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Sunk Cost, Vendor Lock, and the AI Tools Health Systems Can't Let Go Of · The Clinical Realist

• 0:00
  SPEAKER_00: Welcome back to the Clinical Realist.
• 0:02
  SPEAKER_00: I'm Dr.
• 0:02
  SPEAKER_00: Sarah Matt.
• 0:03
  SPEAKER_00: Today I want to talk about something that's not in any vendor evaluation framework and is almost never in any clinical AI governance documentation, the exit decision.
• 0:12
  SPEAKER_00: So, how do you decide that a clinical AI tool is not working?
• 0:15
  SPEAKER_00: Not working in the abstract sense of we are disappointed with the results.
• 0:19
  SPEAKER_00: Not working in the sense of the evidence says this tool should not be running in our clinical environment.
• 0:24
  SPEAKER_00: And then once you've made that decision, how do you execute the exit cleanly without losing six months to organizational politics, vendor pressure, and the sunk cost conversation?
• 0:34
  SPEAKER_00: That conversation happens in every organization.
• 0:36
  SPEAKER_00: And the ones that navigate it well have something.
• 0:39
  SPEAKER_00: The ones that do not navigate it well do not have.
• 0:42
  SPEAKER_00: They define the exit criteria before they even launched.
• 0:46
  SPEAKER_00: So let me describe how sunk cost plays out in a clinical AI context because it has a specific anatomy.
• 0:52
  SPEAKER_00: Usually it starts around month four or five post-go live.
• 0:55
  SPEAKER_00: The performance data will be mixed.
• 0:57
  SPEAKER_00: Clinician adoption is slower than projected, and there are edge cases that the vendor acknowledged and then did not fix.
• 1:04
  SPEAKER_00: So the physician steward has been logging issues for three whole months and has not seen a real resolution.
• 1:11
  SPEAKER_00: And then someone in a leadership meeting will say something like, Well, we've invested 18 months in this.
• 1:16
  SPEAKER_00: If we can exit now, well, then we lose all of it.
• 1:20
  SPEAKER_00: And that sentence is the beginning of the sunk cost trap.
• 1:24
  SPEAKER_00: 18 months of investment is not recoverable.
• 1:27
  SPEAKER_00: It was spent whether you continue with the tool or not.
• 1:29
  SPEAKER_00: The decision you're making at month five after go live is do you also spend months six through 36 with this tool?
• 1:38
  SPEAKER_00: That's the actual cost-benefit question.
• 1:41
  SPEAKER_00: Not do we lose what we spend?
• 1:43
  SPEAKER_00: That's already gone.
• 1:44
  SPEAKER_00: The question is, do we commit more resources to something that is not performing?
• 1:49
  SPEAKER_00: So when you frame it that way, the answer feels kind of obvious, but the sunk cost framing is powerful.
• 1:55
  SPEAKER_00: And most governance conversations do not reframe it fast enough.
• 2:01
  SPEAKER_00: There's a second dimension to this that's specific to clinical AI.
• 2:05
  SPEAKER_00: In most organizational contexts, a sunk cost conversation is about financial resources.
• 2:10
  SPEAKER_00: But in a clinical AI context, it's also about clinical risk.
• 2:14
  SPEAKER_00: Every day a clinical AI tool that is not performing this design stays live in your clinical environment, you're accumulating clinical risk.
• 2:22
  SPEAKER_00: Not necessarily liability in the immediate sense, but risk in the sense that a tool that's not performing correctly is shaping clinical decisions in ways that are not aligned with the evidence standard you held it to during that evaluation.
• 2:35
  SPEAKER_00: That risk does not show up in the vendor invoice.
• 2:38
  SPEAKER_00: It shows up in your clinical outcomes data.
• 2:40
  SPEAKER_00: And by the time it shows up, the sunk cost you are carrying is not just financial.
• 2:47
  SPEAKER_00: So I want to be direct about something that I don't hear discussed enough in healthcare technology conversations.
• 2:53
  SPEAKER_00: Vendors know when you're in the sunk cost trap, and experienced vendor account teams use it deliberately.
• 2:58
  SPEAKER_00: So here's what that looks like.
• 2:59
  SPEAKER_00: Your governance review identifies three major performance gaps at the six-month mark.
• 3:03
  SPEAKER_00: You communicate them to the vendor, and the vendor schedules a response meeting.
• 3:07
  SPEAKER_00: In that meeting, they acknowledge the gaps, commit to a remediation timeline, and show you a roadmap.
• 3:12
  SPEAKER_00: Now, the roadmap has deliverables at 90 days, six months, and 12 months.
• 3:17
  SPEAKER_00: What just happened?
• 3:18
  SPEAKER_00: Well, the vendor reset your clock.
• 3:20
  SPEAKER_00: You were evaluating whether the tool was meeting the performance standards you set at GoLive.
• 3:25
  SPEAKER_00: Now you're evaluating whether the tool is tracking toward a new roadmap that the vendor has now defined.
• 3:30
  SPEAKER_00: So that's a different evaluation standard, and it's almost always worse for you.
• 3:35
  SPEAKER_00: So the 90-day roadmap deliverable will be partially met, enough to make a clean exit politically difficult.
• 3:41
  SPEAKER_00: But look, they delivered on the dashboard enhancement.
• 3:43
  SPEAKER_00: The utilization algorithm is still in progress, but they're clearly making progress.
• 3:48
  SPEAKER_00: You know, all the different excuses.
• 3:49
  SPEAKER_00: But the six-month deliverable will have a similar pattern.
• 3:52
  SPEAKER_00: You'll be 12 months into a remediation timeline with a tool that's still not performing at your original standard.
• 3:58
  SPEAKER_00: And at this point, you've already invested 24 months.
• 4:01
  SPEAKER_00: So this is not a conspiracy theory at all.
• 4:04
  SPEAKER_00: It's a standard vendor retention tactic in any enterprise software relationship.
• 4:08
  SPEAKER_00: But it's also technically impossible for them to fix everything all at once.
• 4:12
  SPEAKER_00: So it makes sense.
• 4:13
  SPEAKER_00: But it's more consequential in a clinical AI context because the tool is in your clinical workflow and the risk is clinical, not just financial.
• 4:21
  SPEAKER_00: So the protection against this is simple.
• 4:23
  SPEAKER_00: Your exit criteria are defined before you go live, and they're not subject to vendor negotiation after the fact.
• 4:30
  SPEAKER_00: So if the tool does not meet the predefined performance threshold by the predefined date, well then the governance body makes the exit decision.
• 4:37
  SPEAKER_00: The vendor's roadmap is relevant to their pitch for the next contract.
• 4:41
  SPEAKER_00: But it's not relevant to your compliance with the governance criteria you've already established.
• 4:46
  SPEAKER_00: So what does a clinical AI exit criteria actually look like?
• 4:50
  SPEAKER_00: It's specific, measurable, and time-bound.
• 4:53
  SPEAKER_00: And it's established before GoLive.
• 4:55
  SPEAKER_00: I cannot stress that enough.
• 4:56
  SPEAKER_00: And it's documented in the governance framework.
• 4:59
  SPEAKER_00: It defines what happens when the threshold is crossed, who makes the decision, what the process is, and what the timeline is for executing the exit.
• 5:08
  SPEAKER_00: So here's an example of what this looks like in practice.
• 5:11
  SPEAKER_00: So an exit criteria for a clinical decision support tool might read something like: if tool utilization falls below 60% of the target physician population at 90 days, post go live, the governance body will convene a formal performance review within 10 business days.
• 5:27
  SPEAKER_00: If the utilization gap is determined to be tool related rather than adoption related, the contract remediation clause will be activated.
• 5:34
  SPEAKER_00: If remediation is not complete within 60 additional days, the governance body will initiate contract termination procedures.
• 5:41
  SPEAKER_00: That's it.
• 5:42
  SPEAKER_00: That's a governance criteria.
• 5:44
  SPEAKER_00: It's not punitive toward the vendor.
• 5:45
  SPEAKER_00: It's a performance standard that the vendor agreed to at contract signing.
• 5:49
  SPEAKER_00: And actually, everyone knows where the goal is.
• 5:52
  SPEAKER_00: So when the utilization gap appears at 90 days, the conversation with the vendor is not we are disappointed.
• 5:58
  SPEAKER_00: The conversation is instead we are at the point defined in our governance framework.
• 6:03
  SPEAKER_00: Here's a remediation clause.
• 6:04
  SPEAKER_00: Here's a 60-day clock.
• 6:06
  SPEAKER_00: What's your plan?
• 6:07
  SPEAKER_00: And that conversation is completely different from the cost conversation because the criteria were established before anyone had any investment in the tool's success.
• 6:16
  SPEAKER_00: Now, most health systems don't have exit criteria in their governance documents.
• 6:20
  SPEAKER_00: They have performance goals for sure.
• 6:22
  SPEAKER_00: But performance goals and exit criteria are different things completely.
• 6:26
  SPEAKER_00: A performance goal says something like, well, we want to achieve this.
• 6:31
  SPEAKER_00: An exit criteria says, if we do not achieve this by this date, we take this specific action.
• 6:37
  SPEAKER_00: One creates aspiration and the other creates accountability.
• 6:42
  SPEAKER_00: So if you're in a health system that's already in the sunk cost trap with a clinical AI tool, here's how you execute a clean exit.
• 6:49
  SPEAKER_00: First, document the performance gap against the original standard, not the vendor's revised roadmap.
• 6:54
  SPEAKER_00: I mean, they're going to try to help you out, of course.
• 6:56
  SPEAKER_00: But the standard you set at GoLive, if you did not set a formal standard, set one out based on the clinical use case the tool is designed to serve.
• 7:05
  SPEAKER_00: What does appropriate performance look like for this tool in your clinical environment?
• 7:09
  SPEAKER_00: Write it down.
• 7:10
  SPEAKER_00: If it's not written down, it doesn't exist.
• 7:12
  SPEAKER_00: Second, convene your governance body and make the exit determination as a formal decision.
• 7:18
  SPEAKER_00: Don't let it drift.
• 7:19
  SPEAKER_00: Don't let it be resolved in email threads and unofficial conversations.
• 7:23
  SPEAKER_00: A formal governance decision, documented and signed off by the decision-making authority, is cleaner than a consensus that forms over six months of quarter conversations.
• 7:33
  SPEAKER_00: And third, activate the contract exit clause.
• 7:36
  SPEAKER_00: You have one.
• 7:36
  SPEAKER_00: It may require notification periods.
• 7:38
  SPEAKER_00: It may trigger financial penalties.
• 7:40
  SPEAKER_00: Review it now before the formal decision.
• 7:42
  SPEAKER_00: Know the cost of exit so that cost is part of the governance deliberation, not a surprise.
• 7:48
  SPEAKER_00: And fourth, lay in the workflow transition before you announce the exit.
• 7:52
  SPEAKER_00: This is the most important operational step.
• 7:54
  SPEAKER_00: Your clinical team has built workflows around this tool.
• 7:57
  SPEAKER_00: Those workflows need somewhere to go when the tool is gone.
• 8:00
  SPEAKER_00: The transition plan should be ready to deploy the day the exit decision is announced.
• 8:05
  SPEAKER_00: So done in this sequence, a clinical AI exit is actually a governance decision, not an organizational crisis.
• 8:12
  SPEAKER_00: Some cost bias is one of the most reliably predictable governance failures in clinical AI.
• 8:20
  SPEAKER_00: And it's not a character flaw, it's a structural problem.
• 8:23
  SPEAKER_00: Organizations that don't define exit criteria before go live don't have a mechanism to override the subcost calculus when it activates.
• 8:30
  SPEAKER_00: The fix is simple in concept, but it requires discipline in execution.
• 8:35
  SPEAKER_00: So define what failure looks like before you launch.
• 8:38
  SPEAKER_00: Assign authority to the decision and protect the criteria from vendor negotiation or internal politics.
• 8:45
  SPEAKER_00: If your organization is in this position right now, needs help defining exit criteria or executing a clean transition, that's a direct advisory engagement with me.
• 8:53
  SPEAKER_00: So discover a clarity session down below.
• 8:56
  SPEAKER_00: So I'm Dr.
• 8:56
  SPEAKER_00: Sarah Matt.
• 8:57
  SPEAKER_00: This is the Clinical Realist, and I'll see you next week.