The health care industry is rapidly implementing interoperable electronic health records This movement is driven by the meaningful use incentives and efforts to prepare for payment reform, which places a strong emphasis on following the evidence, care coordination and population management.
These systems require significant organizational investments of money, management and clinical time and effort. Moreover, the implementation of an EHR requires that resources be diverted from other worthy initiatives.
Still, implementing an enterprisewide EHR is a critical undertaking for a provider. It will not be possible to effectively create new care models (such as a patient-centered medical home), reduce care variability and respond to new quality-based payment models without an electronic health record. Providers reasonably expect to see improvements — significant improvements — in organizational performance as a result of these investments.
However, we should understand that the implementation of an EHR may be necessary, but alone it is insufficient to improve performance. Information technology is not the only factor that leads to IT-enabled performance gains.
Two Studies Worth Noting
Two studies have examined companies in a range of industries that made significant investments in IT — most notably enterprisewide application systems — to materially improve their performance and competitive position. These studies found that while many companies implemented fundamentally the same application system, the resulting performance gains were uneven. Some companies saw significant gains in performance while others did not. There were winners and losers.
Companies that outperformed competitors. The first study (McAfee and Brynjolfsson, Harvard Business Review, July 2008) examined all publicly traded companies in all industries from 1960 to 2005. The authors sought to understand the forces that led to winners and losers over that period. Interestingly, the study found that the gap in performance between the top 25 percent performing companies and the bottom 25 percent performing companies widened significantly over the latter half of that time frame, particularly for IT-intense industries. An IT-intense industry is one in which the use of IT can have a major impact on a company's strategy, e.g., telecommunications and manufacturing.
If the technology were available to all (companies might choose enterprise resource planning systems from different vendors, but they all could implement an ERP system), why did the gap occur? And why did the gap widen?
McAfee and Brynjolfsson found that those companies that outperformed their competitors did three things.
1. They implemented a common IT platform throughout the organization. The system supported critical functions, possessed the right level of features and functions, was well-supported internally and by the vendor, and was able to handle needed modifications and enhancements. This factor proved important; however, it did not distinguish winners from losers. Many low-performing companies had implemented a common IT platform, often the same system as a high-performing company.
2. The winning companies engaged in a series of thoughtful, goal-directed and well-managed innovations using the common platform. They tried new ways to improve customer service, manage inventory, eliminate unnecessary work, and provide new services and products. These innovations taught them ways to improve their performance and hence competitiveness.
3. Having identified innovations that had merit, they propagated them across the organization using the IT platform to implement and enforce the innovation. These companies were effective at introducing and managing change and did so repeatedly with many innovations.
Companies that took the first step but not the other two, or did a poor job in any of the three steps, saw their performance suffer.
These findings explain the gap. As we all know, information technology is a tool. In that regard, it is no different from a chain saw or a hammer. And like all tools, the possession of a tool does not mean that the owner is effective at using the tool. All of us who are weekend handy persons can relate.
The widening of the gap is attributable to the growing power of information technology: During the span of the study, the Internet, ERP systems and business intelligence all emerged. As the technology becomes more powerful, the innovations can become more sophisticated and effective — e.g., today's use of social media to engage customers. Once these innovations become part of the organization's routine way of doing business, the performance gains are that much more dramatic.
The gap results from the second and third factors' building on the first factor. The widening of the gap is due to the second and third factors taking advantage of a more powerful first factor.
Companies with "digital maturity." The second study (Capgemini Consulting, 2012) examined digital innovations at 400 large companies. The study examined the "digital maturity" of these companies and compared this maturity with the performance of the companies. Digital maturity is defined according to two variables:
- Digital intensity, or the extent to which the company had invested in technology-enabled initiatives to change how the company operates. Example investments included advanced analytics, social media, digital design of products and real-time monitoring of operations.
- Transformation management intensity, or the extent of the leadership capabilities necessary to drive digital transformation throughout the company. Example capabilities included vision, governance and ability to change culture.
The study examined the degree to which digital intensity and/or transformation-management intensity separated those that performed well from those that did not.
The study found that companies that had low scores on both intensity dimensions fared the poorest (24 percent less profitable than their competitors), while companies that had high scores on both intensity dimensions performed the best (26 percent more profitable than their competitors).
However, the study found that transformation-management intensity was more important than digital intensity. Companies that had high transformation-management intensity but low digital intensity performed 9 percent better than their competitors. And companies that had high digital intensity but low transformation intensity were 11 percent less profitable than competitors.
Ramifications for Health Care
What does this mean to the health care industry as it implements interoperable electronic health records across the health system?
First, investments in EHRs are a necessary foundational step to prepare the organization for the changes of broad health reform efforts. In the Capgemini study, those organizations that failed to make the analogous investment fared the worst.
Second, as EHRs evolve to incorporate and complement a broad array of increasingly powerful information technology, their ability to enable gains in performance increases significantly. New technology matters.
Third, the organization's ability to change — to transform itself — is vital. In fact, this ability is more important than its ability to "install" an enterprisewide system. Change management skill (or transformation-management intensity) enables the organization to fully realize its information technology investment. At its core, change management involves identifying important small and large innovations and successfully propagating those throughout the organization.
The importance of change management is illustrated by the fact that in the Capgemini study, those organizations that had transformation-management ability outperformed their competitors even if they had underinvested in information technology. The flip side was not true — organizations that had made significant investments in information technology but lacked transformation-management intensity did worse than their competitors.
Fourth, given the aforementioned third point, as organizations invest in information technology, they should examine whether they need to make investments in their change-management ability. Attention to the organization's change-management skills may be necessary before leaders shift their focus to IT.
Fifth, those of us who are bona fide members of the health care IT industry should be humbled by these studies. As important and necessary as we are, our talents and offerings are less important than the skilled administrative and clinical leadership of the organizations we serve.
John Glaser, Ph.D., is the CEO of the health services business unit of Siemens Healthcare in Malvern, Pa. He is also a regular contributor to H&HN Daily.