How the Operating Room Can (and Should) Leverage a Merger, Acquisition

In a perfectly executed plan, a merger or acquisition would bring:

• More cases, more surgeons, new procedures
• Larger market share
• Increased service offerings
• Money for capital expenses, including investment for new ORs/new campus
• Physician training programs (to recruit into the community for the new procedures and services)

However, often the plan itself hasn’t been well developed, so the benefits from the transaction activity are minimal, at best. In reality, mergers and acquisitions often bring more challenges in the form of more reports and disparate cultures. A significant difference in governance structure between facilities will challenge a consistent physician relationship for providers serving both facilities.

Mergers or acquisitions can and should be key opportunities to standardize and streamline OR processes and metrics across their newly merged or acquired site(s). Greater standardization leads to improved financial and operational performance as well as the ability to better manage increasing regulatory reporting demands of programs such as meaningful use.  

Below are a few key considerations and recommended actions on how the OR can (and should) leverage a hospital or healthcare system transaction or partnership.

Key considerations

• What is at stake for the OR departments of the involved facilities?
  • Will current service offerings be split among the new sister organizations? Will the merger allow for increased service offerings, new procedures and investments — or is the plan to maintain the status quo?
  • Will facilities specialize? Complicated cardiac procedures at one, robotics at another, perhaps another will specialize in women’s care or a comprehensive orthopedics program?
  • How will this affect the physicians (surgeons/anesthesiologists)? Do they already have privileges at both facilities? Or, will they potentially choose to take cases elsewhere?
• What are the IT implications of the merger? Have any of the hospitals involved in the merger made a significant investment in an electronic health record or other technology that could be a limiting factor to the options of the new organization post-merge? In regard to the new organization’s perioperative system structure, there are several scenarios each with their own implications:
  • Acquired facility (facilities) moves to acquirer’s EHR /clinical documentation system
  • IT for the new merged organization supports all legacy systems at each facility
  • The merged organization converts, as a whole, to new systems

Recommended actions

• Assess your current state by conducting workflow and data capture analyses.
  • Compare and contrast processes between facilities:
    • How do the facilities’ perioperative workflows compare/contrast?
    • Are scheduling practices (e.g. block schedules and protocols) structured similarly?
    • What is each OR doing well that they can share with the other?
  • Look at the statistics. What are the most commonly performed procedures at each facility? Is there overlap or the opportunity to increase productivity by moving cases between facilities?
  • Review and compare charge rules and the charge description master.
  • Examine the state of perioperative system databases:
    • Are procedure master files compatible (e.g. are they set up by CPT codes vs hospital defined)? 
    • Are the database(s) “clean”? (a clean database is particularly important if there is a database merge or system conversion on the horizon).
  • Review daily, monthly, quarterly management reporting needs and requirements.
• Adopt standard terminology and language.
  • Use CPT, SNOMED, ICD 9/10, RXNORM and other standard coding sets to simplify your processes, documentation and reporting.  Standard terminology is also key if your providers are going to work at multiple facilities within the organization. 
  • Determine and track financial metrics for:
    • Cost per case
    • Charge capture per case
    • Overtime
    • Inventory turns
    • Etc.
  • Determine and track operational performance metrics, including:
    • Case volume
    • Case durations
    • Prime time utilization
    • Block utilization
    • On-time starts
    • Cancellations
    • Room turnover times, by specialty
    • Add-ons
    • Quality metrics
    • Meaningful use
    • Surgical Care Improvement Project

For metrics that must be reported to CMS, building the standard code sets highlighted above into your surgical software simplifies your required reporting.

• Engage key stakeholders.
  • Bring OR managers to the table. Many times, OR leaders are only peripherally engaged in merger discussions. But as the financial driver for facilities, it is imperative that they are at the table when framing the project plan.
  • Facilitate discussions between departments (i.e. OR, ITfFinance); Compare, contrast and assess contracts, case volumes, services provided, FTEs and IT system requirements ensure all parties have an understanding of all of the issues at stake.
  • Consider opportunities to share roles/services across facilities such as OR Business management, surgical and/or anesthesia system analyst(s), perioperative business development.
• Take the opportunity to facilitate change across the (new) organization.

Mergers or acquisitions are a great opportunity, and excuse, to dive deep into the OR performance and identify opportunities to improve processes, workflows and dataflows, and satisfaction that will be vital to the future success and survival of the new  and existing entity(ies) in an increasingly challenging  healthcare environment.   

Mark Atkins is managing principal of Coratek. He founded Coratek in 2002 specifically to help hospitals accomplish challenging tasks within the perioperative environment. He has spent over 20 years focused on perioperative services, working on the provider side as well as for a perioperative information system vendor and a national consulting firm.

Jessica Kovash is director of analytics and operations at Coratek. She has extensive experience in perioperative and anesthesia consulting services. She has completed over 75 perioperative operational reviews and anesthesia-related assignments, helping hospitals and anesthesia practices to improve scheduling practices, streamline patient throughput processes, establish new perioperative governance models, improve financial performance and grow surgical volume.