There are several factors for a healthcare executive to consider while pursuing a merger.
When bringing two healthcare organizations together, leaders usually focus on integrating operations, establishing a cohesive culture and addressing critical strategic concerns. Often, healthcare IT budgets can take a backseat to more pressing issues. Unfortunately, overlooking this key component can contribute to adverse downstream effects, such as paying significantly more to fix healthcare IT obstacles that arise in the long term.
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Paula Cottrell Paula Cottrell is Sr. Director, Healthcare IT Transformation, at Pivot Point Consulting. She has over 25 years of experience leading strategic transformation projects in healthcare organizations including M&A integrations. She brings broad healthcare industry knowledge, encompassing both business and clinical systems, along with healthcare operations. Prior to joining Pivot Point, Paula held a […]
For example, when a deal is finalized, a consolidated healthcare organization can inherit legacy applications, usually consisting of portfolios with aged or underutilized products. The organization can recognize actual savings and avoid potential security breaches down the line by employing IT consultants to decommission these apps. This strategic process is called application rationalization. Cost savings achieved, both in hard savings and cost avoidance, allows hospitals and health systems to free up funds for additional investments, which is critically timely for an industry that typically underfunds its IT infrastructure.
According to a recent industry study, U.S. healthcare organizations spend between 2.5% to 2.8% of their total revenue for IT and related systems, which is below the global healthcare average of 3.5%. Additionally, the report stated that global spending on healthcare IT is only expected to increase in the coming years, topping $200 billion by 2025.
More money will be spent on IT going forward, and chief information officers (CIOs) are the point people for these essential processes. In the aftermath of a sizable healthcare merger and acquisition, they have a significant say in what technology is consolidated and what gets left alone. However, their work doesn’t exist in a vacuum and requires sufficient funding, the support of other leaders in the organization and a proactive mindset to be successful.
Below are three ways healthcare IT leaders can ensure that technology isn’t lost in the larger conversation of a healthcare merger.
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A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
1. Think long-term, not short-term
Yes, an M&A opportunity may bring in copious new revenues, geographic territories or service lines to a health system, but all of those ultimately rely on stable and scalable IT applications.
From a strategic planning perspective, organizations need to build up their IT investments and prioritize tasks accordingly, rather than slashing their IT budgets in the hopes of producing savings.
Without a robust, efficient IT infrastructure in place, the promise of even the most fitting merger can be undone due to unaddressed vulnerabilities that snowball into more significant cost concerns. As Benjamin Franklin once said, “Don’t put off until tomorrow what you can do today.”
Additionally, IT leaders can appeal to a healthcare executive’s short-term perspective and emphasize technology’s effects on a new, consolidated organization. Executing a post-merger IT integration is not as simple as snapping your fingers; it requires time, patience and communication to be successful.
Leaders need to consider the long-term ramifications of their investments and not get blinded by the short-term, instant gratification of the deal. Instead of focusing on an immediate ROI, leaders should examine their existing technology for potential risks and redundancies, assess system performance and establish forward-looking goals and benchmarks.
2. Get buy-in from the top
Healthcare IT leaders serve as the greatest advocates for an organization’s IT infrastructure. However, they cannot make the case alone, and there needs to be team support to bolster the budget.
Buy-in from the entire C-suite, including leaders that oversee finance, clinical staff and operations, goes a long way for the sake of the enterprise.
The conversation among an organization’s stakeholders must shift from a siloed point of view. The current state of the industry—with all the significant digital transformation—doesn’t allow a hospital leader to think of their IT infrastructure as anything less than critical to the overall clinical, operational and financial success of the enterprise.
Beyond healthcare IT leaders, it’s critical to have other executives who understand and support adequate IT budget resources. Each leader should be able to make a case for how each business area will benefit from having the appropriate technology in place.
Additionally, similar to how an executive can lay the foundation for a sustainable and productive culture, the same approach can be taken for technologies that drive new services and products. If a CEO throws their considerable influence behind the need for a top-notch IT operation, others will listen, and the organization will reap the benefits.
3. Address IT staffing challenges head on with healthcare M&A experts
Each year, there is ample competition among divisions of a health system for sufficient funding from the budget. Like so many things, the Covid-19 pandemic has only further complicated that dynamic.
It’s no secret that hospitals and health systems are still reeling from the financial pain and bottom-line deterioration suffered due to the widespread cancellation of elective surgeries during the pandemic.
According to the January 2022 Kaufman Hall National Hospital Flash Report, December 2021 saw hospital margins increase compared to prior months due to the rise in patient volumes as the Omicron variant surged nationwide. Prior to that were two consecutive months of deteriorating margins, which indicate challenges ahead as the pandemic lingers.
To that end, provider executives need to put their money where their mouth is to fund their healthcare IT operations. Even hospitals and health systems that have set aside sizable portions of their budgets for IT need to do more going forward.
These budgets need to be healthy and staffed with a capable team, which will require appropriate benefits. An experienced healthcare IT consulting provider conducts comprehensive IT due diligence, integration planning and risk management across IT systems to unlock cost savings and IT value optimization options. More money is headed towards the IT operating model in the future, so it’s better to act swiftly now than get lapped by competitors later.
The most meaningful takeaway for hospital leaders is to embrace a proactive mindset. The more a provider organization can use technology to evaluate its processes and optimize its performance, the better positioned it is for the future.
Photo: ipopba, Getty Images
Paula Cottrell is Sr. Director, Healthcare IT Transformation, at Pivot Point Consulting. She has over 25 years of experience leading strategic transformation projects in healthcare organizations including M&A integrations. She brings broad healthcare industry knowledge, encompassing both business and clinical systems, along with healthcare operations. Prior to joining Pivot Point, Paula held a variety of leadership roles at Kaiser Permanente focusing on national data strategies, population health and clinical systems integration. Prior to Kaiser, Paula held leadership roles at several multi-disciplinary care delivery organizations, and with Deloitte Consulting -- all contributing to her experience with large-scale transformation projects.
