Healthcare organizations are under significant pressure to manage costs while adopting transformative technologies like cloud computing. The cloud promises scalability, flexibility, and a consumption-driven model, which is especially attractive as healthcare data volumes grow.
However, despite these benefits, the rapid adoption of cloud technologies has exposed gaps in cost management, eroding return on investment (ROI) and leaving healthcare organizations grappling with unforeseen expenses.
This article, based on insights from the first episode of Emids’ Expert Talks series, explores the key drivers behind cloud adoption in healthcare and presents strategies for managing costs and maximizing value. As healthcare organizations embark on their cloud journeys, they must approach this transition with a strategic mindset, focusing on financial governance, data integration, and long-term planning.
Cloud Adoption as an Industry Imperative
Cloud adoption has moved beyond being just a technology upgrade; it is now a strategic necessity for healthcare organizations. The industry’s reliance on vast amounts of data—whether from claims, labs, or patient records—makes it essential to leverage cloud infrastructure to handle and process this information efficiently. The ability to scale and adjust quickly to demand fluctuations offers healthcare providers the flexibility they need to address operational and clinical challenges.
Healthcare organizations are also shifting toward a more patient-centric model, unifying data across multiple touchpoints to create comprehensive member views. This unified approach is critical for delivering personalized care and driving insights through analytics and business intelligence. However, to fully realize these benefits, organizations must carefully plan their cloud adoption strategy, addressing data dependencies and ensuring that their cloud migration is seamless and well-architected.
The Rising Cost Challenge
Healthcare organizations accustomed to traditional CapEx-based models often struggle to adjust to the consumption-driven nature of cloud services. With cloud, organizations pay for what they use, but without proper oversight and financial governance, costs can escalate, threatening the ROI.
To address this, healthcare organizations must treat cloud migration as a long-term transformative journey, not a one-time event. The complexity of legacy systems, disparate data sources, and ongoing digital transformation efforts all contribute to the challenges organizations face in managing costs during cloud adoption and beyond.
It’s important to keep cost at the forefront while architecting applications and developing consumption patterns and create a right balance between storage and compute cost.
Implementing a FinOps Approach for Financial Governance
Financial governance is key to controlling cloud costs, and many healthcare organizations are turning to FinOps (Financial Operations) programs to guide their cloud strategy. A FinOps approach focuses on bringing together IT, finance, and business leaders to create a structured framework for budgeting, forecasting, and cost optimization.
Key aspects of a successful FinOps program include:
Budgeting and Forecasting
Accurate forecasting is essential for controlling cloud costs. This involves predicting the workloads and data volumes that will be processed, as well as accounting for compliance requirements, testing programs, and business events. By forecasting cloud usage effectively, organizations can set realistic budgets and avoid surprises.
Monitoring and Cost Management
Continuous monitoring of cloud usage is crucial to identifying cost overruns and ensuring that cloud resources are used efficiently. Healthcare organizations should implement mechanisms for tracking consumption patterns and assigning ownership for cloud services to individual teams. This enables proactive cost management and allows organizations to adjust their strategies in real-time.
Optimizing Cloud Resources
Cost containment involves optimizing the cloud architecture to avoid overprovisioning and ensure that resources are being used efficiently. Organizations must also be aware of contractual opportunities, such as slot reservations or discounts from cloud providers, that can help reduce costs.
Change Management
Effective change management is necessary to course-correct when costs deviate from the plan. Organizations should have processes in place to tweak cloud strategies, optimize workflows, and address inefficiencies before they escalate.
The Importance of Cross-Functional Collaboration
A successful cloud migration requires collaboration across the entire organization, not just within IT. Executive sponsorship from the C-suite is critical to ensuring that cloud initiatives are aligned with the broader business strategy. Finance and IT teams must work closely to establish KPIs for cloud efficiency and performance, while business leaders must understand how cloud investments align with long-term goals.
Healthcare organizations must also recognize that cloud adoption requires business process transformation. Moving to the cloud may necessitate rethinking traditional workflows, integrating new technologies like APIs, and adopting industry standards such as FHIR and OMOP to ensure data interoperability and consistency.
Measuring Success and Ensuring Long-Term Value
As healthcare organizations progress through their cloud journeys, it’s important to measure success not only in terms of cost savings but also through improvements in operational efficiency and patient outcomes. Key performance indicators (KPIs) such as cost per terabyte of data storage or processing provide valuable insights into the efficiency of cloud operations. Monitoring these metrics allows organizations to make data-driven decisions and adjust their strategies as needed.
The ultimate goal of cloud migration is to enhance the total cost of ownership (TCO) while speeding up time to business value. By carefully managing dependencies, leveraging the right cloud services, and maintaining a focus on long-term objectives, healthcare organizations can ensure that their cloud investments deliver the desired outcomes.
Today, cloud adoption offers healthcare organizations significant opportunities for innovation, scalability, and improved operational efficiency. However, without a strategic approach to cost management and financial governance, the benefits of cloud can be undermined by escalating expenses. By implementing a robust FinOps program, fostering cross-functional collaboration, and focusing on long-term value, healthcare organizations can navigate the complexities of cloud migration and unlock the full potential of their cloud investments.
The journey to the cloud is a transformative process that requires careful planning, execution, and ongoing management. For healthcare organizations, success lies in treating cloud migration not just as a technology upgrade but as a strategic enabler of business value, one that positions them for future growth and innovation in an increasingly digital world.