Big Ideas: Outsourcing Improvement: The Relationship Between Vendor Contracts and Provider Performance
An innovative arrangement means that the provider effectively outsourced data warehousing, analytics, and performance improvement technology, plus content and personnel to the vendor.
This article first appeared in the December 2015 issue of HealthLeaders magazine.
When Allina Health, the $3.7 billion health system headquartered in Minneapolis, signed a $100 million deal with Health Catalyst at the start of this year, the terms of the deal were unusual, to say the least.
As part of the agreement, Health Catalyst—a Salt Lake City–based health IT vendor founded by former Intermountain Healthcare leaders that provides data warehousing, analytics, and outcomes improvement—took dozens of Allina employees onto its payroll, and Allina received a tantalizing potential upside. About 20% of the contract cost is dependent on better outcomes and lower costs at Allina hospitals and clinics. In essence, Allina's vendor partner proposed to share some of the risk that its technology would pay off.
This arrangement differs from and goes beyond the typical healthcare system spinoff, where a technology developed in-house is spun out into a separate company in which the incubating healthcare system retains an investment. In Allina's case, it started out as Health Catalyst's first customer, but Allina did not take a financial investment in Health Catalyst until the two organizations announced the risk-sharing arrangement at the start of 2015.