January 12, 2023


3 Fallacies About Healthcare Technology’s Buy vs. Build Dichotomy

By Minal Patel, MD, Founder and CEO, Abacus Insights

Buy versus build has come to define technology choices at health plans as binary and a necessary fork in the road. In today’s complex and fast-changing technology and regulatory environment, however, these decisions are not nearly so clear-cut. As a result, the buy vs. build mindset is quickly being replaced by a more effective approach: buy + build.

Why Buy + Build

Technology is now expected to play a vital role in every aspect of healthcare, from improving the quality and equity of care and consumer experiences to enabling value-based care and payments. There’s a relentless need for speed to deliver tech-driven gains in operations, analytics, interoperability, and provider, member, and vendor experiences–if not full breakthroughs. No one technology team or company can do it all. And if they can, sustaining it – keeping up with quickly changing needs and maintaining tech currency–is impossible.

Counterproductive Buy vs. Build Myths

Still, buy vs. build myths persist in healthcare, which can impede progress even as payers strive to improve their organizations’ day-to-day performance and position themselves for growth and innovation. As someone who has been on both sides of this decision, as a senior health plan executive and a healthtech CEO, I’d like to lay to rest three common fallacies:

1. Building Keeps Payers Independent and Self-Reliant.

When your organization’s reputation and future is on the line over major technology investments, it’s understandable that the first instinct is to keep everything close and within your own team. This approach depends heavily on having the right talent, bandwidth, and budget. That’s an increasingly steep hill to climb given scarce and expensive digital and other tech talent, an uncertain economy heightening scrutiny on new-hire and other spending and competing demands on the tech team.

Among health-plan CFOs, 50% are seeing significant workforce resignations and 47% are finding it hard to find and hire the staff they need, according to the 2022 Gartner® report 2023 CIO and Technology Executive Agenda: A U.S. Healthcare Payer Perspective.[1]

2. Building Gives Payers More Control.

In my experience, payers don’t develop most solutions, add capabilities, implement new technologies or handle technology transformations completely on their own. Even with a strong internal team, it’s typical to bring in outside firms to develop strategies, implement the plans and often manage the ongoing services.

It’s a smart and proven approach, but it’s misleading to label it an internal build. It doesn’t develop any more in-house control, experience, and expertise, and perhaps less, than buying and integrating technology solutions and services with a collaborative technology partner.

3. Building Means Your Organization Will Get Just What It Needs.

It’s true that the internal team understands the payer’s needs and culture better than any outsider. Nonetheless, setting out to develop new technologies or manage digital transformations is a double-edged sword. It requires the internal team to know exactly what they want, investigate all possible technologies to achieve it, and then build it to fit their organization while finding the time to do it among their myriad, pressing demands.

Even if a team gets it all right, building in-house tends to be more expensive and takes longer than buying. Too often, by the time a multi-year project is completed, the business need has changed or technology has advanced, keeping the payer behind the curve. By focusing efforts on this now-obsolete solution, the tech team sacrificed other tech initiatives that could have delivered more value to the organization.

Data transformation and interoperability is an important case in point. What accomplishments or contributions to the organization is the tech team trading off to invest time and effort in a data infrastructure better served by a partner singularly focused and experienced in this area?

Best of Both Worlds

Just as there is no pure build, there is no pure buy. Technology purchases are made along a continuum. This includes buying and installing a solution, accessing it in the cloud, purchasing a cloud-based managed service to fully outsourcing it. In all cases, the new tech has to be integrated into existing capabilities and requires varying levels of support and upgrading from the vendor.

The buy + build strategy has CIOs, CTOs and their teams focused on how to integrate the best of their capabilities with those of the marketplace. The hybrid approach accelerates results, with payers centralizing, integrating, and controlling what they build and what they buy for the best outcomes.

Buy + build adopters have chucked the myths for one clear truth: The technology is not the differentiator: It’s what you do with it in the context of your business.

[1] GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.