Mergers and acquisitions (M&A) are like marriages in that two entities become one. And just like a newly married couple, the hope is to share one house and one set of values.
For hospitals buying physician practices, the hopes are to boost revenues by increasing referrals while reducing costs through better purchasing arrangements and reduction in technology overlaps such as ambulatory systems.
The acquisition trend is undeniable: a 2016 study commissioned by the Patient Advocacy Institute shows that the number of physician practices and ambulatory surgery centers (ASC) owned by hospitals jumped 85 percent in three years between July 2012 and July 2015. Hospitals now own 26 percent of physician practices.
However, many of those hospital/physician “marriages” don’t produce the anticipated benefits. Costs remain a concern, and hospitals don’t benefit if newly acquired physicians don’t refer into the hospital’s physician network. Another issue can be the burden of merging overlapping technology systems. Although some systems can be taken out of active use, they contain valuable patient data that, must remain accessible to physicians and be maintained for care and regulatory requirements.
One emerging technology that can help hospitals retire unnecessary or legacy technology systems while realizing cost savings is the independent clinical archive (ICA), a vendor-neutral repository of patient data stored in a common format. This vendor-neutral repository allows patient data to be stored in one central repository resulting in unnecessary or legacy technology systems to be retired. Giving providers a 360-degree view of the patient, without additional log-ins – saving time, money and resources.
Fewer independent physicians, more technology
Healthcare mergers of all sorts have grown over the past several years in response to changing market conditions. By July 2015, 67,000 U.S. physician practices were owned by hospitals. That means four out of every 10 physicians works for a hospital system. In the six-month period between July 2014 and January 2015, 13,000 physician practices were acquired.
A 2016 forecast by KPMG showed that nearly half of healthcare executives expected to be involved in M&A, showing the strength of the sector. Healthcare lags only to technology (70 percent) and pharma/biotechnology (60 percent) as hot merger industries.
However, the success rate of mergers, judged by whether they add value to the combined company, is significantly less than that of marriages in the US. According to KPMG, nearly 70 percent of mergers either are neutral or reduce shareholder value. The divorce rate, in contrast, is somewhere between 40-50 percent.
Cost of legacy systems could be the factor
In nearly all acquisitions, the hospital wants the new entity to adopt its EMR and other systems, so what becomes of the ‘no-longer-needed,’ such as the incumbent ambulatory EMR within the physician practice? After manually transferring schedule information and, perhaps, new patient information, the systems are no longer used on a daily basis.
One could argue that this information is no longer needed, but that wouldn’t be true. What is true is that the value of patient data dwindles over time, but it never goes to zero. Patient data has the most value during the first 30 days, when patients are undergoing active treatment. It’s also still valuable at 90 days, especially when hospitals are being hit with readmission penalties for certain conditions or complications. But in many cases, this data continues to be valuable long after 90 days. This is especially true for two large classes of illnesses: 1. chronic disease such as arthritis, cancer or diabetes, and 2. viral diseases such as hepatitis C and HIV/AIDS. Document retention policies mandate that patient information is maintained for a certain number of years, as physicians sometimes need to access information about previous treatments or check past labs.
The continuing value of patient data and the need to retain it for regulatory purposes lead IT departments to license, manage and maintain outdated and unnecessary technology systems long after the merged entity needs them for day-to-day operations. In the case of hospital mergers, this continuing expense can drag down the potential savings from purchasing a physician practice or acquiring another healthcare system.
So how can a hospital retain this data in a cost-effective manner and still make the information accessible? The answer is an independent clinical archive, which also allows unnecessary and legacy systems to be retired.
ICA benefits IT department and, the hospital’s bottom line
An ICA is a centralized, standards-based data repository that accepts a wide range of data and stores it using open healthcare data standards that can be readily accessed. For documents such as radiology and lab reports, data is stored as PDFs, but an ICA also can store DICOM images, HL7 broadcasts, XDS files and other unstructured data types.
Standardizing data management to an ICA greatly reduces the number of systems that physicians need to access for patient information. In fact, a single log-in can be used to access both the EMR and the ICA system, streamlining clinical workflow. And because all objects managed within the ICA use patient identifiers, physicians can quickly find the information they need.
An ICA doesn’t replace an EMR or a PACS. Rather, the three work in concert to present a complete, 360-degree view of patients, with current and historic information available. That helps physicians better understand a patient’s history and the potential impact of current care decisions.
For the hospital system, employing an ICA allows the IT department to retire older legacy systems, including redundant ambulatory EMR and other systems an acquired physician practice may have been using. This saves money on training, maintenance, licensing fees, storage costs and hardware to keep older technologies around that were only being used for historic patient data and regulatory purposes.
Reducing software redundancies also can increase security of existing systems, a critical consideration as incidents of ransomware continue to increase. Reported ransomware rose 250 percent in the first quarter of 2017, compared with the same period of 2016. Older systems aren’t as robust security-wise as current systems, and the application programming interface (API) connections between systems is only as good as the weakest link. Reducing the number of systems also reduces the number of potential entry points for cyberthieves.
Better patient care: the ultimate goal
Perhaps the greatest beneficiary of an ICA is the patient. Imagine giving physicians and other providers complete patient information that can be filtered and subdivided by specialty, condition or date range. This allows physicians to get a better historical perspective of patients without having to access multiple technology systems.
Better, more informed patient care can result in greater patient satisfaction and loyalty. And for hospitals buying physician practices, that can make for a happy marriage, indeed.
Tim Kaschinske has spent more than 30 years in business, 20 of that specifically in healthcare and data management. He has held senior roles in technology and development in organizations such as: Symantec, Agfa and Mitra Corporation prior to BridgeHead Software. Along with being a conduit between the market needs and BridgeHead, Tim finds by improving technology that supports better healthcare delivery, he can help make a positive impact in people’s lives.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.