CHW Signs $600 Million Outsourcing Agreement with Integrator Perot Systems

In a sign that more large organizations are recognizing the intrinsic financial benefits of outsourcing, San Francisco-based Catholic Healthcare West (CHW), the largest Catholic health-care system in the western United States, has signed a 10-year, $600 million IT services contract with Dallas-based integrator Perot Systems.

Under the agreement, Perot Systems will provide IT applications and operations to 48 hospitals and five medical-practice groups in California, Nevada and Arizona. The integrator will operate the data center and supervise network management. It will also convert CHW hospitals to new administrative, clinical, patient-management and strategic systems.

The huge outsourcing deal is part of an effort by the health organization to improve its bottom line, according to executives.

"My goal is to use Perot Systems as a catalyst for our consolidation and streamlining efforts, which will, in turn, allow us to achieve our financial turnaround objectives," said Lloyd Dean, president and CEO of CHW, in a statement.

The health provider is undergoing a reorganization that it hopes will save $101 million--and eliminate a budget deficit--by the end of next year.

Gayle Simkin, vice president for information and technology services for CHW, says the health-care organization has grappled with integrating very diverse IT solutions since 1988, when it began growing from a group of 10 hospitals to one that now numbers 48.

"In many cases, hospitals within a region do not use compatible IT systems," she says.

Simkin adds that the integrator has extensive experience in the health-care vertical, working with both for-profit and not-for-profit organizations.

As part of its involvement, Perot Systems will implement an IT governance process under which an IT team will be held accountable for achieving performance benchmarks and meeting the financial turnaround goals, officials say. Simkin says she expects the integrator's approach to allow CHW to "create economies of scale and improve levels of [patient] service across the health system."

The integrator has started working with CHW's IT staff to transition it to Perot Systems' service delivery organization, officials say.