The Healthcare Hub

Healthcare Mergers and Acquisitions: Still a driving force

Wednesday, July 24, 2019

With the shift to value-based healthcare fully underway, we are not seeing a slow-down in mergers and acquisitions. This has become a favored way to build on financial, clinical and operational synergies, extend care to a broader geographic area and mitigate declining reimbursements. According to the Q2 report from KaufmanHall1, the first half of 2019 is tracking in line with 2018 transaction activity for the same time period.

One primary challenge as a result of all of this M&A activity is that most health systems are dealing with some level of disparate, disconnected information technology across the new entities. Developing a plan and building a project management team to address this challenge is key to achieving success.

At our recent Summit, Hackensack Meridian Health shared how they developed, managed, and executed a complex ERP implementation plan across their large network of hospitals in New Jersey. Over time, multiple acquisitions led to three material management information systems (MMISs), outdated technology that needed to be phased out, and five regional purchasing departments needing consolidation into a single office to provide comprehensive reporting and budgeting.

Highlights from the presentation:

Project Management

At the top of the list, the team advised identifying an executive sponsor to champion and support the project as well as a project manager to lead the team and to act as the point-person for change requests, resources and due dates. Additionally, assemble a team of subject matter experts from each department to develop your timeline and tasks for the project plan.

Discovery, Development and Gap Analysis

Define a process for interviewing the new acquisition to determine the differences in key areas such as ordering processes, pharmacy specialty, handling non-catalog items and physical location limitations. In this phase leave room for the imagination, this discovery may lead to the decision for a hybrid conversion. In some cases, it may be better to not go forward with a complete implementation but to use in part the processes from a legacy system due to unique differences or circumstances from location to location. 

Vendor Onboarding

The Hackensack team used this as an opportunity to qualify vendors and help ensure compliance requirements. Any vendor that had not provided a Tax ID was not added to the master. The upfront leg work here helped to reduce purchase order (PO) failures and other errors downstream. They also emphasized the immense value of automation. As you bring on more hospitals over time, uploading pricing files in a manual process becomes unsustainable.

Test, Communicate and Train

Communicate and promote the benefits of the new system to help everyone understand the value of the implementation/conversion and gain buy-in.

Plan for training and prepare attendees with materials before the training. Encourage your staff to come more than once to leverage repetition. And often, the second training will surface new questions. Quick tip, don’t forget to book a room for training as space may be limited due to other implementations (think your EHR).

A few final nuggets of wisdom

  • Don’t underestimate the power of culture. There is a strong tendency to go back to old ways, so you have to continue to guide in the new direction.
  • When possible, develop a permanent team to work on implementations. They will learn and iterate processes, optimizing over time for increasingly better results. 

Many areas impact the ability to successfully engage in M&A, all of which are dependent on a robust plan to integrate people, processes and technology.

1Q2-2019 Mergers and Acquisitions Report KaufmanHall