Wednesday, Apr 12, 2023

A Strong Cloud Strategy May Help Hospitals Avoid the Storm

Neal BatraPrincipal, Deloitte Consulting LLP 

Michael BlackManaging Director, Deloitte Consulting LLP 


Hospitals and health systems that continue to invest in legacy IT systems could risk being left behind by competitors, new entrants…and patients. Cloud-based solutions are increasingly being used to support the digital transformation that could be essential for competing in the Future of Health.TM But past investments in legacy systems can cause hesitation among executives who are considering a move to the Cloud.  


Some hospitals and health systems may be at a crossroads. In conversations with health system leaders, we continue to see a fair amount of resistance to change. But there also tends to be an acknowledgement that relying on existing data centers might not be a forward-looking strategy. Disruptive technology could be the differentiator between winners and losers in the future.


Is time up for legacy systems? 

Hospital data centers have changed little over the past few decades. They tend to take up a lot of space, often have capacity challenges, and might need to be serviced or updated regularly. Maintaining legacy systems can require ongoing investments in onsite data storage and regularly updated security to help ensure that patient information is protected against emerging threats. 

Some health system executives might be committed to the technology they understand and could feel obligated to ensure the expected return on investment (ROI). There can be an almost emotional attachment to infrastructure technologies and the way things have always been done. Moreover, health system leaders might have a good understanding of their costs and the likely return from existing systems—even if that ROI is consistently diminishing.  


Some health systems have underestimated ROI from Cloud 

The transition to Cloud should not be seen as merely a new type of data center or as an extension of existing data centers. Instead, it might be considered a necessary catalyst for change that could be a bridge to a significant ROI over the long-term. Cloud could help health systems keep pace with changing technologies and tools without having to make significant, ongoing capital investments. 

Cloud-based electronic health records (EHRs)—populated by radically interoperable data from a variety of sources and combined with artificial intelligence—could transform decision-making processes and help improve the quality of care. EHRs coupled with scalable Cloud-based analytics could open the door to new types of patient monitoring and predictive interventions and could enable new ways for consumers to access health care services and engage in their health (see Can health IT teams find a silver lining in the Cloud?). 


We recently helped a $7 billion integrated health system (plan and provider) move to the Cloud with AWS. The organization is on track to save $46 million a year. The change allowed the organization to step away from its antiquated infrastructure and legacy data centers. The organization also reduced obsolete applications by 25% with a targeted infrastructure-to-Cloud adoption rate of 90%.

Why health system execs should get their heads in the Cloud

While there appears to be widespread awareness of Cloud among health system leaders, adoption seems rather limited. Some organizations might not be aware of the full potential of Cloud, according to Deloitte’s latest research (see The future of Cloud strategy survey report). The report is based on a survey of 500 senior Cloud decision makers across a broad range of industries. While nearly 90% of respondents said they view Cloud as a cornerstone of digital strategy, investments have been limited. Over the past year, only 9% of the surveyed organizations invested more than $100 million in Cloud solutions, while another 21% invested between $20 million and $100 million. Most surveyed organizations (67%) invested less than $20 million.​ The vast majority of surveyed organizations (87%) intend to increase that investment by at least 6% over the next one to two years and many by more than 20%.  


While we see Cloud investments as a positive sign, spending appears to be far less than what hospitals and health systems might need to thrive as the Future of Health unfolds. A sustained financial commitment to legacy systems could stunt the potential of Cloud technology. 

Hospitals and health systems should consider a strategy to transition away from their legacy systems and transform themselves into technology companies. But becoming a technology company means that technology is a driver of strategy rather than a cost center. A Cloud-enabled transformation involves a deliberate effort to make enterprise-wide changes. Cloud can be an important first step in becoming a digital, insights-driven organization and creating digital experiences for our patients and consumers. Now is the time to disrupt or risk being disrupted and left behind.  

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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