Healthcare organizations have seen their worlds upended in the last year, as the COVID-19 pandemic has caused changes in many processes. It’s also demonstrated the importance of having systems available in the cloud, and this has proven especially true with Enterprise Resource Planning systems. Organizations are considering multi-tenant, cloud-based ERP systems, and the shift away from traditional single-tenant or on-premises systems is likely to gain momentum over the next three to five years, say Craig Schlusberg, principal at The Chartis Group, and Greg Benton, director and national practice leader of ERP at the consultancy. Both leaders talked recently to Anthony Guerra, Founder and Editor of healthsystemCIO, outlining emerging industry trends as well as best practices for implementing these complex solutions and gaining users’ buy-in.
Guerra: Gentlemen, thank you for joining me today. Why don’t we start by telling me a little bit about your organization and your roles there.
Schlusberg: The Chartis Group is a consulting firm with over 500 professionals dedicated to improving the delivery of healthcare in the world. Healthcare is our sole focus, and we work with our clients on their clinical and operational strategies, helping them to improve their performance, and helping to ensure that they get the most value out of their IT investments. Greg and I are both partners; we’re partners in our business informatics and technology practice, of which ERP is a major part. For my part, I’ve been in healthcare consulting, and IT specifically, for over 25 years.
Benton: I’ve been in healthcare IT and ERP for over 20 years. I pioneered some of the early adopter cloud and ERP solutions and helped with implementations for over 50 healthcare organizations. I co-lead the ERP practice.
Guerra: So you’re both obviously very involved with ERP implementations, and I believe they are on the rise. So could you tell me why this is happening?
Schlusberg: Well, for one, the ERP landscape is really evolving. After years of focusing on EHRs and clinical systems, healthcare systems largely have those systems in place and we’re seeing a big shift over to ERP due to the cost savings and operational improvement and the integration that organizations can expect out of these new cloud-based ERP systems. The uptick in M&A activity also has been a major driver, as organizations are forced to, in some cases, replace or integrate their ERP systems with others. But this year especially the pandemic has been a major driver. The patchwork of disparate HR and supply chain and finance systems has really prevented healthcare leaders from having the access to real-time data that they really should have had for decision making through the pandemic. And from things like supply chain systems that really struggled to locate reputable sources of PPE, to HR systems that were challenged to keep up with the demands of the newly remote workforce, it’s like the pandemic has broken down years’ worth of barriers to replacing and optimizing these ERP systems.
Benton: And the ERP systems have dramatically changed over the last three to five years. They are smarter, faster, leaner and can keep pace with business change. But importantly, the multi-tenant cloud environment that’s been developing, taking the place of single-tenant and on-premise solutions for ERP, has really revolutionized the way that ERP is deployed and really facilitates healthcare operations, in terms of the business operations within a healthcare organization. So you’re now able to achieve really strategic gains in ROI and strategy with the new ERP systems, whereas before, it was really more focused on EHRs and getting the clinical systems in place.
Guerra: Craig, you mentioned PPE, and we know that was a huge concern. So you’re saying you can see a direct tie between health systems trying to move on things like that, and the fact that if they had a patchwork ERP environment, they were inhibited from being successful there. Can you tell me more about that?
Schlusberg: The integration between those systems, and the ability and agility to change quickly with those systems, is key. So when you’ve got disparate systems, and you’ve got supply chain systems with a lot of manual process – without new AI-type tools and without robotic process automation tools – really old type of standard systems, you’re limited to just the contract management capabilities of the old systems that aren’t tied into the finance systems, that aren’t tied into your clinical systems. And it just makes it more difficult to get real-time information out, and to be able to change quickly to adapt to what the market needs — in this case, being able to have access to additional suppliers of materials, to be able to quickly change when current suppliers aren’t able to supply the organization with what it needs.
Guerra: So it’s really a combination of things coming together. First, they were kind of done with the EMR, so you had some capacity opening up there. You had the pandemic coming in, highlighting the deficiencies of the current environment, and then you had an environment where the systems available out there, now that they’re in the cloud, gave you an improved environment. Would you say it’s those three things and perhaps others coming together to make ERP a natural pivot point for health systems?
Benton: Absolutely. The pandemic has shown a bright spotlight on what needs to happen to enhance these abilities across the entire organization. The ability for these formerly siloed business operations to be able to speak to each other and be able to pass information back and forth so that financial officers, for instance, can get real-time data about what’s going on with the organization, from budget to actual expenditures, from having to locate PPE and get it into the right place at the right time. All of that is facilitated by the new technology – really, the next generation ERP systems and platforms on which they reside. The multi-tenant cloud has made it so that there’s a great deal of portability, in terms of the database and the ability to manage everything remotely. But that has really facilitated a rapid change in the deployment of supply chain solutions.
Guerra: There’s really a different set of internal customers that you’re dealing with as a CIO when you’re rolling out ERP. With EHRs, you’re always dealing with doctors and nurses – you’re dealing with the clinicians, and they are their own challenge. There’s a distinct methodology for dealing with them. There are some similarities when you’re rolling out a system, in terms of getting buy-in. But with ERP, you’re dealing more with the business, the internal business people. There’s a difference there, right?
Schlusberg: There’s a big difference. So first, you’re dealing with operational leadership, and that’s a really big opportunity for the CIO to help the organization to come together and move forward with these kinds of decisions. You’ve got, in many cases, supply chain and materials management leaders who have had their own systems for years and who feel strongly about a particular vendor’s system and feel strongly about potential future vendors’ systems. You’ve got chief human resources officers who might feel very differently about the systems that they’re using and the systems that they would like to move to, and other departmental leaders as well. So that in itself is a challenge, but it’s an opportunity area for CIOs who can help organizations to understand what these new integrated systems have to offer, to help build consensus around the platform for change, to help the organization realize that it’s really the sum of its parts, and to really engage the key stakeholders and generate that interest and willingness to move ahead with integrated systems, recognizing that it makes sense for the organization as a whole.
Guerra: If organizations are pivoting – if they have capacity, you can go anywhere, right? You can do anything with capacity, and you don’t necessarily need to do ERP. But we talked about some reasons that they might be doing it. We talk a lot about governance, in terms of an organization deciding where they’re going to spend their money. So what is the CIO’s role right now in promoting ERP and working within the governance structure of a health system. What are they supposed to do?
Benton: I think the CIO needs to point out that the transformation to a new ERP system is not a decision for a new ERP. It’s not a technology decision. It’s a people, process AND technology decision. There is a ton of return on investment available through deploying the latest and greatest system in the cloud. So moving to multi-tenancy and a cloud solution comes with a lower bottom-line cost – the cost of operations can be decreased. The ability to pivot and to be able to operate anywhere and to turn on a dime in order to account for crises or the next thing that comes around the corner to impact the hospital. And that lower cost of operations, the ability to move very quickly and to respond to anything that comes the healthcare system’s way – and conveying that to the CFO that it’s an investment that makes sense, and making the business case for the organization – is what CIOs are really trying to do right now in terms of making that transformational change throughout the organization.
Guerra: There may be a ton of ROI here, but that doesn’t mean this is easy. This is a project you have to be ready for and believe in, because it’s going to take a long time, it’s going to take a lot of political capital, it’s going to take a lot of your budget, it’s going to take a lot of your team’s manpower, you’re going to hit a lot of snags that you’re going to have to power through. You have to gear up; you’ve got to be ready. Is that how you see it?
Schlusberg: You’ve got to gear up and you’ve got to be ready, yeah. And that’s the case whether you’re upgrading existing systems or you’re migrating to new systems. Moving to cloud systems isn’t really an upgrade. These are entirely new processes, entirely new systems – it’s a migration if anything, at best, and probably more like a new implementation. But in terms of gearing up, we see a lot of organizations jump right into a system selection process, and really, the challenge there is they haven’t taken the time to understand what it is they’re looking to accomplish. So we recommend starting with the end in mind, starting with developing that strategy around what the organization wants to accomplish with an ERP system. Where are the savings going to be? What are the changes going to look like? Where are we looking to get to as an organization? And then, just getting an understanding of where things are today – what do you do well today, what works well in today’s environment, what’s really going to have to change moving forward. So it’s understanding where you want to go, understanding how you do things today that you can build on, and then launching a thoughtful selection process to determine what system vendors and implementation partners can best help you get there.
And even with the selection process itself, we’re seeing a real change from that history of selecting vendors to a much more accelerated process today. It’s no longer focused on an exhaustive list of system functionality – there’s just too much that these new cloud ERP systems can do. What we recommend to our clients is focusing on the priority areas – what functionalities are most important, what functionalities are most unique to your particular organization, in terms of looking at the next system and what it can support. You should understand which ERP systems work well in the market, what’s been their history, where have they had successes, where haven’t they had successes and why. And then putting together that whole total cost of ownership model so that the organization understands what they’re really getting into from an investment standpoint. It’s not just the cost of the software – what’s the cost of the entire implementation and what it’s really going to cost over time to really do it right. So doing all of that before really launching into the implementation is the way to do it right and maximize the chances for success.
Guerra: Tell me a little more about the CIO’s role in this. Craig talked about understanding what the organization wants to do. Well, how does the CIO find out what the organization wants to do as it relates to ERP. Are they supposed to wait until the “ERP folks” come to them and say, “We’ve heard about these cloud systems, and we’d like to be able to do more things. How can technology help us?” Or does the CIO proactively go to business executives and say, “Hey, there are these cool ERP systems out there. You might want to think about it.” What’s the natural way a CIO should behave, or what’s the best way, if they believe that this is the right thing for the organization?
Benton: Over the next five years, every healthcare organization is going to be facing a transformative change. They’re going to be looking at new systems that are going to be available to them; they’re going to be looking at how to best compete in the marketplace. They’re going to be looking to the CIO to make those technology decisions. The CIO has to proactively get out in front of the decisions that are going to be made and really pull in the entire organization. The decision should not be an IT decision; it really needs to be the IT and business leaders’ decision that they’re going to move forward with a new system, or that they’re going to optimize the system that they currently have.
That brings in the budgetary considerations, so you can’t just go out there and say, “We’re going to adopt this new technology – we’ve got no budget, but we’ll get there.” You need to bring in the CFO; you need to bring in the business leaders from each of the departments in the organization; they’re going to have feedback for the organization, And then as Craig was saying, you need to go through a process of getting everyone on board with putting together the business case, for putting together the strategy for the organization, establishing real goals for what the end game looks like in terms of your transformed operations. And then, it’s pulling everybody together to make sound decisions about different ERP systems that are available to them.
Guerra: So it’s like, “Don’t tell me what tools you need. Don’t tell me what bells and whistles you need. Tell me what you’re trying to do,” from a business point of view. “Let me go see what we have, because we might already have it. Let me see what’s out there that might do what you’re trying to do. But let me figure out that technology match. Don’t come to me with that technology piece, because that’s my job to make sure we’re getting the right piece of technology.” Is that a good way to look at it?
Schlusberg: I think it’s important for those leaders in the organization to understand what’s out there and what’s available to them, so, right, don’t come to me with the technology; let’s jointly talk about what the needs are. And I think the CIO also can help to demonstrate what the systems can do. So the department leaders might not be aware of the latest and greatest functionalities in the tools; they may not be aware of what they can do and how much is available online – in the HR example, how much employee self-service you can do. There have been great advances with the integration of financial with clinical systems that those leaders might not be aware of. The premise is solid; “Come to me with where you want to go; let me, as a CIO, explain what’s out there in the market that can meet those needs, and let’s jointly work together to get something great in place.”
Guerra: So we’ve talked about the fact that they have to understand what the tools are. We’ve talked a little bit about why they need to take another look at ERP now or what the new capabilities are. Is there anything else you want to add, in terms of what you want CIOs to know if they haven’t taken much of a look at ERP? Anything additional you want them to know about what’s going on and what’s available?
Benton: If you looked at ERP systems even three years ago, and you looked at the single-tenant or on-premise type of solution that was provided by all of the top ERP vendors, you haven’t really looked at the systems and solutions that are available today. You need to take a closer look at the way they interoperate, the way that interoperability between the EHR systems and the ERP systems have been flexed and accommodated by the newer technology and the systems that run your healthcare operations. So ERP has really evolved very quickly, especially accelerated by the pandemic, to healthcare operations platforms rather than your grandfather’s ERP system.
Guerra: Is this for large health systems only? How far down is this scaled in terms of cloud migration?
Schlusberg: It’s a great question. Sometimes we hear about these fantastic multi-tenant cloud environments and it seems like they’re just being set up for large organizations. But small and mid-sized organizations can absolutely benefit from this technology as well and from the processes. Sometimes small organizations can benefit more – they’re used to managing their own ERP systems and a data center—it didn’t used to be an option for smaller organizations; you needed to manage your own systems.
Now, with the move to cloud, smaller organizations can finally get rid of that data center, and since they’ve already moved EHR operations to the cloud, now they have an opportunity to move ERP operations to the cloud as well. So it’s certainly an opportunity for small and mid-sized organizations. From a process change standpoint, they might have a little more difficult of a time. We haven’t talked too much yet about change management, which is important. But for smaller and mid-sized organizations, being able to take on the amount of change required in the new cloud-based ERP systems could be a challenge – you’ve got to make sure that you’re adequately ramped up for that. But certainly, from a systems standpoint, they support from small to large organizations.
Guerra: We talked a little about not picking a vendor right away. You have to understand what you’re trying to do. There’s the element of selecting the vendor; once that’s done, there’s the implementation, which would include the change management we’ve discussed, and then making sure the system is optimized, or used and fully embraced. Do you want to take those one at a time and give me your thoughts around what CIOs need to know?
Benton: The point of the discussion is where should I start and where do I want to end up? So before you ever get started with the selection process, you really should take a look at starting with a very deep strategy dive internally within your own organization. In other words, understand where you want to go, put the metrics around what the transformed operations system is going to look like, and how it will perform, and work backwards from there, so that you’re very clear internally, with everyone on board, about where the system selection is going to go. It’s really kind of a Phase Zero, looking at your current topology, looking at the current systems that you run, the need for interoperability between EHR and ERP, and then going into a selection process where you really look at everything that’s available out there, and narrow it down very quickly. We’ve seen that the selection process has been narrowed down to really those operational improvements that you can get out of the system rather than the table stakes of the ongoing operations that are included in ERP. And then go into a very accelerated selection process. Choosing the right implementation partner is equally as important as choosing the right software vendor, and that should really be done in concert with deciding how you’re going to go forward as part of the planning phase. And then, getting into the full implementation, it’s very helplful to have implementation governed by an internal and external PMO, so basically have program management to make sure you go all the way through the implementation. Change management is a very disciplined part of that – making sure that the entire organization moves forward with the changes that you’re implementing with the new ERP system. And then, there’s support and ongoing operations beyond that.
Schlusberg: I would just add that, as Greg mentioned change management, the importance of change management in this implementation process – especially from an ERP standpoint – what we see from organizations that don’t focus on change, first off, is that they spend all this money and time to implement brand new systems, and shortly after they’re implemented, people start reverting to old processes or inventing workarounds to get back to the ways they’re used to doing things, and often, it’s because they don’t have a great understanding of how the new system is supposed to work.
So we see organizations be most successful when they focus the time on communication and change management, and ensuring that operational owners and all of the users understand and are ready for the change. And that includes understanding what’s changing, why it’s changing, and how it’s going to impact everybody’s daily work, and having the time to learn about that, incorporate it, practice it, so that when you actually go live – I don’t want to say it’s a non-event, but everybody’s really ready for the system, they’re excited about the system. Sure, there’s some trepidation there and concern, but they’re able to use the system and understand what’s changing and why. And that really sets the path for being able to use the functionality delivered initially, as well as optimization down the road and being able to take on new tools.
Guerra: With change management, there’s training involved there. You have to train people on the new system. So when we say, “OK, it’s time to use it,” they have some clue how. What are your thoughts on mandatory vs. just putting a bunch of stuff out there (with no one using it). If you’re the CIO or you’re the head of IT, and you put a bunch of stuff out there and no one looked at it, and then there’s a disaster on Day One with the help desk because no one knows how to use it, it’s not good enough to make excuses.
Schlusberg: Yes, it’s critical that everybody understands how to use the new system. But gone are they days when we would send everyone to training for a day and turn the system on and they’d figure it out. There’s so much more advanced work that we know now with the communication and change management – communicating to end users about what’s changing and what to expect, ensuring that they’ve got the right training tools to go to, and that’s a mix of online training, classroom-based training – there’s not quite as much focus on classroom training as there used to be because there are such great online tools available. And also, there’s just a proliferation of web-based or mobile-based functionality that in many cases is self-explanatory. You never went through training on how to use your new iPhone or Android phone – we figured it out as we needed to. The new systems have a lot of that built in. There’s a lot usage that’s self-explanatory, based on the new graphical interfaces and how they’re designed. But none of that takes the place of required training so that you’re prepared to be able to do your job, and so that you don’t have financial and, more importantly, clinical impact.
Guerra: So you didn’t like my saying mandatory, but you like “required.” LOL
Schlusberg: It’s just that organizations struggle when they refuse to deliver a new sign on to somebody who hasn’t gone through the mandatory training. Organizations have to make sure that the training is there, not just to have it out there, not so that it’s encouraged – you have to get people signed up, you have to track progress through training – they have to make sure that they’ve completed those courses. So yes, I’ll go so far as to say both mandatory and required training are necessary.
Guerra: We know that there are places that, when EHRs were rolled out, required training on the EHR by a certain date or you were not going to be able to put in orders or whatever. Do you not seeing that as being essential with ERP?
Benton: It definitely is a part of it. As you go through the implementation process, there’s a lot of training involved with the implementation teams. So as you progress, you actually get your hands on the software system that you’re implementing, and you do this knowledge transfer and side-by-side training of the teams that are implementing the software, and then transferring that into formal training that goes all the way through the end users adopting the system – it’s change management embedded with training, all the way through the go-live process. What we’ve seen is that if you don’t continue that change management and training regimen beyond the go-live event, when the implementation team rolls off and some of those people are going back to their day jobs, then you don’t have the resources necessary to continue the training and adoption that’s necessary. So that does have to formally be put in place, and put in place as a learning management system on an ongoing basis.
Guerra: I’d like to give each of you an opportunity for final thoughts or a takeaway piece of advice, anything that we didn’t touch on that you’d want to cover.
Schlusberg: We’ve covered a lot of ground about the steps that organizations need to take, and we’ve mentioned that, in the three- to five-year time horizon, this might not even be a choice anymore. We’re seeing existing ERP systems being sunsetted and there are vendors that are no longer supporting those systems. So not only is all this great functionality there, but at this point, it’s not even really a question of if, but it’s when an organization will be making this move to cloud-based ERP systems. It’s really getting ahead of their competition, taking action now and preparing themselves for what’s going to come next.
Benton: Beginning with the end in mind is really meant to visualize and importantly measure the end-state transformed operations that you’re looking to achieve when fully realized, and work backwards to map out how to get there. Given the significant advancements that we see in cloud-based ERP, the opportunity for operational and strategic gain is tremendous right now. So I just encourage everyone to get out and really take a look at the systems they’re operating on currently, and see if next-generation ERP is exactly what you’re looking for to transform your organization for the next decade.
Guerra: Alright gentlemen, that was wonderful and I thank you both very much for your time. I think this will be valuable for our listeners.