Childrens Hospital Los Angeles has signed a five-year, $13 million contract with IBM to manage and support the hospital's financial, human resources, materials management and grants-tracking systems.

The contract completes the hospital's transition from outsourcing its information technology support to a single vendor and instead using multiple vendors, each a specialist in their fields. IBM will provide outsourced services in Canada and at the hospital for the PeopleSoft applications that manage medical supplies, inventory, general ledger, accounts payable, purchasing, budgetary controls, asset management, payroll and benefits.

"We were looking for a more nimble, best-in-breed vendor relationship," said Rod Hanners, the hospital's chief operating officer. He noted that another company, Cerner Corp., supports the hospital's in-patient medical records systems.

The hospital is hoping to save $2 million to $3 million, Hanners said, around 10 percent of its IT operating budget, with the vendor changes.

For IBM, the contract is its first outsourcing support agreement with a California hospital and a significant step toward beefing up its healthcare industry practice.

The company last year acquired Healthlink Inc., a respected healthcare consulting group in Houston, and Corio, a Silicon Valley-based application hosting services company that specializes in medium-sized companies.

The company already provides consulting services to some area hospitals, including Cedars-Sinai Medical Center. Most of IBM healthcare contracts in the state have been with managed care companies, such as Blue Cross of California parent WellPoint Inc.

"IBM has been on a tear both in outsourcing and targeting the healthcare market," said Jim Jacobson, health care industry attorney and partner at the Holland & Knight law firm.

Hospitals traditionally kept their IT services in-house with the rationale that their applications were too complex and specialized to outsource. That has changed as facilities migrated to using more industry standard software such as PeopleSoft's.

"Hospitals are realizing that their core competency is the care of patients, and to the extent that they can offload things to people who do that routinely, they can achieve better reliability and service for their clinicians at a reasonable cost," said Dana Sellers, a healthcare industry consultant for IBM Global Business Services.

SCAN Expands

Long Beach-based SCAN Health Plan, a senior-focused specialty health plan, has significantly expanded its Westside L.A. provider network.

With the addition this month of the UCLA Health System, SCAN members will have access to the UCLA Medical Center, Santa Monica-UCLA Medical Center and the 100-physician UCLA Medical Group.

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