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Bill Russell: Today on Newsday.

Jason Rose: I'd say with zombie apps, is that they're they're often not maintained by the vendor. And they're just sitting there waiting to get attacked. And these are probably the most vulnerable apps that there are.

Bill Russell: My name is Bill Russell. I'm a former CIO for a 16 hospital system and creator of This Week Health. where we are dedicated to transforming healthcare, one connection at a time. Newstay discusses the breaking news in healthcare with industry experts

[00:01:00] Now, let's jump right in.

(Main) Hey, it's Newsday, and today I'm joined by Jason Rose, CEO of Clearsense. And we're gonna, we're gonna have some fun. Hey Jason, welcome back to the show.

Jason Rose: Appreciate the opportunity as always.

Bill Russell: I'm looking forward to this.

We're gonna do something a little different. I wrote an article, you wrote an article. Usually we look at the news in general and what's going on, but this is the news and what's going on. And it is the challenges that a lot of organizations are facing right now with regard to putting budgets together, figuring out where they're gonna go.

There's a potential for significant Medicaid cuts and, the talk is so varied. If this president does nothing, well, he creates uncertainty very well and so regardless of your politics, you have to agree with that. I mean, there's just there's a lot of unknowns right now, but the budget that is moving through the system represents significant cuts for healthcare organizations.

And so I wrote an article. About leading through that storm and what it would look like if you had to put together a [00:02:00] 20% IT staff reduction. You wrote an article, and I love this article. It is a little different approach, but it's how application portfolio management accelerates M and A

value. But I think there's a lot of the principles that just collide in this because there's just a lot of the principles. I mean, one of the things I loved when I read your article was this whole idea of zombie applications. And they're not quite alive, but they're not quite dead.

And as I have conversations with these CIOs, I still ask them, you know, what does your application portfolio look like? And it's vast and it's kind of crazy 'because some of it was from M and A, but some of it's just natural lack of good governance and it's just exploded. Talk to me a little bit about those zombie applications.

What are you trying to communicate there? What is going on at health systems that they have these kinds of applications?

Jason Rose: I think you nailed it, Bill. So it's zombie apps are just hygiene issues. [00:03:00] So, it could be a combination of things that led to that hygiene issue, but it's a combination of systems that are not being used at all.

Or could be systems that maybe you have a very, very few number of users that are actually accessing the system that is not getting the value that you're spending. For the number of people using or the value getting out of the system. And it could be, literally over $10 million right now in annual costs just on zombie apps.

And so if you think about the zombie apps. You know, we're talking about a lot about the economic issues and challenges there, but let's not also forget the same issues also create often cyber problems too. So these are applications in particular, I'd say with zombie apps, is that they're, they're often not maintained by the vendor.

They've already, you know, passed the support timeline and they're just sitting there waiting to get attacked. And these are probably the most vulnerable apps that there are.

Bill Russell: [00:04:00] And people think we're making this stuff up, but I'll just do my experience.

So we decided, hey, we're gonna move to the cloud. So we did an application portfolio project, and the first thing we did is we identified how many applications we had. So we had 1600 instances of 900 different applications. And I thought, all right, well we're gonna do an app rat project as we're moving to the cloud.

And the first thing we recognized is. Like two months after we started the project, our number of applications grew and I'm like, why is it still growing? It's like, well, we're still finding stuff, like we didn't know what everything was. Then we found, like this whole group of applications, and I think this still exists in a lot of health systems that we just shut off and no one called like, it.

They were literally not doing anything. No one cared. nothing critical assigned to them. 20 applications that are using power, using space, using cooling, using all that stuff that just exist. There's this and I'm not sure if it came through M and A or [00:05:00] if it just came through consolidation over time or how it happens.

And maybe that's the path we should take. What happens when two organizations come together? I mean, you've been through this a bunch. So when M and A happens I think we all assume that there's these decisions that get made that it's like very clear that we go, okay, we're gonna go with this one.

We're gonna get rid of this, we're gonna do this one, we're gonna get rid of this. But that's not really what happens, is it?

Jason Rose: I don't think that the uh, those who are in corporate dev or finance or the CEOs realize how massive of a cost there is.

It's just waste is what it is. My overriding point in this article was, put it in your investment thesis because why on earth would you not, if you're not putting this as a part of your investment thesis of a rough order of magnitude.

That you think that there is a reconciliation or rationalization of when you're putting these two health systems together or even just adding a hospital or a practice group, that there is a significant it cost and software infrastructure and [00:06:00] personnel. And so to not put that in the investment thesis is a huge miss because number one, you have a cost, but then you also, secondarily it's not a priority.

So, we all know health systems that are, you know, a couple years, four years, five years since the actual coming together and they still haven't done the reconciliation. So these two systems still exist. You still have these bloated IT teams and portfolios and so one of the things that I'm really focusing on right now is trying to help the finance folks, corp dev CEOs, understand.

How big of a deal this is, because if you're talking, and Gartner says 20 to 30% of all application portfolios are redundant, this is absurdly high. And so I read your awesome article, which was like a real world guide to hey, if you're faced with challenges with needing to reduce costs from your staff.

'cause that personnel is always gonna be a high amount of costs. [00:07:00] But I think that you can actually do both because just by taking out a significant portion, let's just say it's 10 or 15%. Let's say Gartner's wrong, I doubt it, but let's just say it's wrong. I usually see it's more like 30 or 40%, by the way, not 20 or 30, but let's just say that Gartner's wrong.

It's say 10 or 15%. Well, you're still actually removing software licenses, infrastructure and personnel, or at minimum, you're actually, reducing the number of things that your team has to manage uh, in the base of things. It's such an obvious play, but it's not a strategy application archiving, active archiving.

What I've seen, I've been here about a year and a half now, so I haven't been here for 20 years doing the same thing. I've been here a year and a half, so it's a fresh set of eyes. So what I've seen is that health systems in general that are not clear sense clients. Go and they'll hire one of our competitors and it's because they did it.

They have an M and A event. They have an EHR consolidation. They have an ERP consolidation, and they do [00:08:00] a project and then they go away. They never actually said, Hey, this is a, mandate. We've got a cost takeout, we've got cyber risk, we've got an ongoing M and A machine. We've got other enterprise application roles we're gonna wanna do in the future.

We need a business strategy. Where you have it, security, finance, clinical you know, the executive team at HIM, all stacking hands and say, okay, we're going to root out all the redundancies, all the waste, and we're gonna prioritize in a supply chain format on a regular basis that these applications are the ones that need to go and the timings.

And then you are working and you mentioned something earlier, Bill. You identify, this is a contract, this is the end. Procurement gets involved, they write the termination letter. You got communications to end users making sure that they're aware this is the end date when it goes to read only and all those types of things.

You got data acquisition, you've got the archiving itself , you got the training on the application that's in the [00:09:00] workflow scientifically epic. But that's a machine. It's a supply chain assembly line. You just don't see that.

Bill Russell: So that's a really important point, you know, one the premise of my article is you have to make a 20% cut in IT. What are you gonna do? And I go through prioritize what cannot break. I mean, there's a whole bunch of things that just can't, you know, cybersecurity, storage, backups, et cetera. Second thing is, you know, accept innovation shrinks.

It doesn't die, but it shrinks. But the third one is adopt a crisis governance model. I'm gonna come back to that 'cause that's what you're describing. And then communicate like it's life support. Revisit every vendor relationship. So adopt a crisis governance model, what you're describing is the biggest challenge.

It's an operational project. Shutting these applications off is an operational project and no IT leader is going to put their neck out there to shut off an application that the clinical staff is saying, look, don't shut it off. And even if it's like two people in the entire 10,000, right, [00:10:00] whatever's using it, they're just not gonna put their neck out there.

What they need is a crisis governance model or, or, or what you just described. A model that says, look, these are the priorities of the organization. There's a group of high level executives that say, look, this is the direction we're going and we're not going to maintain an application that just two people use and only impacts, you know, 3% of our patient population.

It's not driving anything of substance of value. And just because some people like it. That governance model is so critical. I call it a crisis governance model, which is primarily as small a part of the organization as you possibly can, and it's a group of people that has to live with the consequences of the decisions.

And they just go, look, this is what we're gonna do. We don't need eight applications that do the same thing. Or they also follow through on projects. This is the other part I think that happens. We have this consolidation, and then no one ever shuts it off. That's right. The licensing continues [00:11:00] and the work continues and the staff continues.

Jason Rose: And the backups. And the backups of the backups and all the above.

A little controversial what I'm about to say, but you kind of set me up on this Bill is oftentimes when we go to IT leaders, we point out, unless you're some unicorn, you probably have 20 to 30% blow in your portfolio.

But sometimes these leaders have been there a really long time and I am trying to understand why would, they would not say I need to make this a project. I'm gonna be the hero and I'm gonna take the cost out. And it's hard work. What you just described is, 'cause it's not an IT project, it's a business project, it's a strategy, it's operational.

So maybe they don't wanna stick their neck out unless they're brand new. That's why I've come to the conclusion is that the rest of the organization doesn't realize how massive a cost it is, but in reality is it's because probably these products are already budgeted. It's not the burning platform.

You know, you've got a, maybe dozens or hundreds of [00:12:00] applications that are already budgeted. They've already been there a long time. No one's asking about it, what they are asking about. Is, where's my EHR project? Where's my ai initiative? That's what they're asking about. That's what people are focusing on.

Whereas like, the bread and butter you know, I won't say easier stuff, but the maybe not sexy stuff is actually taking all these applications that are just unnecessary and wasteful.

Bill Russell: Well, I'm gonna give you two examples. If you can give any examples, that would be great

because I know you, with the position you're in, you're not allowed to talk about some clients and whatnot. So, the first one I wanna give you is so we had a city tour in Philadelphia and Chad Brisendine with St. Luke's was in the room. And one of the things is on M and A, when they go in, they don't mess around anymore.

They essentially say, you will go onto our systems. It will be this timeline. And it's very clear in the documents like, well, this is, we're not gonna come in and say, Hey, let's talk about this. It's like, you're going on our systems is what it looks like. The cool thing is he's able to say to them, now, within 30 [00:13:00] days of the deal getting done, you'll be on Epic.

And they look at him like he's insane, but he's done it three times. So it's like, no, we've done it. We know how to do it, we're gonna do it. That's one story. The second is Corewell. So I interviewed Jason Joseph, and when Corwell is the combination of two fairly large systems came together and they became Corewell, but when they came together, they had, as their mantra, single system, single operating system. And they relentlessly for the last two years, just went after, Hey, we're gonna create, as if we're a brand new entity.

We're not gonna say, hey, this one wins, this one wins. We're gonna come in and we're gonna decide which one wins, and that's what we're gonna do. And we're gonna drive hyper efficiency through this. And I talked to him and he goes, you know, it was really hard because essentially all the fun projects people wanted to do had to go on hold while we established the foundation, because if you don't establish the foundation, all this really cool stuff we're talking [00:14:00] about, you're not gonna get to do.

Like, we can't do the fun AI stuff. We can't, 'cause the data starts, right? And everything's a mess. So we have to do that. But it wasn't just these individual CIOs saying it, it was the organization going, this is a priority. This is the direction we're going.

Jason Rose: completely agree. I'll start with what you just said a moment ago and I'll go backwards. So class research back in August noted that Clearsense has done the largest decommissioning programs in the history of decommissioning. So that's across any of our competitors in the history of time.

We've done the largest and we're actually in the process of doing a case study on one in particular, which I can't name who it is, but I can tell you it's a, you know, a hundred hospital system. Over $20 Billion. We have cut 750 applications of their 7,500 that they have so far. They do a lot of mergers and acquisitions and we are right now sitting at over $65 million of permanent operational cost takeout.

That's net of my fees [00:15:00] and any other fees that they do to for this. So it's a net cost savings and we're on our way to over a hundred million dollars probably by the end of 2025 and permanent cost savings. That would never have been there had we not done this aggressive action years ago.

And so that to me is the model. It's a business strategy, it's a supply chain, and everyone is on the same page. Lots of transparency. This has got board visibility within that organization on a quarterly basis. It's most important IT project they have and it has been for years. So, it is absolutely real.

By the way I will point out is that we haven't even decommissioned their big EHR system yet. This is before that. And then another example is TSA's could be millions and millions of dollars a month. And it's just because you're sitting on their systems. So it's not good when you do the transaction, what you're describing, where in 30 days will go right to Epic. That's beautiful. I haven't actually heard that before and that's wonderful.

'cause then you can go right to read only and you can [00:16:00] start archiving away. But you know, typically, well, not typically always. There are TSAs and TSAs are just a huge amount of money just to sit inside of their applications. Until you can get the data out, they can shut it down.

Bill Russell: TSA stands for.

Jason Rose: transition service agreement. So it's the interim timeframe while you're doing the acquisition.

And again I don't think, I mean, I know the IT team knows about this. I know the finance team knows about this, but I don't know if they're tracking this as closely as they should because it's a massive amount of cost savings. I've seen clients right now that are tens of millions of dollars just in TSA costs.

Bill Russell: when we did our EHR and one of the things was ar so they were always like no, we gotta keep that system running for ar. And I kept my eye on that for a little while before, I finally called you guys actually.

I kept my eye on that for a little while. I'm like, alright, when are we gonna shut this down? When are we gonna be able to shut this down? And it started to become apparent to me, like they had no intention of ever shutting off the old system. It's like e even if there was like [00:17:00] $5 in ar they were still working three years from now.

Yeah. They were gonna keep that thing running. And I'm like, alright. This needs to be a larger conversation. And so we had the conversation with the CFO. I said, when it gets to what point are you willing to shut this down? So we had that conversation. Then I said, all right, we have a solution that's gonna be able to move that stuff over.

Shut that thing off. And essentially we will get outta that contract. and they'll be able to still access that through our normal system through a link. They'll be able to get to that same AR and that kinda stuff. And they were like, oh, if you're gonna do that, then yeah, we can get rid of that system.

\ I'm like, well,

Jason Rose: yeah, you Just have to like give the options there. So I'll tell you like another thing that I found fascinating that a lot of people don't realize this really important. when we go and do a a relationship with a health system, most of our fees are actually capital budget for the health system because they're implementation.

[00:18:00] So, when you think about it, if you're taking a capital budget item to drive down opex cost savings, that is a beautiful thing because everyone knows how tight the opex budgets are. That's where the all the constriction is. CapEx is a lot looser, lots squishier, A lot of times it's not even used on an annual basis.

And it's it leaders often have much more autonomy on their CapEx budgets. But because of the way. We implement where we're doing a lot of patient matching. We're doing reporting, we're doing data acquisition, not migration, but data acquisition, all those pieces and parts.

And we've already gone to audit firms. We're gonna do another white paper on this as well. Looked at Gap. These are capital budget items. That you can invest in and drives down massive cost savings. I mean, it is a really big deal because when you're thinking about my priorities of the year, a lot of times the IT leaders, these are very smart ones too.

I'll get challenged on that. No. You're a [00:19:00] subscription, you're a platform. Yeah I get that that's the opex, i'm not talking about that, i'm talking about the actual implementation, which for us because of the size and scope of what we typically do, or we're shutting down thousands of applications over a given course of a contract, we'll be there for years doing this.

You know? So it's a capital budget issue. It's an opportunity.

Bill Russell: let me ask you this, 'cause this is gonna be the and we will close on this actually. So it becomes a question of, I've just been asked to do a 20% budget cut, and I think a lot of CIOs are sitting there going, look. First of all, I don't, by definition, I don't have more money to invest because it needs to go down.

Unless that ROI is extremely fast and we can move and we can set a course where we can reduce that cost and measure that cost very rapidly over time. And I think. So if I'm talking to CIOs, I'm saying, look, the easiest cut you're gonna do is to things that aren't adding any value.

And so [00:20:00] to identify those first and to say, look, we have zombie apps over here. We have apps that add very little value to clinical care or to just operational value to the organization in general. We have this group of things. That essentially are sucking money out of the organization, but they are adding very little value.

That's probably what you want to target first. That's the thing I would say is what you want to target first. Now, if you have a platform in place, if you have a clear sense in place, you can start to do that very rapidly today, but you could potentially have to put a platform in place to address those things.

That's probably worth doing from this perspective. You should be doing it every day. For the rest of your career while you're at that organization? Yes, you should. You should. Bringing applications in, moving applications out,

Jason Rose: the health systems today are, they're going to go acquire a vendor. They're gonna do a project. They might have two or three competitors of [00:21:00] Clearsense. What we do is when we typically go to a health system, we call it archiving the arch archiver because we're looking at the whole system, not a project.

We're looking at the whole system. And we may not have come in because of M and A or EHR, we're just coming across to take out the 10 or 20% that might include my competitors.

one, one Piece of help.

that I'll leave on is that we haven't formally announced it. I think we're about a week or two away from the formal press release on this. But Clearsense is delighted to have a strategic partnership with Nordic Global. And so, with Nordic, and we're working on some massive projects right now that we're really excited about already.

But with Nordic, we have a tool that in a matter of weeks for free. We can do an assessment on the rough order of magnitude of cost takeout for the health system with extremely low amount of input from anybody in the health system. Probably a couple hours of interviews and access to a couple systems.

And we can actually do a rough order [00:22:00] magnitude separated by how many months or years it will take, depending upon the size of the scope and the health system. And then you take that rough order, magnitude cost and it's an easy, ROI, it's purest ROI reason healthcare is application archiving.

Take that to your CFO. Say, okay, more than half of this is gonna be CapEx, probably way more than half. And then everyone's happy and you become a hero. We've seen this time and time again, but happy to talk about that further. But that's a in this time of economics, distress. Just getting the ruffler magnitude.

we get that done in a matter of about three weeks, four weeks at the most. And then you can actually be a hero in this economic challenge.

Bill Russell: that's fantastic. If people want access to these articles, the links will be in the show notes and obviously you could reach out to Jason and the team as well.

And it sounds like to Nordic as well, if Yeah, they're interested in that. like the word free. I like to be able to quantify the potential savings with a free tool over a very short period of [00:23:00] time is of significant value. So, Jason, I wanna thank you again for coming on this news day.

Really appreciate it.

Jason Rose: Thank you very much, Bill. Appreciate it as always.

Bill Russell: Thanks for listening to Newstay. There's a lot happening in our industry and while Newstay covers interesting stuff, another way to stay informed is by subscribing to our daily insights email, which delivers Expertly curated health IT news straight to your inbox. Sign up at thisweekealth. com slash news.

Thanks for listening. That's all for now