This is part one of a three-part series on the top issues faced by executive leaders involved in IT-enabled projects. Tough economic times call for serious thinking when it comes to IT spending. Dwindling reimbursements clash with ever-expanding demand for new spending. So what is a savvy CIO to do? Here are five lessons from the pros.

John Liston knows all about financial prudence. Serving as vice president of finance and CFO at 186-bed Port Huron (Mich.) Hospital, Liston must grapple with the reality of limited resources. The small community hospital lacks the resources of larger academic centers, and being independent, it has no corporate parent to turn to for additional capital. That's why, when it comes to spending on IT, Liston must maximize the bang for every buck. Even recruiting IT staff is a problem, he says, because of the limited opportunities the community hospital can offer its potential hires.The economic constraints led Port Huron to outsource its entire IT operation several years ago to Superior Consulting, now part of Affiliated Computer Services Inc. of Dallas. The hospital recently switched outsourcing partners, converting last fall to Troy, Mich.-based CareTech Solutions. Port Huron now pays CareTech $6 million annually to run its entire IT operation, including the data center. "It is virtually our entire IT operating budget," Liston says. In return for that, Liston is able to tap into CareTech's expertise, which he concedes far outstrips what the hospital could assemble on its own. "Being a small hospital, we don't have the economies of scale," he says. "They can offer the system redundancy and back-up we need at a better price."The outsourcer also negotiates IT contracts on behalf of Port Huron. "We don't have the leverage they do," Liston says. As far as capital budgets go, Port Huron has been spending ambitiously on developing an electronic health records platform.Using technology primarily from San Francisco-based McKesson Corp., the hospital has spent nearly $5 million to date. It has deployed systems that enable nursing documentation, admission-discharge-transfer planning and billing. Next will be an emergency department system and physician order entry.Port Huron faces two other large IT spends in the near-term. First, it will spend about $1.2 million on a picture archiving and communication system. Port Huron has winnowed down the list to two finalists and at press time was on track to pick a vendor early this year. Second, it needs to upgrade its 20-year-old phone system to a modern network that supports Voice over Internet Protocol, a project which will come in around $1 million, Liston says. Other needs that compete against IT projects loom on the horizon as well."We need to replace a patient tower and are looking to do that in the next five years," Liston says. "We want private rooms."The key to wise spending, Liston asserts, is benchmarking against other hospitals and what the industry is doing overall. That is one reason the hospital has invested so heavily in its EHR."We believe that we will be required by the federal government or Medicare to become more electronic," Liston says. "But with the tremendous cost of paper and record storage, a good IT system should pay for itself. But you can't afford everything at once. So you have to plan, plan, plan."

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