The M&A Mistake Health Systems Are Making

When I became CIO of one of our community hospitals, John Glaser, who was then Partners CIO, and Pat Jordan, the hospital COO to whom I reported, said, “Well, you’re going to convert the infrastructure to Partners standards. You’re going to install PeopleSoft for ERP. You’ll do Soarian for revenue cycle, and if you stay long enough, you’ll implement the enterprise clinical system we choose. You’ll basically be working yourself out of a job.”

Since I was more focused on being a successful CIO in the short run, I didn’t worry so much about working myself out of a job. In fact, I liked the idea of standardizing infrastructure and applications and making the hospital more integrated with the Partners care continuum. I believed then, and still believe now, that those steps create a safer care environment and allow unit costs to be lowered. With a lot of help, I completed the infrastructure, ERP and revenue cycle projects. I did end up feeling like the job shrank and had some discomfort about whether my next role would still be at Partners. Happily, Jim Noga asked me to be Deputy CIO, and I continue to work on making our entire IT infrastructure highly available at the lowest cost.

Back at the community hospital, the revenue cycle system has since been switched out to Epic as part of our Partners eCare program, and the clinicals will go-live in March, 2016. The bottom line is that I want the technology to work for our patients and clinicians — I’m less fascinated by the bits and bytes, and certainly didn’t feel like I needed to own them locally when they could be delivered by enterprise grade experts.

In recent years, there has been much discussion and writing about the evolution of the CIO role — that we must be able to speak in laymen’s terms about the technology and we must help demonstrate its value to the business. Perhaps that isn’t happening as quickly in healthcare as in other industries, but it’s sure to come. We’re all familiar with the challenges of the external environment. Reimbursement is declining across the payer mix. Funding for medical research and graduate medical education is being challenged. The need to cover for uncompensated care and support our community is ever-present. It’s more important than ever for CIOs to make the business case for the value of IT and for healthcare leaders to get comfortable with the use of technology and associated costs — both capital investments and ongoing operating expenses.

Given this backdrop, there is a lot of merger and acquisition activity with hospitals and physician practices. Since IT has become to integral to healthcare delivery, it’s important for both information systems professionals and healthcare executives to be at the table when these transactions are agreed upon. Like most things, smooth transitions come down to good governance. Time and again, we see the following scenario unfold. Parties agree on a clinical acquisition, and non-technical leaders assume IT integration will be executed. It’s like flipping a light switch, right? The technical integration can be hard, but I’ve found that the human element is even more challenging — we IT folks get involved and want to “keep our own shop running.”

In any M&A, there is a more dominant party. I’ve been on both sides of these scenarios. The more dominant organization is perceived as not having much to lose and can be insensitive to the specific business requirements or even emotional feelings of the smaller organization. The IT leader of the less dominant organization can often feel their job is in jeopardy or that their people won’t have a role in the new entity. That person may then make a case to their executive leader that the bigger organization can’t meet their needs — or at least can’t meet them at a reasonable cost. These stalemates can remain for months or years, creating duplication, security issues, increased cost and frustration on both sides.

Similar to other M&A structures, I’ve suggested it would be helpful to secure the role of certain IT leaders from the less dominant entity, even if it means the loss of some roles at the larger organization. Integrating these leaders, particularly at the infrastructure level, is key to smooth and timely technical integration. It’s important for non-technical executives to recognize this dynamic and agree to hold firm on the IT merger scope and timeline. Too often, we see these projects held hostage by the fears of local IT leaders. This takes a great deal of intestinal fortitude by all parties — whether it’s the IT leader from the more dominant organization that needs to rely on their skills to find a new role, or the executive from the less dominant organization who has to educate themselves enough to not be snowed by their IT person playing chicken little.

These are not easy times for anyone, and I am no exception. I have found my instincts to be abnormal though — consolidate, standardize, reduce unit cost, rationalize teams. Make the technology work for care delivery, even if it means we lose control of our “shop.” I hope I still feel the same way the next time I end up as the smaller organization.