When two healthcare organizations begin the process of carrying out a merger or acquisition, they commonly encounter certain "pain points," says Munzoor Shaikh, senior manager at consulting firm West Monroe Partners.
"We know it's going to be trouble or a tough thing to deal with," he says. "I call it the thorn in your side."
If providers put off removing those thorns for too long, what originally seemed like a minor annoyance can turn into a disaster that brings down the whole deal. "There are a lot of these things that get pushed to the side that end up being pretty dangerous," he says.
Therefore, he advises hospitals, health systems and other healthcare organizations to address the following five pain points early on in the transaction process.
1. Reporting systems. Healthcare organizations commonly face financial, clinical or claims-related reporting system issues, Mr. Shaikh says. In a merger, combining two different reporting systems into one can present various challenges. For instance, the two organizations might have different financial and accounting approaches. The IT department or business operations team can find a workaround to address these issues most of the time, according to Mr. Shaikh. However, if they don't tackle the issue early enough, they may become overwhelmed by post-merger integration responsibilities and have difficulty finding time to carry out the solution.
2. Data cleansing. Often, in a transaction, Mr. Shaikh says one of the two healthcare organizations involved will have data cleansing issues predating their agreement they haven't attended to for a long time. "There's a data cleansing debt that builds up," he says. "It slows down the merger, and sometimes prevents the integration of core systems."
In the absence of sophisticated data governance, health IT data (especially that from legacy systems) will need a significant amount of cleaning and reconciling to avoid problems when the data is migrated to a new system, according to Mr. Shaikh. He recalls a merger he worked on involving two provider systems. The new system the data was supposed to migrate to had much stricter data rules regarding discrepancies; subsequently, "the new system just didn't want to take the data," Mr. Shaikh says. The IT department ultimately had to create two instances of the new system, leading to higher maintenance and operating expenses.
3. System scalability. The consolidation process of core IT systems can be derailed by major issues without proper testing. As an example, Mr. Shaikh presents a hypothetical scenario where hospital A is acquiring hospital B, and each has 1 million patients' information in their separate electronic health records, which they plan on storing in one combined EHR system. It's crucial to carry out performance testing before the combined system goes live to ensure the system won't crash, he says.
4. Electronic data interchange connections. Issues with EDI connections used to process claims and payments can threaten a provider's financial management. Therefore, during a transaction, IT departments need to allow plenty of time for migrating EDI connections. "There's a lot of testing that has to be done and a lot of confirmations that have to be made so the revenue cycle management process isn't broken," Mr. Shaikh says.
5. Back office accounting. The systems used to collect payments, post cash and manage accounts receivable need to be properly tested to ensure they will function smoothly following the merger, according to Mr. Shaikh. If the organizations aim to have consolidated lockboxes at the end of the merger, they should make sure payments from a different source to the lockbox are accepted, processed and posted without problems. If healthcare organizations wait to address the accounting system until an issue arises when it goes live, they won't be able to avoid negative financial fallout.
Mr. Shaikh suggests addressing back office accounting testing early. "I've seen one example where the provider started off by doing that first, and that was a great success for them," he says.
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