Skip to content Skip to navigation

Making ERP Work

June 1, 2006
by root
| Reprints
Healthcare providers are taking a closer look at enterprise resource planning.

Before it made the switch to an enterprise resource planning system, Northwestern Memorial Hospital in Chicago suffered the same basic problem with its financial management software that many hospitals do: a lack of integration.

"We had dispersed systems, and you had to write custom interfaces between them," explains Nick Marmantje, director of finance.

Sue Lopardo, director of information services, says the hospital had limped along with older software that barely made it through Y2K before making the plunge into ERP in December 2002. "We knew we needed to move to an integrated environment and, since we were already using PeopleSoft for human resources, we liked that finance could easily be integrated with that system," she says. (Oracle Corp., Redwood Shores, Calif., purchased PeopleSoft in 2005.)

Although less than 20 percent of hospitals have installed ERP systems, according to HIMSS Analytics research, the market is growing and hospitals are increasingly looking for single-vendor solutions to their financial application problems.

Lewis Redd, managing partner, provider health and life sciences, for the New York-based consulting firm Accenture, says many health systems, especially those growing through mergers, have "tried a makeshift approach to pull that data into spreadsheets, but they feel a need for better integrated reporting, and the bigger they are the more complex the reporting is."

Created in 1999 by a merger of two health systems, Phoenix-based Banner Health System faced exactly the dilemma Redd describes. The newly formed Banner "tried to put band-aid tools" on its disparate financial reporting systems but soon gave up, recalls Dennis Dahlen, vice president of finance at Banner. "We realized that it was kind of a ridiculous approach for a $2.5 billion company," he says. The company gravitated toward Lawson Software's ERP offerings because Banner executives liked its supply chain module, which Dahlen calls Lawson's "strongest card."

As Banner has implemented St. Paul, Minn.-based Lawson's financial software, Dahlen considers it "enabling technology" that allows the company to centralize business support functions and continually reduce business support costs as a percent of net revenue. "Last year, we added a 170-bed hospital and didn't have to add a single accountant or central warehouse person," he notes. Banner is now using Lawson's tools to add self-service features for payroll changes.

Besides consolidated reporting, ERP systems offer hospitals business intelligence tools to better measure their operational performance. "A key is for managers of divisions to have information at their fingertips, such as the status of a requisition or to know if they are over budget," Lopardo says. "They now have real-time access to that data."

Yet ERP implementation requires a huge investment of time and money, and healthcare executives haven't always been happy with the results. "Some implementations have languished in part because of a lack of healthcare-specific features such as shift differentials for nursing, patient accounting, and claims tracking," says John Lovelock, a Stamford. Conn.-based Gartner Inc. analyst. For instance, although the Northwestern execs are pleased with their PeopleSoft implementation, they say its budgeting module is too generic and not as specifically applicable to healthcare as they'd like.

The most successful ERP vendors, Redd says, "have responded to customers and made changes to the products to fit the needs of that environment."

Vendors also have adapted their offerings to target specific market segments, he adds. "A product like Lawson tends to fit smaller, less complex health systems and at a lower price point, and a PeopleSoft is more expensive but better suited to the business intelligence tasks," Redd says.

Even three years into their ERP implementation, the Northwestern executives are just starting to reap some of the benefits. "If you graph it out, at the beginning the value is low because the change is massive and difficult," says Marmantje. "We're still on the upswing." n

Author Information:

David Raths is a Portland, Maine-based freelance writer.