Case Analysis: Caregroup

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  • Topic: Health care, Fixing Broken Windows, The Network
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Case Analysis: CareGroup

Brief Synopsis
The case “CareGroup” prepared by the Harvard Business School recounts an astonishing tale of how the health-care company CareGroup’s leading state-of-the-art information technology (IT) systems had abruptly collapsed for three and a half days, what actions they took to recover, and the invaluable lessons learned through them.

Background and Analysis
On October 1, 1996 three prominent hospitals in eastern Massachusetts merged together to form CareGroup. CareGroup was a group of health-care professionals that offered community-based primary care and a broad spectrum of specialty services. CareGroup was formed in response to three key factors of the health care industry at that time. Firstly, the intense competitive environment within the industry in the mid-1990s had driven many hospitals to join forces to gain contracting power against HMOs. Secondly, there was a strong demand for hospitals to strengthen their balance sheets in a complex price war due to excess supply. Lastly, merging hospitals had the opportunity to develop integrated services that could greatly improve the quality of health care as well as drive down costs.

The merger that had formed CareGroup had been successful. Although the road to success had been bumpy the company had produced $1.6 billion in revenue and became the second-largest group of hospitals in eastern Massachusetts. An unforeseen achievement had been the development of an integrated IT system that linked the entire organization together. CareGroup became a leading innovator in IT not only recognized as the best in health care, but the finest in any industry. Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis Strengths

From a birds eye view the CareGroup IT systems were not only strong, but the most advanced in the nation. The company enjoyed the best e-mail system, voice and wireless, data center and web-based infrastructure in healthcare. Their IT systems had handled 900,000 patient records dating back to 1977 and 3,000 physicians and 200 staff personnel processed 40 terabytes per day. CareGroup’s CIO John D. Halamka was also a key strength for the organization. His impressive resume and extraordinary background made him the most qualified CIO CareGroup could hope for. Halamka explains: The reason why I’ve been successful is because I know all the technologies, I program in 12 languages, I written books on Unix system administration. I am a doctor, so I understand the clinical domain and the technical requirements. But as I tell people, my own blind spot—I’ve wired a telephone closet; I’ve built 100 servers, hundreds of desktops, but never built anything beyond a home network. It’s just the reality. But, I have now. Weaknesses

CareGroup’s weaknesses, which ultimately caused the network collapse, were revealed in the lessons learned from the catastrophic event. Prior to the crash, CareGroup’s belief that they had the most advanced network in the health care industry had inadvertently caused them to neglect the need to keep their IT system updated and controlled. CareGroup’s systems were completely controlled by one single switch, which was in turn controlled by one single person, who ultimately became the sole point of failure. The company did not have a group of people dedicated to monitoring and controlling the on-going changes to IT and their effects on the entire network. Opportunities and Threats

The merger that had formed CareGroup had given the organization the opportunity to integrate all of the individual hospital’s resources and broaden their quality of care. The company had realized that opportunity which led to the evolution of their advanced IT system. Unfortunately, CareGroup prior to the network collapse was not as successful in responding their threats as they were with their opportunities. The fast paced nature of the IT industry is a threat that no company, no matter how advanced the...
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