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An HIT Moment with … Ralph Fargnoli

December 8, 2008 Interviews 2 Comments

An HIT Moment with ... is a quick interview with someone we find interesting. Ralph Fargnoli is president and CEO of Beacon Partners.

Many of the big consulting players have been acquired: FCG, Superior, Healthlink, JJWILD. The smaller ones seem to be hot properties now. What does that trend mean and what kind of consolidation is happening?

I look at the consolidation as an opportunity for an increase in market share. The larger firms were acquired by what I would call the mega-sized companies, i.e. CSC, IBM, and Perot, for their particular strengths that compliment or enhance existing service lines.

ralph With most of the large firms off the market, the mid-level and smaller firms are hot because they, too, have the people and service lines to help the mega-firms gain healthcare market share and enhance service line offerings. With the shortage of experienced healthcare IT, clinical, and operational professionals, demand has made all of us an acquisition target.

What I see as a potential conflict issue is that most of the mega-firms have products and services that provide solutions, i.e. software, hardware, offshoring, and data centers, that can be a solution or answer to a client’s challenges. So the question is: are the provider organizations getting unbiased, not self-serving, recommendations based on what else they have to sell?

How is the mix of consulting services that clients want changing?

Provider organizations want help from consulting firms that have proven success and results. With the economy in a recession and unemployment increasing, clients will want to see projects that can translate to savings and improved cash flow moved higher on the priority list.

While IT adoption can be key to these projects, IT remains a tool. Many organizations can improve their results just by reviewing their operational work flows and improving the efficiencies of patient care.

How do you see vendors and consulting firms changing their businesses to weather bad economic conditions?

Vendors will cut employees and will look to consulting firms to fill the gaps when the demands outstrip their internal resource supply. As demand for project assistance increases or slows, consulting firms will adjust their workforce size accordingly. Firms like Beacon Partners will look to have a balance of employee consultants with well-vetted contractors.

Many of those in the vendor and consulting industries affected by layoffs will end up working for provider organizations as full-time or contract employees. In addition, vendors and consulting firms will look very closely at expenditures and cut back areas that are not essential. The good companies will do everything possible to make cuts other than employees. That means conferences and all their related costs, travel, sponsorships, and charitable goodwill may be cut.  

I believe that good firms will also do a self-assessment to determine their business plan moving forward to be prepared for the turnaround and the new administration’s impact on the healthcare industry.

What healthcare changes do you think the Obama administration will make and what will healthcare and healthcare IT look like in 3-5 years?

I think that President-Elect Obama will start the discussions early in his administration for universal healthcare based on the Massachusetts model. Senator Kennedy, who is ill and is fighting for his healthcare legacy, has already set the stage for the healthcare reform debate.  

President-Elect Obama wants mandated coverage of all children, but not adults, which the Kennedy and Massachusetts model promote. So far in Massachusetts, there have been positive results with increased insurance coverage, but there are issues regarding access to primary care and the cost of the program.

Unfortunately for the Obama administration, the economy is the top priority and will need all the government funding and attention probably for most of 2009.

The President-elect does see the adoption of healthcare IT as a way to save billions of dollars and reduce medical errors. The question is does it carry enough weight and create enough jobs to be part of the stimulus package expected to be pushed through Congress in early January 2009?

In three to five years, I see universal healthcare for all, a modified payment system based on preventative measures, quality and results. I am still a cynic that Washington sees things at the 50,000 foot level and the real challenges to reducing costs and improving care are at the day-to-day operational level, of which I am not sure anyone in Washington has a grasp.

The issues that surround healthcare reform go way beyond technology adoption. Most are a huge cultural challenge, and one that cannot easily be forced to change.

What should vendor and providers be doing while they wait for economic conditions to improve?

Anyone in business who goes through these economic cycles knows that you need to survive for the turnaround. Diversity of services and products is important, and in the healthcare industry, there is still opportunity to grow and prosper.   

As with any company that has gone through an economic growth cycle, in tough times, a thorough review of internal programs and people is a must.

For the software vendors, the last thing I would do is cut my R&D. The market will return and the better prepared they are, the more they will prosper and gain market share.

On the provider side, refocus efforts on operational improvement projects that can help clients reduce costs and increase cash flow and patient access to care. If they have IT projects started or about to start, I would recommend that they keep moving forward with them because the expected benefit may not be realized until long after the go-live date, which may coincide with the economic recovery, making their organization more competitive.

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Currently there are "2 comments" on this Article:

  1. Ralph Fargnoli is spot on. I would wholeheartedly agree with his prognostics on the emerging market.

    Ralph, let’s have a lunch when you are in Houston next time around!

    Best,

    Don

  2. I do believe Mr. Fargnoli’s predictions of a socialist utopia and tax-payer funded, universal healthcare may be a bit premature. He is quite right that the economy will demand most of the attention. Regrettably, it will also entail large amounts of money handed out. The only benefit of all this government intervention is that the Obama Administration will be hard pressed to find new taxes with which to bear the costs of such a system. Even if the markets were in good shape I think that 3-5 years would be somewhat unrealistic. Interestingly, Mr. Fargnoli hopes to see HIS initiatives in a forthcoming “stimulus,” thereby showing just how much he and Beacon are vested in the status quo. Nothing mandated in Washington can decrease costs in the healthcare industry (except euthanasia perhaps). Every act of government costs the people money; every mandate costs money to comply with it. Do you truly want to cut costs of delivering care Mr. Fargnoli, or would you rather just shift the burden from one person to another (spreading the wealth)? Can you give us an example of another industry where massive investment of public money had the effect of lowering costs?







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