An IV pump is probably not the first thing healthcare organizations think about when merging health systems. However, something as simple as an IV pump is an excellent example of how healthcare mergers and acquisitions (M&A) can become extremely complicated and difficult to navigate at a granular level, introducing both hidden pitfalls, costs and opportunities.
Biomedical equipment is an integral part of a high functioning healthcare system. An IV pump is a small, but vital, piece of equipment in virtually every patient room that is touched in one way or another by everyone involved with direct patient care, as well as IT, pharmacy, lab and biomedical engineering.
What happens to these IV pumps when one healthcare organization merges with another? Duplicate equipment is consolidated—which may or may not be compatible with core networks and software systems such as the Electronic Health Record (EHR). If the acquired hospital has newer pumps, it would seem logical to replace the older ones. However, for a nurse who has specific training on the older IV pump and years of hands-on experience, replacing the older pumps with newer ones may not be the best choice. Not to mention the time, effort and cost to evaluate, contract, acquire, install and train on the new equipment.
Arriving at an informed decision in this scenario requires due diligence, rationalization and contract consideration, as well as a deep understanding of the people impact to determine the downstream effects.
Whether it’s bedside vitals monitors, EKGs or point–of–care lab testing equipment, they all pose the same challenge to a healthcare system that has different products they now need to maintain and support, integrate with their EHR, upgrade, monitor security, test on a regular basis and have people who are knowledgeable about them.
Is it better to standardize on one platform and potentially have to get rid of substantial equipment and possibly increase cost significantly? If the answer is yes, organizations also must factor in training, rewriting policies and the considerable effort involved in replacing these devices. Even if organizations set the financial investment aside, it is not a trivial decision given user and patient experience, as well as the downstream impact for IT, biomedical engineering and clinical educators.
The challenges do not stop with biomedical equipment. The same issues arise during M&A with network infrastructure. There are many scenarios where one organization has built their network infrastructure on top of a specific platform or set of products from an enterprise vendor and the hospital they are merging with or acquiring has another enterprise vendor as their base. Much like two restaurants merging with different beverage suppliers, it is not cost effective to have both Coke and Pepsi, but often the costs, retraining efforts and other impacts require health systems to maintain both states for at least an interim period while transitioning to an enterprise solution across the new organization.
The IV pump is an example of the many small decisions that contribute to the overall value realized as part of M&A. While it can be daunting given the number of discrete decisions to be made, there are 4 steps to successfully navigate these challenges for the best possible outcome. Regardless of whether it is an IV pump or an entire wireless network that might have to be replaced or rationalized, the steps for reaching the best decision for everyone involved are the same.
- Assess Inventory: This is always the first step. Organizations need to figure out what their options are. Start with inventory and evaluate what you have. Often, healthcare systems do not always have a good assessment of what they already have in house for both organizations.
- Consider Contracts: Look at product capabilities and contract terms to evaluate what the options are. Is it possible to break a contract if necessary? Sometimes there are terms or agreements that organizations can advantage of. Sometimes there is more buying power together, so explore upgrading the contract to include the other organization.
- Rationalize & Decondition: Do a functionality gap assessment to determine if one solution delivers more clinical or operational value than the other. Determine when contracts expire to see if equipment is nearing end of life or in need of replacement. Build a new cost model and overall project plan.
- Appreciate the People Impact: Although the end user should always be taken into consideration, all too often organizations get buried in spreadsheets during M&A and forget to consider the human factor. It is best practice to get a broad range of stakeholder viewpoints before making any decisions and always consider bedside impact. In specialty areas like lab or pharmacy, where people have particular expertise with certain equipment, at a minimum, they may need additional training to support any equipment or infrastructure changes. Often, you have to retrain some of the administrative team and clinical staff as well. In addition, change management should be considered for nurses or technicians who interact with equipment that may work differently than what they are used to or were trained on to drive adoption.
Fewer Headaches, More Value
With every healthcare M&A transaction — joint-venture, partnership and affiliation— CIOs must evaluate, integrate and rationalize complex IT to unlock cost savings, enhance data sharing and uncover opportunities for clinical and business value. Deliberate rationalization of biomedical equipment and infrastructure during M&A is a critical part of realizing transaction value.
Pivot Point Consulting’s M&A team is experienced in leading JVs, acquisitions, affiliations and Epic Community Connect initiatives for leading academic medical centers and IDNs nationwide. Our healthcare M&A team conducts comprehensive IT due diligence, integration planning and risk management across IT systems, services and human resources. We bring deep financial acumen and proven tools to identify integration costs and synergies to inform pragmatic budgets, timelines and outcomes.
Pivot Point Consulting works with clients nationwide in IT M&A and affiliation planning to support organizational growth and clinically integrated network development. We bring the expertise, experience, framework and tools and assist clients in planning for and optimizing their broader technology ecosystems with and across their M&A and affiliation community.
Need help with your M&A? Contact our experts.
Zack Tisch, Vice President, Strategic Growth, is a dynamic healthcare IT executive leader with 15 years’ experience in leading complex, integrated healthcare information technology projects at some of the nation’s leading healthcare institutions, such as Cedars-Sinai, MD Anderson Cancer Center, UCLA Health and Stanford Heath Care. He is passionate about maximizing value out of the EHR systems to provide efficient, effective patient care.
In his role leading Strategic Growth for clients, Zack focuses on architecting high value solutions to enable client growth as well as process and resource optimization. Zack is a former Epic employee and is certified in 15 Epic applications. He is also a PMP. Zack received his BA from Duke University and has completed Executive MBA Coursework at UCLA and the University of Texas.
Joe Clemons, Managing Director, Engagement Management, Data Analytics & ERP contributes practical experience and guidance to his clients through his advisory and ERP practice leadership role at Pivot Point Consulting.
Joe brings over 17 years’ experience in healthcare IT strategy, EHR and ERP planning and implementation, merger and acquisition execution, process improvement, change management and organizational development. His expertise intersects the clinical components of the EHR with the business components of ERP to drive organizational strategy and value. He routinely contributes to industry articles, podcasts and video interviews and the development of methodology and best practices. Joe serves on the Oregon Chapter of HIMSS Board of Directors as the Sponsorship Chair. He holds a BS in Healthcare Administration.