A February 2013 report by Booz & Co. (now part of PwC) estimated that as many as 1,000 healthcare facilities will undergo a merger or acquisition between 2013 and 2020. In every one of those cases, there will be CIOs on both sides of the merger trying to figure out how to blend IT organizations and platforms.
Jared Rhoads, senior research specialist with CSC’s Global Institute for Emerging Healthcare Practices, recently co-authored a white paper on how to turn those challenges into opportunities. I had the chance to speak with Rhoads about some of the key points he and co-author James Kuhn outlined in their paper.
One thing they noted is that the rationale for mergers and acquisitions has changed from just looking for cost savings to a broader focus on accountable care and population health. Health systems are joining together so that they have the leverage to address these matters at scale, and IT teams are essential to making that happen.
The CIOs of the smaller hospitals are often highly regarded in these mergers, Rhoads said. “These are not designed to shed senior leaders. That is not the motive,” he stressed. “Generally the CIOs of both merging organizations are very important, and extra steps are taken to make sure they don't go anywhere and are retained.”
Organizations undergoing a merger often appoint a “chief integration officer” for the duration of the integration process, which can last several years. In the white paper, CSC says a chief integration officer “should be in very close communication with the CEO and the CIO. This will enable the CIOs of the participating organizations to continue managing their daily operations without getting pulled into merger-related issues all the time. It is also a smart move if the regular CIO does not have the right personality for bringing two cultures and two departments together.”
The chief integration officer is not usually a consultant, Rhoads said. The education effort needed to get an outside person up to speed to make these decisions would be too great, he said, adding that you have to find someone with the right mix of expertise and management skills for this crucial position. “You have to have the right type of personality, because this work is about organizational structure and governance skills,” he said. “You need to be good at building coalitions with multiple stakeholder groups and really listening, and not just assuming that what you did before is the right way to go in the future.”
One of the first steps is to take stock of what you have in terms of applications, technology platforms, staffing, services and processes, Rhoads said. Then plan what the future state will look like by involving an IT governance committee and senior managers of large projects and initiatives. Few, if any, of the two organizations’ technologies will be seamlessly compatible, CSC notes. Many decisions will need to be made about which system should be the new standard. “You may be able to get yourself out of sticky vendor contracts,” Rhoads said. “Going down to one vendor relationship for each type of system will make it a whole lot easier to manage.”
Another big decision is whether the merger marks the right time to consolidate on a single electronic health record. Switching to a common EHR early on could eliminate the need to combine and translate between multiple reporting systems. Obviously this is easier if one of the organizations is already using the desired system. But if neither entity is using the desired EHR, “that is a whole lot more dicey,” Rhoads said. “You could argue the payoff would be enormous,” but moving all the providers to a new EHR platform while trying to merge organizations adds considerably to the risk of failure.
Not all past investments or vendor relationships may have a place in the new order, CSC notes. “Some projects or attempts at innovation may have been promising at one time, but have since fallen out of strategic alignment. The planning phase is an opportunity to jettison any unnecessary tools, add-ons, systems, and devices and prepare the organization for a fresh future,” their report states.
Any readers out there who can share their experience and lessons learned about going through the merger process?