Market pressures are forcing healthcare systems to look for savings in every corner, and one category that is often overlooked is healthcare software costs. According to Becker’s Hospital Review, a 2023 analysis of more than 5,000 US hospitals found IT operating expenses average 2.29% of total operating budgets, or more than $9.5 million per hospital.
Regardless of IT spend as a slice of operating costs, most organizations in any industry have room to recover value from unmanaged software sprawl: unused licenses, redundant applications, and tools that go beyond what day-to-day operations actually call for. For health systems facing ongoing financial pressure, healthcare vendor management can be an opportunity to identify unnecessary costs and make technology investments work harder.
Most health systems did not set out to build a sprawling technology stack. It happened one point solution at a time: a scheduling tool here, a patient outreach platform there, a separate system for compliance tracking. Each purchase solved a real problem. But add them up over a decade, and many hospitals now juggle dozens, or even hundreds, of vendors across clinical, administrative, and IT functions, at a real cost. Below, we break down what healthcare vendor sprawl is, why it costs more than most leaders realize, and how health systems can build a leaner, more connected technology strategy.
Healthcare vendor sprawl occurs when a hospital or health system accumulates too many technology vendors, platforms, and point solutions, often resulting in overlapping functionality, disconnected data, inconsistent user experiences, and unnecessary costs. It is not one bad decision. It is the buildup of many reasonable ones, made by different departments, over many years.
Vendor sprawl usually starts small. A department needs a fix for a specific problem, so it buys a point solution instead of waiting on a broader IT rollout. Mergers and acquisitions add more systems to the mix, often without full integration. Over time, no one owns the full vendor list, and the organization loses track of what it is actually paying for.
The challenge is not simply connecting systems. Each new vendor adds its own login, its own data format and its own support contract. A 2025 report by KLAS Research found that healthcare organizations continue to struggle with duplicative information, inconsistent formats, and poor data mapping across systems despite years of interoperability investments. As organizations add more vendors, they also increase the number of systems, interfaces, and data flows that must be managed and reconciled.
According to KLAS Research, healthcare organizations continue to face duplicative information, inconsistent formats, and poor data mapping across systems because of vendor sprawl.
Vendor sprawl rarely shows up as one large expense. Instead, it drains budgets through smaller, recurring costs that are easy to overlook individually and expensive in total.
It is common for large health systems to pay for overlapping tools that serve the same basic purpose, whether that is two scheduling platforms in different departments or several communication tools doing nearly the same job. Every overlapping license is money spent twice for one outcome.
Every new vendor needs to be connected to existing systems, tested and rolled out to staff. More vendors means more implementation projects running at once, each with its own timeline, its own IT resources and its own risk of delay.
Contracts need renewal. Invoices need review. Support tickets need routing to the right vendor. As vendor ecosystems grow, simply keeping track of third-party relationships becomes a challenge. A 2025 survey published in Applied Clinical Informatics found that only 51% of healthcare delivery organizations maintained a comprehensive inventory of all third parties with network access, with respondents citing limited resources, decentralized oversight, and complexity as barriers to effective vendor management.
Every additional vendor adds another relationship to manage, and only 51% of healthcare organizations maintain a comprehensive inventory of third parties with network access, according to Applied Clinical Informatics.
Compliance adds another layer of cost. Every additional vendor with access to protected health information is another relationship that requires oversight, security reviews, and ongoing governance. The same 2025 study found that 60% of healthcare organizations did not routinely monitor third-party access to sensitive or confidential information, illustrating the operational burden that comes with managing a large vendor ecosystem.
Beyond the balance sheet, vendor sprawl slows down the people who rely on these systems every day.
Every vendor relationship is also a compliance relationship. Healthcare organizations often work with dozens of business associates that have varying levels of access to protected health information, and each one is a touchpoint that IT and compliance teams must monitor.
Proposed updates to the HIPAA Security Rule are expected to push organizations toward more frequent audits and stricter incident reporting. Vendor management adds to that load. Multiply that pattern across departments, and vendor management becomes a full-time job that pulls focus away from strategic IT work.
Every new system requires its own training. Staff already stretched thin have to learn multiple logins, interfaces and workflows just to do their jobs. The more systems in play, the harder it is to get consistent adoption across departments.
Fixing vendor sprawl does not require replacing every system overnight. It starts with a clear-eyed audit and a deliberate, phased plan.
Start with a full inventory of every active vendor contract, including which department owns it, what it costs and how heavily it is used. Many health systems are surprised by how many licenses are barely in use, or not in use at all. From there, map which tools serve the same function. Overlap is often hiding in plain sight, especially after a merger or acquisition brings two organizations' technology stacks together.
Consolidation does not mean picking one vendor for everything. It means reducing redundant tools while keeping specialized systems where they genuinely add value. According to The Wall Street Journal, Moderna was able to cut its software vendor count from 257 to 200 in a single year simply by reviewing unnecessary and redundant usage. Auditing spend and usage rather than continuing to add new tools can reveal overlapping functionality, reduce vendor sprawl, and create a more streamlined technology ecosystem.
When evaluating new technology, look for platforms built to unify multiple functions rather than another standalone point solution. A connected platform reduces the number of logins, integrations and support contracts a health system has to manage going forward.
Vendor sprawl tends to creep back in without ongoing governance. Health systems that stay lean typically assign clear ownership over technology purchasing, require new vendor requests to go through a review process and revisit their vendor list on a regular schedule.
Health systems that reduce vendor sprawl typically see:
A more efficient technology strategy starts with connection, not just reduction. HealthStream's hStream platform was built around that principle. It brings learning, credentialing and scheduling together in one connected ecosystem, so health systems can replace scattered point solutions with a single platform and a shared data foundation, giving IT the architecture to scale safely instead of adding one more disconnected tool to an already crowded stack.
Existing investments do not have to be scrapped to get there. The hStream Developer Portal offers prebuilt integrations with systems health systems already use, including Epic and Workday, along with APIs that let IT teams connect the tools they want to keep. That approach lets health systems cut redundant vendors while preserving the specialized systems that still earn their place. For CIOs building a business case for consolidation, the strongest argument is often the simplest one: fewer vendors, better connected, cost less to run and are easier for staff to use.
Healthcare vendor sprawl is the accumulation of far more technology vendors than a health system needs, usually built up over years of piecemeal purchasing decisions.
It raises technology costs, slows down IT and compliance teams, fragments patient and workforce data, and makes staff training harder across multiple disconnected systems.
Vendor consolidation is the process of reducing redundant technology vendors and replacing them with fewer, more connected platforms, while keeping specialized tools that still add clear value.
Health systems can audit their existing vendors, identify overlapping tools, consolidate where it makes sense, prioritize connected platforms and put a long-term governance process in place.
Benefits include lower technology costs, simplified vendor management, better data visibility, streamlined workflows and reduced administrative burden on IT and compliance teams.
CIOs should weigh integration capability, security and compliance support, total cost of ownership and whether a platform can absorb multiple workflows instead of adding another standalone system.
