With the proliferation of AI and other technology vendors, health systems are applying a fresh level of scrutiny to IT solutions to ensure they’re actually solving the intended problems — and that their organizations can’t do the same thing themselves, executives told Becker’s.
In recent months, some high-profile vendor exits have made headlines, with health systems moving the services in-house. Meanwhile, healthcare organizations routinely change EHR suppliers, deals that can reach 10 figures. And amid the explosion of AI startups, many won’t advance past the pilot stage or their first contract with health systems.
“Exit or nonrenewal decisions are triggered when a vendor demonstrates a pattern of underperformance, lacks transparency, or can no longer scale with our strategic direction,” said Sunil Dadlani, executive vice president and chief information and digital transformation officer at Morristown, N.J.-based Atlantic Health. “We don’t wait for contract expiration to have those conversations — we build off-ramps into agreements from Day 1. Real leverage comes from strong governance upfront, clear metrics in the contract, disciplined review cycles, and a willingness to act when value is not being delivered.”
The seven-hospital system analyzes not only cost but also adoption, interoperability, outcomes, security, service reliability, speed to value, and strategy advancement, Mr. Dadlani said.
With technology evolving so rapidly, namely AI, health systems also don’t want to get stuck with applications that may be obsolete by the time the deal expires.
“I will definitely not sign contracts longer than three years, and I really require a one-year out clause for convenience,” said Luis Taveras, PhD, senior vice president and CIO of Philadelphia-based Jefferson Health. “These long-term commitments don’t make any sense anymore, yet we still have a lot of vendors that will insist on a three-to-five-year contract.”
Vendors, particularly publicly traded ones, want to project revenue, but Dr. Taveras argues they’ll have to change their approach — just like health systems are doing — to stay relevant and competitive. Even “sweeteners” to reduce annual costs for more years won’t make a difference.
“Things are moving too fast to make long-term, big-dollar commitments,” Dr. Taveras said.
He hasn’t had to exercise a one-year out clause yet, but expects to in the next few months. Part of the reason is that, thanks to AI, coding has become easier than ever, so Jefferson Health will build more of its own solutions. That might require hiring some developers, but the cost savings will still be there.
Nowadays, many tech vendors market themselves as AI — and, lately, agentic AI — companies. So Jefferson Health has a team — led by a physician data scientist — that validates whether they actually are, and, if so, how they train their models and institute ethical standards.
Health systems might also leave vendor deals when one of their enterprise platforms — for Jefferson Health, those are Epic, Microsoft, Workday, Salesforce and ServiceNow — comes up with a similar or better tool.
Healthcare executives should also carefully review vendor contracts, both for what’s promised — and what might be missing.
“I have seen numerous instances when organizations suffered because contracts didn’t spell out basics like service‑level expectations, remedies for outages or performance issues, termination terms, or limits on annual price increases,” said Joy Oh, chief information and digital transformation officer at Cincinnati-based Christ Hospital Health Network.
With the sheer number of tech vendors, Ms. Oh said it’s also important to evaluate not only the solutions but also the companies themselves. She concentrates on cybersecurity risk assessment, strategic alignment, and viability. But long-term sustainability isn’t just limited to failure. “I’ve observed rapid growth and early success strain a vendor’s ability to continue supporting early adopters,” she said.
A thorough evaluation and selection process thus prevents the possibility of vendor contract exits, which can add costs, disruption and rework, Ms. Oh said.
“Vendor scrutiny in healthcare technology starts with the recognition that the industry is now moving faster than traditional procurement cycles were designed for,” said Sha Edathumparampil, chief digital and information officer at Coral Gables-based Baptist Health South Florida.
So he also advocates for shorter contracts, as well as clear performance metrics. “Exit or nonrenewal comes into play when business outcomes aren’t being hit, the roadmap diverges from where the market is going, or security and compliance no longer meet our standard,” he said.
Health systems must also factor in shadow AI — employees or departments using the technology without formal approval, Mr. Edathumparampil said. That can lead to cost leakage if multiple teams are buying overlapping or unnecessary tools.
The post ‘Things are moving too fast’: Health systems intensify IT vendor scrutiny appeared first on Becker's Hospital Review | Healthcare News & Analysis.
