Technology first, organization last: Rethinking M&A integration

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Hospitals and health systems undergoing mergers and acquisitions are going about the process backward. Typically, integrations first address the people — really the organization — then the processes and finally technologies. However, given the importance of technology in the healthcare environment, hospitals may be better suited to reverse this integration order.

So argues Paul Cioni, CTO of Velocity Technology Solutions, a private cloud application hosting company.

Integrating personnel first — typically by giving the acquired entity a new organization chart — Mr. Cioni says, often leads to a delayed urgency in the information systems integration, which in turn can result in redundancies and inefficient processes.

Instead, prioritizing systems integration in M&A can actually help accelerate the overall process and achieve desired outcomes. "Using systems — specifically integrating on a single system of record for each area such as one clinical system, one accounting system, one time and labor system) — serves to rationalize or harmonize process and people. Systems serve as a vehicle to catalyze and accelerate integration," Mr. Cioni says. "It forces the business process owners to embrace the best practices of each entity and to rationalize business processes for economies of scale. After all, that's why these acquisitions are being done — to gain scale."

During M&A, organizations are often faced with redundancies in overhead functions, such as accounts payable and human resources. Information systems aren't excluded from this list. At the same time, Mr. Cioni says acquisitions present an ideal time to consolidate certain functions, including purchasing, procurement and human capital management. However, discussions regarding immediate personnel reductions are often prioritized over discussions regarding the potential efficiencies of focusing knowledge toward the outcome of combining operations on a single system, Mr. Cioni says.

"Just as important as it is to eventually issue a new organization chart, I think the right approach is to use systems — whether that is a clinical system, a HR system or a patient accounting system — as the way to integrate, assimilate and catalyze the adoption of best practices," Mr. Cioni says. "That drives process efficiencies throughout the organization."

By first selecting the best IT systems to use, healthcare organizations then can determine personnel and staffing positions knowing that the systems and processes are already the best they can be for the organization.

"Selection of the system drives efficiencies of process, and when processes are validated and refined through the integration of systems, what I've found is the people on the organization chart almost self-settle through that forming process," Mr. Cioni says.

When it comes to system selection, Mr. Cioni says it's important for the joining organizations to thoroughly vet each system to determine which will be the best fit.

"Deciding in advance that all of the systems of the acquirer are going to be selected for the combined entities probably misses some opportunities for process improvement and efficiency," Mr. Cioni says. "Try not to subscribe to the temptation of, 'We bought you so you have to use our stuff.'"

Mergers and acquisitions are complicated adjustments, but they could be made easier if health systems approached integration in a way the industry isn't used to: technology first, then business processes and organization last. It sounds less than ideal for the personnel discussions, but overall system functionality and efficiency may benefit. Additionally great people will not be bruised by being pigeon-holed into an organization not optimized for the new, at-scale business, Mr. Cioni says.

"When the acquisition is finally consummated, we are typically not hiring people to accelerate the integration effort. We're trying to gain synergies by removing redundant personnel or redundant processes," Mr. Cioni says. "It's difficult to take a running system and change the engine without stopping after transitioning some of the best mechanics."

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