During the decade I’ve been CIO, IT operating budgets have been 2 percent of my organization’s total budget, which is typical for the health care industry.
During the same period, IT budgets for the financial services industry have averaged 10 percent or higher.
Since 1998, I’ve often been told that Healthcare IT needs to take a lesson from the financial folks about doing IT right.
The Boston Globe nicely summarized the financial issues at the core of the crisis
1. Mortgage backed securities2. "Stop loss" insurance on mortgage backed securities3. The credit crunch4. The Banking system5. The Bailout6. Recession v. Depression
Given the recent challenges of Lehman, Merrill, AIG, Washington Mutual, and others, you wonder just how effective the IT systems of these companies have been.
Of course they had great transactional systems, disaster recovery, infrastructure, and data warehouses.
However, did they have the business intelligence tools and dashboards that could have alerted decision makers about the looming collapse of the industry?
Did the financial services industry have controls, risk analysis, or a memory of previous crisis – the Depression, the Japanese banking crisis, Enron/Worldcom? Was it greed, irrational expectations or too much data and not enough information that brought down these great institutions?
I’m sure many books will be written about the causes and those who are to blame.
One thing is for certain, In 2008, no one is going to tell me that health care IT should run as well as Lehman Brothers. I’ve even talked to folks in the industry who are rewriting their websites and resumes to remove historical references to their overwhelming historical successes in financial services IT.
I certainly feel for everyone in the financial services industry – the anxiety and stress must feel overwhelming. Given that every person in the US will be paying $3,000 in tax dollars to rescue the industry if the bailout bill passes today, we’re all going to accept responsibility for the IT systems and the management using them that led the unsinkable ship of the financial services industry into an iceberg at full speed.
John D. Halamka, MD, MS, is Chief Information Officer of the
CareGroup Health System, Chief Information Officer and Dean for
Technology at Harvard Medical School, Chairman of the New England
Health Electronic Data Interchange Network (NEHEN), CEO of MA-SHARE
(the Regional Health Information Organization), Chair of the US
Healthcare Information Technology Standards Panel (HITSP), and a
practicing emergency physician.
One thing that has completely gone under the radar is how completely worthless the data provided by the private credit rating agencies were (e.g., Moody’s, etc.
This is the second time in less than 10 years that these firms have completely and fundamentally failed in their evaluation of various types of risk. What is the point of having these firms if their ratings are so useless and meaningless?
Nah, this financial crisis didn’t really have anything to do with financial systems. This is a great article on what happened internally with the “watchmen” at these firms (risk managers).
Basically comes down to two basic things:
1. Pure old-fashioned greed
2. Lack of financial disclosure on their budget sheets of various CDS instruments and certain regulations that have changed over the past 10-15 years including relaxation by the SEC on certain leverage issues and certain repeals around Glass-Steagall/others
John – Interesting comments, but from the title, I thought you were going someplace else. A big challenges in health IT is not just collecting the data, but turning it into useful information. (Which is from the title what I thought you were going to write about.) However, an even bigger challenge is taking that information and turning it into knowledge that can be communicated to appropriate groups to change their actions, and thus the outcomes we are looking for, i.e. higher quality and lower costs (or greater value). This is a central theme of the book I’m working on, because too often health policy debates focus on process or structural changes without looking at how proposals will actually improve real world clinical and economic outcomes.
I would agree that we shouldn’t take all of our cues on IT structure from Lehman, but I do think we can still learn from the banking industry about ease of transactions processing electronically and securely. Thanks for your insights.
It is ironic that financial services is one of the industries that “outspent” us on IT and to whom healthcare is constantly unfavorably compared. It doesn’t matter how much you spend on IT if your management decisionmaking is blinded by greed and fee-seeking behavior, heedless of risks. Risk management and sound corporate governance is ultimately about exercising judgment on behalf of your equity holders, customers and employees (see Sachs, Goldman). If isn’t information that people lacked in our financial industry, but wisdom.