27 May 2015 / Blog
M&A in Healthcare Part 1: Why it Pays to Take an Innovative Approach to Integration
By: Chance Veasey
Chance Veasey is the SVP of the Infor & Healthcare Line of Businesses at Velocity.
The pace of mergers and acquisitions in healthcare is at an all time high as more systems look for ways to reduce costs, coordinate care and increase market share.
Deloitte predicts that over the next ten years, 50% of hospitals will be part of a merger or acquisition.*
In a recent survey of healthcare professionals, 86% of respondents expect mergers and acquisitions to increase in the healthcare and life sciences industry.**
The volume of healthcare M&A transactions increased 18% from 2013 to 2014.***
While consolidation may be an optimal way to achieve long term growth, the process has plenty of short term challenges. Integrating disparate technologies and IT environments top the list.
The new reality of M&As requires a new and refined approach to integration. The process of integration should not be viewed simply as an IT project but part of a bigger strategic goal for the newly formed healthcare entity.
If consolidation is inevitable, how can you respond? How can you be a thought leader within your organization by taking an innovative approach?
The 1980’s Approach:
A traditional approach, or what I sometimes call the 1980’s approach, typically begins with identifying positions that overlap and reducing staff with sweeping cuts. I’ve been part of an organization that used this approach and know the risks involved by doing more, with less, following an acquisition.
The problem is, a reduced IT staff often delays the integration process. Stalled integration leads to ineffective business decisions using incorrect data and lacking a single source of truth.
Without complete integration, organizations also miss out on opportunities to innovate and drive the healthcare system to overcome competition.
An Innovative Approach:
A sound approach to integration views IT as a catalyst and strategic advantage. This approach begins with rationalizing around systems.
First, pick the best of the best for each IT application and platform. Then, gain a single source of truth by integrating data and systems. This provides IT with the ability to innovate and provide acquired employees something they did not have before, like social or mobile capabilities.
Once the systems are rationalized, focus can be turned to standardizing business processes. Only after processes are optimized does it make sense to then take a step back and look at the people, the human capital costs and the organizational structure.
By re-thinking the strategic value of IT during a merger or acquisition, healthcare organizations can better identify opportunities and realize the benefits of consolidation.
At Velocity, we believe in the innovative approach to integration because it has aided our ability to successfully integrate five companies into our teams. It is a best practice to use IT as the foundational element that allows you to rationalize your integration strategy.
We’ve seen this approach benefit organizations by liberating IT to help usher in new innovations, meet regulatory requirements and adopt best practices for process improvement.
* Deloitte Global Healthcare Outlook
** Bass, Berry and Sims PLC
***Irving Levin Associates