Mergers and acquisitions have been sweeping the healthcare industry for the past several years. PwC reported more than 200 M&A deals in 2017 alone, totaling $175.2 billion with that figure only expected to increase.

A variety of factors have pushed the industry toward consolidation as a growth strategy, chief among them a growing demand for care and specialized services, reimbursement in the age of value-based care, cost savings and improved margins and buying power through economies of scale and, without question, an aging population.

Every acquisition comes with its own unique set of challenges. But with so much money invested, particularly in an industry that is already bending under the pressures of rising costs and reduced margins, it’s critical that healthcare executives ensure these deals are ultimately successful. Unfortunately, there are no guarantees: KPMG finds only about one-third of mergers, acquisitions and takeovers add value to North American organizations.

Having the right data is crucial to understanding how a merger will work. And included in those calculations must be the potential impact of bringing together two organizations’ information systems and how that will affect ongoing integration efforts.

The healthcare industry can’t afford miscalculations that lead to bad combinations.

M&A success relies not only on the integration of people, but also of technology and business processes. There’s inherent complexity in the execution of the latter. Both acquirer and acquired will likely have their own technologies and ways of doing business, and it’s only through the full integration of systems and business processes that the strategic goals of M&As are achieved.

At the heart of every acquisition, whether in healthcare or any industry, especially in today’s digitized age, is data. Data powers the business, financial and clinical systems. If the data isn’t standardized, the two entities involved in the transaction will not be truly integrated, and ROI will not be maximized. Worse yet, misaligned data will have negative downstream effects, including disruptions to the procurement and payment cycles for both suppliers and providers, and eventually the level of patient care.

For suppliers, misaligned data can disrupt orders and result in longer revenue cycles. A hospital buying from a newly acquired supplier organization must make changes to its item and vendor masters, as well as to other systems. If there is a disconnect in the product number used on a purchase order, the account number or remit address, the order and payment process comes to a halt.

On the provider side, if item masters contain inaccurate, incomplete or duplicate information, the newly merged entity cannot rely on analytics resulting from this data. The provider can’t control costs if it doesn't know what it is purchasing, from whom and at what price. This presents a real problem, particularly since increased purchasing power is often one of the expected benefits of an acquisition.

A final consideration is patient safety. If inaccurate product data is fed to a patient’s electronic health record, the organization will not have accurate information on the treatments the patient received or the products used.

It’s easy to overlook the critical role data plays in the M&A process because the default is to think about the integration of people and systems. The focus and prevailing questions commonly revolve around how the consolidation will occur and when. Less time is spent thinking about the data that needs to be consolidated in support of those systems, and the processes needed to align and migrate it.

Consolidating data after an acquisition is a marathon, not a sprint. There isn’t a magic switch that can be flipped. And while standardization and consolidation can’t happen before the deal is closed, it is possible, and essential, to conduct enhanced diligence to understand the other entity’s data sources.

After the deal is closed, it’s ideal to begin with a single system. Ensure that the data is cleaned and aligned between the two organizations, and only then merge the two systems. From there, you can move system by system toward complete, cross-organizational integration of clinical, financial and business intelligence systems.

Few enjoy the hard, often manual work, of cleaning your data, but the rewards are great.

The healthcare industry often refers to itself as an ecosystem, yet much of the focus on M&A tends to be internally focused. More attention needs to be given to how customers and partners will interact with the newly merged entity on the “go live” date.

When there isn’t a solid plan in place, it’s common for back-end human processes that have worked forever to suddenly break down. It’s important to understand the ramifications of a go live date, not only for internal groups, but also for customers and partners. There are a few questions to help outline the big picture and smooth the transition, including:

  • Have customers and partners received the right level of communications?
  • How long will it take for them to adjust their systems? Is your go live date realistic?
  • How many business entities will be affected by the go live date?
  • Have executives planned for the higher call volumes on Day One?
  • Is the organization staffed properly to manage the transition period?

As M&As continue at a torrid pace in healthcare, the onus will be on CIOs, CTOs and supply chain leaders to ensure the smooth integration of people, systems and data. Only then can the industry realize the intended growth and value from these transactions.

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