's not a cost they have to uh to manage. But as that happens, that's where you see the bloat and the growth come in. So I think establishing some kind of governance around decisions is critical. Uh the other thing I would say is you really have to make sure IT and finance are more closely aligned. You need, as an IT organization, to understand spend on a monthly minimum, maybe weekly uh view. You have to be tightly aligned with finance. You need someone who's telling you in the finance area how you're spending, how you're projecting, so that you can make good decisions. Um couple last things, I think you have to make data-driven decisions. It's really hard in an organization because there's a lot of passion around technology and the IT uh systems that are used, uh, but it has to be data-driven. And uh, as someone that I know often says, data, not drama. And you get a lot of drama when it comes to applications, but I think you have to have a data-driven decision about those investments and your spend. And then finally, I think develop a long-term technology financial strategy, not just a long-term technology roadmap or strategy, but the financial strategy. So set up a goal around how you're gonna drive down cost. Um, easy not to do because you feel like you always need more than you're being asked for, but that's where governance comes into play. But having that long-term strategy is really important.

SPEAKER_01 18:10

Sure, sure. Well, and I'm gonna jump into uh another topic that relates um and comes with a lot of drama and unfortunate drama, but the word cybersecurity. I know it's often viewed strictly as a technical issue, a protection issue, but it has huge financial implications as well. How should leaders think about cybersecurity in the context of protecting their margin?

SPEAKER_02 18:32

Yeah, you know, um, cybersecurity spending, as I'm sure everyone knows, continues to go up every year. Um, and second sometimes in cost to people. Um, it it is growing uh very fast. So there's a couple of reasons why you really have to think about cybersecurity in the context of margin two. It is about protecting your organization and you must do it. And but if you don't do it well, the lack of cyber spend uh can have some real serious impacts to the organization. It disrupts operations, it can disrupt revenue if you were to have an incident. Uh the recovery costs of bringing a system back up and bringing an organization back up and running are massive. And the regulatory penalties that can be established on top of that can make it even worse. Um, so if you're not doing the right things um on a regulatory basis, uh the penalties that can come from that event will also just pile on top of everything else. Um clearly, downtime impacts patient care. So you have to think about cybersecurity, not just in security, but the the way it impacts patient care. Um and frankly, cybersecurity is important because it protects your financial stability and your patient and provider trust, right? If they don't trust the systems, uh if those systems are down, uh it has an impact to you financially. So you have a great question there, which is cybersecurity. Sometimes people see it as technical, but frankly, cybersecurity is as much about the technical as it is about the financial impact if something happens. So I would just tell everybody don't um don't skimp on your cybersecurity spending.

SPEAKER_01 20:22

So I'm hearing from all of our conversation, technology is truly a strategic uh financial lever and when we're looking at financial spend and margin pressures. So when all the pieces come together, I heard you talk about cost visibility, transparency, optimization, security, it really positions technology differently. How does intentional technology management support long-term financial resilience?

SPEAKER_02 20:47

Well, you know, like I said at the very outset, it used to be that technology was a spend and it wasn't necessarily one of the larger spins, it is now. Um, and and any any financial professional, any CFO in an organization, what they're looking for is predictable spend. They want to know what to expect, when is it gonna happen? Um, how do we know that we're controlling it? And so I think by being intentional as a technologist in your financial view, it really does create that predictable, um, controllable spend that the organization needs. Um, frankly, it improves operational efficiency, it makes strategic planning better, um, it reduces some of the financial risk uh that comes to play, but all in all, it helps organizations operate better, right? Because they're able to understand where their spend's coming from and what they're gonna get from that spend. Um, you know, as an IT, organizations are often um not really great at explaining the why uh you need to do it. And so I think by being more financially focused. You're able to help them understand what they're spending on and make them operate at a higher level. So really important, I think, overall, if you're going to be a technologist, you have to be strategic in your thinking and understand that it's not just the strategy of IT, but it's the strategy of the finances.

SPEAKER_01 22:21

Sure, sure. You've given some super valuable insight today. And I think for the leaders listening, much like myself, you know, it sounds like a lot. It's a big undertaking. If somebody wants to get started, what are just some few practical first steps that they can take?

SPEAKER_02 22:38

Well, I would start really, I mean, frankly, I would start with some of the things I mentioned earlier. I would get a full inventory of all technology. And when I say that, I mean applications, I mean hardware, I mean circuits, anything that is technology related. And that means you've got to go find out where all that shadow IT is as well. You've got to know what you have. Um, I would then jump into what are some quick wins? What are some quick things that we shouldn't be spending that money anymore? And you will find things when you dig in that you will be amazed you had no idea money had been going out the door on that particular thing. Let me tell you a quick just example of that. Um, was with an IT organization, helped them. We were going through this kind of um inventory and analysis and pulling everything together, and we did a telecom spend analysis. We found a phone, uh one single phone in a hospital that was tied back to the old uh kind of bat phone idea where you picked up the cradle and it called the police station down the road directly. They had disconnected that phone, taken it off the wall, gotten rid of that capability 15 years before we found that they were still paying for that phone line every month, and they were paying$1,100 a month for that dedicated line. And they had done that for 15 years. Um, so you're gonna find things when you really dig in that you had no idea you were spending. Um, so get the inventory, look for the quick wins, start focusing on reporting and transparency and analysis of your financial spend. Um, you can't just focus on the technology, you got to focus on what's it costing us. Develop that collaboration between finance and IT. Go sit down with them. And if you're not a financial person, admit it and say, I need your help financially. And hopefully they're willing to admit they don't understand the technology either, but the two of you together can be very powerful. And then really what I would say is you need to consider some outside expertise, right? Because the real analysis, the deeper analysis, the surface quick wins are fairly easy. The deeper stuff, take somebody from the outside that can take an objective view on things and probably knows areas that you don't even notify. So consider some kind of outside expertise for that deeper analysis.

SPEAKER_01 25:02

Sure. I think we've both seen everybody has a day job, and to take on something like this is hard. It's extra for sure. So looking ahead as we wrap up, I'd love to get your perspective on the road ahead. How do you see data and technology continuing to shape financial performance for hospitals in the coming years?

SPEAKER_02 25:19

Okay. Well, you know, there's going to be a continuing increasing reliance on data-driven financial decisions. There's just no way around it. You you've got to have the data. And you need to expect, as an organization, greater scrutiny on the the ROI of the technology. Gone are the days when you can just implement something with no thought to the return on the investment. Um, the organizations that do that today are really throwing money down a hole. Um, and I know some today that are doing that kind of thing. Um, you know, you have to look at continued growth in cloud and digital infrastructure. It's there, but if you don't manage it, it will break you from a spend perspective. Um last, I would say, you know, technology is gonna be a key part of margin protection. We're always going to be asked in the technology space, how can you reduce spend and help us increase our margin? So you have to be ready for that and understand that organize organizations are gonna prioritize really visibility. Uh, the ones that do that will have a competitive advantage. Sure.

SPEAKER_01 26:29

Lots to think about for our listeners and all of us living in healthcare um technology of today. That brings us to the end of our episode. Um, I thank all of you so much for listening to John's feedback and listening to us. Uh, we hope the conversation helped offer practical insights. We would like to remind you not to forget to follow us on LinkedIn at ovation healthcare. If you'd like to learn more about ovation healthcare and any of our shared services, please visit ovationhc.com. Thank you.

SPEAKER_00 26:59

Thank you for joining us on the Ovation Healthcare Learning Institute podcast. We're committed to supporting independent hospitals as they navigate challenges and shape a stronger future for the communities they serve. If you found today's conversation valuable, be sure to subscribe, share this episode, and connect with us on LinkedIn at ovationhealthcare, or visit us at ovationhc.com for more insights and resources. Until next time, keep leading with confidence.