As health systems merge and acquire more hospitals, they expect significant strategic, financial and operational benefits from integrating and centralizing clinical service lines and support functions, such as finance, revenue cycle, HR, IT, supply chain, marketing, lab, pharmacy and quality.
In reality, they often find the integration process is harder, takes longer and results in fewer benefits than expected.
To get a better sense of the work that lies ahead of multihospital systems looking to integrate and centralize support functions, Becker's Hospital Review caught up with Mukesh Gangwal, president and CEO, and Jan van Londen, managing director, both with Prism Healthcare Partners in Chicago.
Here, Mr. Gangwal and Mr. van Londen share six quick tips for hospital system CEOs to plan more successful integration programs.
Note: Responses have been lightly edited for style and length.
1. Align the merging health systems to a common, measurable goal. During the pre-merger planning stages, management of merging institutions should establish common goals and objectives attached to milestones and tangible outcomes. Organizational alignment in the C-suite is critical to setting the strategic trajectory of the common entity. Executives should not have the luxury of second guessing the purpose and process of the merger to serve individual goals and priorities. The strategic planning objectives need to be anchored to specific results on a timeline signed off by all parties. Establish issue escalation procedures upfront to the common board to resolve any disputes on strategic matters, and encourage course correction, where appropriate, in response to business environment changes.
2. Avoid these mistakes. Health systems planning integration initiatives commonly make five mistakes:
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They don't sufficiently involve local hospital CEOs in planning integration efforts. Local hospital leaders often resist integration because of a concern of losing functions and autonomy, so a successful integration effort involves them upfront in the development of the new operating model. Local leadership can provide valuable insights on how a central organization can best support the individual hospitals. To garner their support, it is important to point out to local CEOs that moving functions from local hospitals to corporate will enable them to better focus on patient care, community relationships and physician needs.
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They lack a comprehensive change management plan that addresses the difficulties local hospital employees, leadership and physicians may experience during consolidation. The biggest concern with a merger or integration effort is what will happen to local jobs, so it is important to address those objections upfront and create change management plans that minimize the impact on employees and patients. Work with the functional leaders and human resources to assess the impact of each recommended integration initiative and put together change management plans addressing the timing and messaging of communications to key stakeholders. These change management plans are not static but living documents that should be updated throughout the course of the integration process.
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They think centralization is the answer to achieve the maximum integration synergies, when the right solution is actually a balance between centralization and standardization of support functions. For example:
- Marketing: Centralize marketing strategies, communication plans and digital functions, while community relations efforts remain a local function
- Finance: Centralize A/P and payroll processes while maintaining local accounting functions
- Supply chain: Centralize contracting and procurement, but keep value analysis and inventory management local with central coordination
- Legal: Centralize contracts and compliance, but keep risk management and labor relations decentralized in the short term
- They underestimate the timeline to achieve full integration, which can take several years. It will take time to address employee concerns and find acceptable solutions for local jobs that are disappearing. The IT systems can also create significant delays, especially when merging health systems have different business and clinical systems. Many merged health systems run two parallel EHR systems for years before finally moving to one platform.
3. Tackle first things first. There are several integration opportunities systems can tackle that generate savings quickly, have limited impact on employees and are patient friendly. Examples are:
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Standardize procurement practices by consolidating GPOs and vendors, centralizing contracts, and achieving lower pricing for supplies and purchased services based on combined volumes. These steps don’t affect employees and can be a quick way to achieve substantial savings.
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Consolidate patient billing processes to avoid patients receiving bills from multiple billing offices. Even when the merging systems have different EHR systems, this is possible by consolidating the billing processes between multiple self-pay vendors.
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Standardize employee health plans. This is another area that lends itself to relatively quick changes that can generate substantial financial benefit. Changes in HR benefits, like adjusting employee deductibles or premiums or consolidating TPAs, are a lot easier than standardizing pay practices, which has a large operational ripple effect.
4. Don't underestimate the power of a central integration committee. Successfully integrated organizations leverage a coordinated central committee to orchestrate large-scale change. Given the enormous impact of this integration work, the committee is typically led by the CEO(s) of the merged or merging system(s) and should include local hospital leadership and senior leaders from all functional areas. Each functional area, such as revenue cycle, marketing, finance, human resources, IT and supply chain, should then have its own team to tackle the integration work and develop and present recommendations for the new operating model to the Central Integration Committee for approval and prioritization. Prioritization criteria typically include financial benefit, impact on patients and employees, implementation complexity, and strategic value.
5. The CEO must be the cheerleader for systemness. The system CEO is critical to the success of a merger or integration effort. It's up to the system CEO to paint the vision for the new enterprise and motivate functional and hospital leaders to think creatively about what is best for the overall system. It is the CEO who should set the financial and operational goals for the integration effort, chair the central integration committee and hold each leader accountable to their goals. And it is the CEO who should talk frequently with staff, local boards and physician leaders to keep them abreast of the initiative and listen to their concerns.
6. You cannot manage what you cannot measure. Last but not least, it is important to have a central measurement system or dashboard with financial and operational metrics to track the progress of the integration effort. This dashboard should be updated monthly to ensure each team is moving toward its goals and to celebrate successes. And even when goals are met, the measurement system should continue so changes are sustained and enhanced over time.