By Trent Sanders, Vice President of Healthcare at Kyndryl

Hospitals in the U.S. are under strain, and many are closing. This is bad news for the communities these hospitals serve, and in some cases, it’s leading to the formation of healthcare deserts for inpatient and outpatient care. And all of this is happening just as the tail-end of America’s largest population cohort enters a period of both greater care needs and longer life expectancies.

While most of us are familiar with the services side of hospitals and healthcare systems, the back-office operations are just as important for patient care and a hospital’s financial stability. This is true even when many hospitals have serious “technical debt.” Their IT systems are outdated, siloed, lacking in scalability and increasingly subject to cybersecurity threats.

Here are three approaches hospitals can take to resolve their technology issues and strengthen their bottom lines.

1. Position to survive and thrive

Many hospitals that were already under financial pressure before the global pandemic never fully recovered in the years since. For rural areas in particular, hospital closures make it harder for millions of Americans to access vital healthcare services. According to the Center for Healthcare Quality and Payment Reform, more than 30% of all rural hospitals in the U.S. are at risk of closing. Rising costs and debt are leaving hospitals vulnerable to challenges ranging from unrecoverable payments to inadequate access to capital and smaller profit margins to increasing telehealth demands that strain or overwhelm already inadequate IT systems.

Solutions to addressing technical debt across the healthcare industry begin with expert assessments of IT systems, followed by the co-creation of a strategic roadmap to address current and anticipated needs. The good news is that since hospitals typically have fewer IT systems because of their technical debt, formulating system diagnoses can be less challenging. The first step is to enlist a partner with industry and technical expertise, and tap into a solutions ecosystem that delivers the right tools for the job. 

By the numbers: healthcare costs

$42.5 billion

Between 2021 and 2023, hospital labor costs — which account for an average of 60% of their budget — increased by over $42.5 billion.*

Over 30%

More than 30% of rural hospitals in the U.S. are at risk of closing, which could affect millions of patients.**

2. Strategic sourcing to fund the future

It is common for hospitals to seek outside partners to drive better patient outcomes — as an example, many hospitals outsource everything from specialty physician groups to laundry and food services. Similarly, there are many reasons to outsource IT. An integrated approach to sourcing can help healthcare providers identify spending efficiencies, minimize supply-chain risks and improve visibility into pricing and forecasting. This is another area where having access to shared-value partnerships and an ecosystem of solutions providers can be critical to driving performance improvements and growth.

For example, with a focus on shared services, healthcare systems and their partners can use industry benchmark data to help improve decision-making. This level of analysis can assist hospitals in balancing their IT investments to help enable speedy modernization and return on investment. Working with the right services providers also enables pressure testing to determine the functionality and robustness of a modernized IT estate. The goal is to improve employee and patient engagement, increase net patient revenue, develop sustainable cost models and reduce expenses.

3. Achieve improvements and savings in shared services

By working with their IT services and ecosystem partners, healthcare systems can use technology to deliver performance improvements and margin lift. Collaboration on shared goals (measured against industry benchmarks) can also yield improvements in a healthcare system’s Net Promoter Score (NPS), increase Net Patient Revenue (NPR) and reduce costs. When healthcare systems and their partners work together to achieve a joint innovation agenda, they can accelerate IT modernization while also investing for strategic initiatives and growth.

A healthcare system doesn’t have to compromise its culture or relinquish control when entering a sourcing contract. The keys to success will be having shared metrics and the right governance model.

Costs of Caring, American Hospital Association, May 2024
** Rural Hospitals at Risk, Center for Healthcare Quality and Payment Reform, April 2024

Trent Sanders

Vice President of Healthcare

Related Industries