Kaiser inks $500M healthcare IT deal with IBM, job cuts on horizon

Healthcare provider Kaiser Permanente has signed a $500 million data-center management contract with IBM, which could put as many as 860 IT jobs in jeopardy as part of the strategic realignment.

The Armonk, N.Y.-based IBM said it will leverage its global technology capabilities to manage Kaiser data center operations, including computer systems, storage systems and associated software. Kaiser said it will continue to manage applications, including its EMR, Kaiser Permanente HealthConnect, which is used daily by 14,000 physicians and thousands of other caregivers.

The payor said that the agreement with IBM puts 700 Kaiser jobs in jeopardy at data centers in California and Maryland. Phil Fasano, chief information officer for Kaiser, said a good portion of those workers could become IBM employees. "Forty percent of those will find jobs in IBM during a transition period of six months," Fasano said.

In a separate action, Kaiser is eliminating an additional 160 IT jobs scattered across 30 locations as it pares back spending due to the impact of the economic downturn, the San Francisco Chronicle reported.

"This step is necessary to enable us to operate as efficiently as possible during these extraordinary and challenging times," Fasano said. "Making decisions like these that affect employees is never easy. However, like many other organizations, due to the slowing of the economy, we are slowing our growth in IT expense."

Kaiser has a total of 6,200 IT staffers, so the layoffs affect 15 percent of that work force, Fasano said. The average employee notified of a layoff will receive pay and benefits for eight months, the payor said.

The Oakland, Calif.-based payor has spent approximately $5 billion over the past five years building up its EMR system, said it signed the seven-year deal with IBM to maximize the performance of its data processing units on March 13.