Rural Hospitals Benefit from Hospital-to-Hospital Partnerships in IT Outsourcing

Author:  Liu Amy
Date:  November 2008

The business practice of information technology (IT) outsourcing can help small rural hospitals with limited budgets benefit from modern technological infrastructure. Researchers at Penn State's College of Information Sciences and Technology (IST) have found that small rural hospitals save costs while modernizing their IT infrastructure by partnering with nearby larger hospitals.

The case study, recently published in the Journal of the American Medical Informatics Association, followed three rural Pennsylvania hospitals whose numbers of beds ranged from 9 to 83 that partnered with a nearby 411-bed regional hospital. Through the partnerships, the regional hospital provided IT products and services to the smaller hospitals, including data storage, IT personnel support, and software and hardware. Interviews were conducted at all hospitals over a half-year time period in 2006-2007.

Rural hospitals benefited from the relationship through economies of scale; because the regional hospital is larger than the rural hospitals, it is able to purchase more technologies at a discounted price not available to the individual rural hospitals. "The most prominent financial benefit for the rural hospitals was the ability to afford a comprehensive IT infrastructure at a relatively low price," said Madhu Reddy, assistant professor at IST and co-author of the study. "For instance, the rural hospitals only pay a percentage of the hardware dedicated to their needs . if the regional hospital buys a new hard drive, the rural hospitals will only be charged for the percentage of the hard drive they use."

IT staff from the regional hospital were sent to provide support to the rural hospitals. Though this allowed the small hospitals to provide IT services not otherwise possible, this aspect of outsourcing had some challenges. First, rural hospitals felt that their requests for support were not considered high priority by the regional hospital staff, which had to take care of its own issues at the regional hospital itself. Also, rural hospitals felt constrained by their dependence on the regional hospital for IT needs.

In an effort to learn more about the long-term effects of IT partnerships, Reddy plans to continue to perform case studies of rural and regional hospitals in Pennsylvania.

Written by: Amy Liu

Edited by: Jeffrey Kost

Published by: Hoi See Tsao