SLAs Add Accountability

July 1, 2009

Agreements can address a broad range of issues, including technical performance and customer-service responsiveness.

While Web-based applications proliferate and replace on-site, server-based software for critical business functions, healthcare organizations routinely secure commitments from vendors regarding application performance and reliability. After all, what good is an application if it is not available when you need it?

Agreements can address a broad range of issues, including technical performance and customer-service responsiveness.

While Web-based applications proliferate and replace on-site, server-based software for critical business functions, healthcare organizations routinely secure commitments from vendors regarding application performance and reliability. After all, what good is an application if it is not available when you need it?

What about the business results that the application is supposed to deliver? Is it reasonable to expect a vendor to commit to a service-level agreement (SLA) with regard to results? While this trend is still in its early stages, some vendors that offer applications over the Web are beginning to make these kinds of commitments.

If clients evaluate vendors based on SLA commitments, they could end up with a host of different vendors providing best-of-breed applications. The plus side is that they can expect to get the most favorable results possible.

Broadly defined, an SLA is a contract — either incorporated with the sales agreement or stand-alone — that specifies vendor obligations, usually in quantifiable terms. These can address a broad range of issues, with various levels of accountability, including technical performance, customer-service responsiveness, impact on customer operations, customer business outcomes, or other mutually agreed-upon benchmarks and results.

SLAs ensure accountability after implementation in several ways: by carrying due diligence from selection process through to the ongoing relationship; by forcing the client and the vendor to translate commitments into metrics; by supporting mission-critical operations more reliably; and by justifying investments and protecting long-term value.

The types of services SLAs cover in healthcare IT are broadening in scope. The most common focus is on service or support standards, such as time-to-answer for incoming technical support calls, system downtime, application response times for end-users and frequency of software updates. SLAs are also being applied to guarantee business-performance metrics. In revenue-cycle management, for instance, these benchmarks might specify a percentage reduction in the number of claims rejected or reimbursement received within a pre-established number of days. Lastly, the final frontier for vendor accountability in healthcare IT is quantifiable return-on-investment SLAs, which stipulate net financial or business outcomes for the client.

SLAs Transform Client-Vendor Relationships

Before Web-based applications were widely available, vendors typically could count on clients to continue using their software products — even when results were not as advertised — because the cost to switch was so high. In addition, satisfied clients evaluating new software or systems often limited their search only to products offered by their primary IT vendor due to the challenges of integration.

Since there is little or no installation required for Web-based applications, however, clients today can easily convert from one vendor to another. Consequently, vendors that are able to commit to SLAs related to business results see these agreements as a logical strategy to distinguish themselves from the competition and retain their client relationships. The motivation to expand service commitments to include business results benefits both the buyer and the vendor.

The problem of integration has largely been resolved through the use of HIPAA standards for administrative transactions and the use of Certification Commission for Healthcare Information Technology (CCHIT) standards for interoperability requirements. Vendors that do not support standards and interoperability should not even be considered.

If clients evaluate vendors based on SLA commitments, they could end up with a host of different vendors providing best-of-breed applications. The plus side is that they can expect to get the most favorable results possible. The downside is that these organizations need to manage multiple relationships.

One of the oft-cited reasons for consolidating all IT needs with one vendor is access to dedicated support when problems arise. Selecting vendors based on their SLAs implies that clients are working with vendors that recognize the value of good service and likely will continue to improve the results they produce.

Healthcare organizations should approach SLAs with caution in several areas. Entering into an SLA requires a certain level of sophistication and an organization should be deliberate in its approach to each of the basic components of an SLA contract.

Assessing the Benchmarks

When negotiating an SLA, the client needs to define for itself what benchmarks are requisite, which are preferred but not necessary, and which are not important. Enforcing a large SLA or a large number of SLAs, for example, is simply not possible. Healthcare organizations should also bear in mind that SLAs are not necessarily a way to achieve cost savings; rather, SLAs are more often a way to ensure quality or value.

In addition, those contemplating an SLA for the first time should be attuned to typical “rookie mistakes.” They should keep in mind that the overarching intent of an SLA is to maximize performance of the technology to improve user operations.

To achieve this, SLAs should be designed with clearly articulated expectations, deliverables and desired outcomes; have teeth, with detailed assessment measures and consequences; encourage dialog so that both partners collaborate to optimize performance; and include enforceable articles for termination if the vendor is in breach of the SLA.

Two details are often overlooked when practices and providers develop an SLA. First, they often include a lengthy “cure period” to allow the vendor to rectify any breach issues. In many cases, the cure period is unreasonably long. Regarding mission-critical functionality, for instance, a 60-day window is excessive. Time allowed to correct problems should be commensurate with the impact the issue has on the organization.

Second, healthcare organizations should address chronic concerns. Regular occurrences of a specific problem should not be acceptable, even if the vendor is able to rectify each incident within the agreed-upon cure period. The SLA should include parameters that demand a permanent solution to any breach after it occurs two or more times.

SLAs should be designed with clearly articulated expectations, and include enforceable articles for termination if the vendor is in breach of the SLA.

Developing an SLA and then filing it away with the purchase order and sales agreement is tempting. For an SLA to have value, however, it should be seen as a blueprint reflecting how the relationship between vendor and client is to evolve. Healthcare organizations should refer to the SLA often, relying on it to motivate vendors to drive performance to a new level. This allows the client to ensure the technology achieves the operational mission for which it was implemented.

James Denny Jr. is CEO, founder and president of Navicure, an Internet-based medical claims clearinghouse for physician practices.

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