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Top 10 Tech Trends: The Urge to Merge

February 12, 2013
by David Raths
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More CIOs charged with consolidating IT operations

Clinical integration tops Cadence Health CIO Dan Kinsella’s agenda for 2013. That’s because Cadence was formed by the 2011 merger between Central DuPage Hospital and Delnor Hospital in the Chicago suburbs.

Kinsella, who joined the organization in September 2012, says the decision was made to get both hospitals on the Epic Systems platform. “Beyond that, we have to get the relevant data extended out to the providers who needs it,” Kinsella says, “whether owned or affiliated, including home health agencies and nursing homes, to improve the patient experience.”

Driven by the need for infrastructure to survive in the new era of accountable care, more hospitals are planning mergers and acquisitions every day. With the shift to value-based reimbursement, organizations will need to measure quality and cost at an enterprise level. CIOs are finding themselves in Kinsella’s position of overseeing the harmonization of multiple systems and staffs.

Dan Kinsella

Healthcare Informatics asked a handful of consultants and analysts about the most challenging aspects of these consolidations. Here is a snapshot of what they told us:

• “A CIO of merging hospitals will have to make a decision of whether to rip and replace the core clinical information systems in one of them in order to be compatible. They may leave the systems alone and develop a data warehouse strategy to look at data across the organization. Ambulatory systems are easier to migrate, so we are seeing more consolidation there. Meanwhile, we’re seeing some of the acquiring organizations using their strength in IT as a core competency to leverage efficiencies. They can get the new hospital using analytics and other innovations quickly. The University of Pittsburgh Medical Center (UPMC) health system is a great example in that regard. We also expect to see more payer-provider mergers. Payer-provider combinations seem to be doing the best in terms of accountable care organization development.” —Judy Hanover, research director, IDC Health Insights

• “Having a core competency in IT can be very effective in driving clinical integration as part of an acquisition strategy. We work with a children’s hospital that is seeking to align itself more closely with pediatric physician practices in the region. The hospital has been on Epic for 10 years and has developed all kinds of clinical content specific to pediatrics. They can share that with these community physicians. That customized content is a huge source of reduced risk and a very powerful draw.” —Brad Boyd, vice president, sales and marketing, Culbert Healthcare Solutions, Woburn, Mass.

• “The hospital being acquired may have lots of applications that aren’t updated. That can be a serious problem. But CIOs have to study the finances, IT costs, and projects under way to figure out what the two groups might cost together, and the capital costs to make it happen. They also have to look at business processes, clinical and business apps and technology infrastructure side by side. I have seen CIOs do their due diligence before mergers and urge walking away.” —Gregg Mohrmann, principal, Aspen Advisors

• “The population health focus of the Affordable Care Act means you have to look across the entire continuum of care, not just at what is happening in your hospital or clinic. Small practices won’t have the infrastructure to respond in a timely manner. This population health philosophy is the biggest driver of consolidation at the end of the day. And I think the real emphasis is going to shift from EHRs and HIEs to the data analytics platform to get at the data that can tell me how to get to better outcomes and reduced cost.” —Kevin Fickenscher, M.D., CEO, American Medical Informatics Association


We also asked our experts about whether health system consolidation will lead to an acceleration in consolidation among software vendors in the health IT space in 2013. How will vendors handle chasing fewer but larger customers? We specifically asked why Epic Systems seems to be winning so much of the new business for inpatient hospital systems. The potential implications of those developments are considerable. Here is what they told us:

• “As large integrated delivery networks acquire small doctors’ offices for referral networks and to eliminate duplication of services, we are starting to see some smaller EHR vendors go away. Many of the larger consolidated networks are going with the top four or five ambulatory EHRs. The doctors are in a tough spot because they may have been early adopters of the mom-and-pop EHRs that were less expensive, but now they have to move to the system of the larger provider they are joining and that can be a painful process.” —Justin Campbell, director of integrations for consulting firm Galen Healthcare Solutions, Grosse Pointe, Mich.

• “There aren’t a lot of vendors offering the kind of integration that Epic does. That is why they are winning so much new business. Other vendors are taking that approach and working on it, but Epic has it now. And it can offer interoperability not just within an enterprise. There are pockets geographically where it can help providers share data with others. One question is: is their success sustainable as they continue to grow?” —Brad Boyd

• “Epic made a bet and built a better mousetrap. Other vendors tried the acquisition and roll-up strategy. I joke that some of these systems are integrated at the invoice level, but when you look underneath the covers, they aren’t really integrated.” —Dan Kinsella

• “On the ambulatory side, the smaller players have been buoyed somewhat by the meaningful use financial infusion. But when it comes time to for provider customers to renew their technology, many of these players are not going to make enough profit to survive. On the inpatient side, the vendors have this old, aging code base on obsolete architectures, and providers are looking at who can update that code the quickest and help them meet meaningful use. It is a Herculean task, and so far Epic has just done that better than everyone else. One concern is that down the road, with no meaningful use dollars, the total cost of ownership with Epic is going to be unsustainable for a lot of providers when it comes time to renew. At that point, I think we will see a second round of players—cloud-based ones—that will shake this market up, but it may be after 2016. Right now the whole industry is overpaying.” —Judy Hanover

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