The vital role of hospital technology selection in achieving post-merger alignment

The transition to value-based care has hospitals and health systems focused on improving operating margins while maintaining or improving the quality of care their organizations provide. To achieve this goal, many provider organizations are exploring the benefits of joining forces with another healthcare facility.

"The volume of M&A activity is still strong. Many systems are even looking at merging or acquiring as a preferred growth strategy in the year ahead," Keith Lohkamp, Senior Director of Industry Strategy at Workday, said during a July 19 webinar hosted by Becker's Hospital Review and sponsored by Workday, a provider of enterprise cloud applications for finance and human resources. 

There are many reasons hospitals choose to pursue mergers or acquisitions, such as to achieve operational efficiencies, expand the care continuum, develop new capabilities and position themselves for population health.

However, some hospitals are not interested in mergers and acquisitions but still want to realize some of the benefits of joining with another organization. Virginia Hospital Center, a 394-bed nonprofit teaching facility based in Arlington, falls into this category, said Senior Vice President and CFO Robin Norman during the webinar.

"Strategically, we want to increase our services and footprint without necessarily providing all of the capital," she said. "We are exploring multiple partnerships."

Technology considerations around M&A
Whether pursuing a merger, acquisition or another type of partnership, hospitals and health systems want a seamless integration, and technology selection plays a vital role in achieving this goal.

Michael Burke, Senior Vice President, Vice Dean and Corporate CFO of NYU Langone Medical Center in New York City, said clinical and financial system integration is key when the academic medical center affiliates with a hospital or nonhospital provider. This allows the organizations to produce consolidated financial statements and combine clinical data.

"Because we have both inpatient and outpatient data on all patients in the network, we've been able to use that to find the missing information that prevents us from maximizing reimbursement with payers," he said.

Ms. Norman from Virginia Hospital Center agreed that compatible technology is one of the keys to successful integration.

"We're about to put in a new health information system. When we were searching for a new system, we definitely considered the fit with other systems in our market," she said. "Although we're fiercely independent, we don't have our heads in the sand."

Compatible cultures are key
In addition to seamless integration of technology, culture is another major consideration for hospitals and health systems pursuing partnerships.

"The culture of the organizations that you partner or merge with is going to go far toward [having] success or not having success," said Ms. Norman.

She said Virginia Hospital Center entered into a joint venture in the '90s that involved 50-50 ownership with a healthcare organization that was not a good match culturally. The parties eventually ended the partnership for tax reasons, but Ms. Norman said the lack of compatible cultures and the 50-50 ownership structure of the joint venture, which made it difficult to settle any issues, also contributed to the decision.

Mr. Burke echoed many of Ms. Norman's thoughts on the cultural fit of two organizations exploring a partnership.

"I've been around the block a number of years, and I've seen a number of these mergers fail and I've been a part of ones that have succeeded. When you're putting two organizations together you have to understand the reason for the merger and the synergy of the cultures … and the roadblocks preventing you from coming together," he said. "In a lot of these cases when you're doing the assessment, you have to be willing to walk away."

To view a recording of the webinar, click here.

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