A Healthcare Mergers Framework: How to Accelerate the Benefits
This report is based on a 2019 Healthcare Analytics Summit presentation given by Hani Elias, JD, MPH, Chief Executive Officer, Lumere, and Amy Whitaker, RN, BSN, Vice President, Supply Chain Clinical Integration Accountability, Bon Secours Mercy Health, titled, “Expediting Mergers & Acquisitions: The Role of Data and Clinical Evidence.”
Health system mergers and acquisitions promise appealing benefits, including eliminating inefficiencies and the competitive advantage of scale. However, successfully navigating the merger process for optimal gains is complex, and research shows that organizations often fail to fully leverage cost synergies.
For example, while executives may expect a supply chain cost savings of 15 percent (e.g., $1.7 million) with a merger, the average savings realized is far lower at 1.5 percent (e.g., $176,000)—a tenfold gap between expectation and reality. Part of the challenge is that federal, state, and internal regulations may prevent two legacy systems from accessing each other’s data before the merger, compounded by possible distinct standards, governance structures, IT infrastructure, and cultures between the two systems.
Though healthcare mergers may not yield the big gains once forecasted, organizations can still benefit with a merger strategy that supports sophisticated process management, data sharing, and a governance structure that aligns leadership, clinicians, and all stakeholders. With the right framework and preparation, mergers can achieve goals rapidly by jointly leveraging clinical evidence and analytics to accelerate benefits.
Four Pillars of a Pre-Merger Framework
With the right organizational framework, legacy systems can quickly scale and align value analysis and vendor management capabilities to achieve desired supply chain efficiency and scale. Pre-merger, the executive steering committee (comprised of the CFOs and other members of executive leadership) uses high-level data analysis to identify its supply chain goal (e.g., 10 percent savings target for supply chain costs).
A four-pillar framework will help the merger achieve its stated goal:
#1: Review Partnerships
Review both legacy systems’ partnerships to identify commonalities, redundancies, and opportunities.
#2: Establish Goal-Driven Processes
Establish effective process for the legacy systems to reach goals together and align communication to ensure both entities are working towards same goal. Identify which organizational level to make process decisions (e.g., the facility, system, or market level).
#3: Understand Organizational Structure
Establish the culture—such as determining a collaborative/interdisciplinary model versus a more siloed approach. Review the current teams’ skillset and establish accountability for talks post-merger.
#4: Line Up the Technology
Consider post-merger technology challenges (e.g., are both legacy systems on the same enterprise resource planning software?). To ensure clinical integration, data from disparate software and platforms will need to be translated into a common language.
Applying Evidence and Analytics to Healthcare Mergers
After establishing the four pillars for a successful merger, the next step is applying evidence and analytics to achieve to following milestones:
- Provide an objective source of truth—By coupling broader evidence with organization-specific data, systems establish a source of truth to guide decision making.
- Identify product variation and overlaps—Identify similar purchase patterns, overlapping contracts for supplies, equipment, and services. Look at variation in products and consider evidence-based research for product decisions (e.g., does one product have better outcomes and why?).
- Establish best practices around value analysis governance—Look at pricing, market share, and contracting for ways to save (e.g., eliminate variation).
- Give clinicians the data they need to have greater input in value analysis decisions—Seeing internal outcomes versus national outcomes gives clinicians the full picture to understand the best product choices. Start clinician conversations around evidence including quality metrics, customer feedback, safety, and more.
- Ensure alternative product options are clinically superior as well as cost effective—Use a market lens to make informed supply chain decisions.
Legacy systems may have to plan their merger without seeing one another’s specific data. In this case, an analytics partner can create a “black box,” in which blinded information from both systems can be stored and analyzed pre-merger. As soon as the merger takes place, the analytics partner can share findings and recommendations to immediately start realizing savings goals.
Supply Chain Clinical Integration
By establishing the four pillars for a merger and applying evidence and analytics, organizations prepare a pipeline that allows them to move forward with supply chain clinical integration as soon as the merger is complete, taking action for instant wins.
Organizations can follow four steps to implement supply chain clinical integration:
- Research best-in-class value analysis programs.
- Create processes to support a large health system.
- Engage with corporate executives to communicate the program (including a plan to communicate success, such as a monthly systemwide newsletter and regular stakeholder meetings).
- Conduct focused discussions with the appropriate stakeholders (e.g., operational leaders for financial opportunity and gains; clinical leaders for key quality indicators and clinical outcomes).
Following the four steps above, the clinical integration process takes place in five phases: identifying opportunity; analyzing and determining solutions; contracting activity to confirm solutions; executing contracted solutions; and measuring results (Figure 1).
Figure 1: The five-phase clinical integration process.
A successful clinical integration process has positive impacts both financially/operationally and clinically:
- Financial and operational benefits can include identifying opportunities for savings and launching clinical integration savings; research and analysis of product categories to influence an ongoing purchasing strategy; aligning both organizations around a single process and request form; significantly reducing manual labor days; and quickly establishing a new, interdisciplinary clinical integration process.
- Clinical benefits can include clinical integration discussions around quality outcomes with a patient-centric focus; identifying areas with the most opportunity for negotiation and improvement; developing clinical product category frameworks to guide ongoing discussions and aid with decision making; and establishing a review of quality outcomes to ensure desired outcomes.
Making Healthcare Mergers an Opportunity to Rethink and Improve Processes
As referenced earlier, mergers seldomly deliver the level of savings they might promise. Their greater benefit may be the opportunity to rethink and improve operations of both organizations while also achieving realistic savings with a robust evidence- and analytics-driven clinical integration process. By building a pre-merger framework and engaging clinicians and empowering them with data to make the best decisions, post-merger organizations can optimally prepare to deliver improved outcomes while saving costs.
Would you like to learn more about this topic? Here are some articles we suggest:
- The Key to Healthcare Mergers and Acquisitions Success: Don’t Rip and Replace Your IT
- Healthcare Mergers and Acquisitions: Reducing IT Consolidation Expenses with a Data Operating System
- Critical Healthcare M&A Strategies: A Data-driven Approach
- The Top Three 2020 Healthcare Trends and How to Prepare
- Seven Ways DOS™ Simplifies the Complexities of Healthcare IT
Would you like to use or share these concepts? Download the presentation highlighting the key main points.