CHICAGO--The healthcare delivery landscape in the United States has seen a steady uptick in mergers and acquisitions (M &A) of facilities over the past decade; in these tough economic times M &A activity will likely increase as institutions deal with operating margins that are consistently leaner.
According to a pair of presenters at the 2009 Healthcare Information and Management Systems Society (HIMSS) conference this week, many U.S. hospitals will be forced to deal with the reality of acquiring--or being acquired by--another organization.
"In New Jersey, over 50 percent of the hospitals in the state are losing money," said Carol V. Brown, PhD, a distinguished professor at the Stevens institute of Technology in Hoboken, N.J. "In New York state, a government commission has indicated that a number of hospitals need to be closed in order to give the neighboring hospitals a chance at financial success."
As healthcare delivery M &A ramp up in response to a difficult economic climate, health IT administrators will be challenged with integrating disparate clinical, financial and administrative systems. In addition, their skill set will be called upon to ease the transition of personnel into a new corporate culture.
Richard Temple, chief information officer (CIO) for AristaCare Health Services in South Plainfield, N.J., recently went through the acquisition of his provider group, formerly known as Saint Clare's Health System. Saint Clare's was the largest community health system in northern New Jersey, comprising four hospitals with $300 million in operating revenue for 2007. The group is based in an affluent area; however, it was losing money.
Catholic Health Initiatives (CHI) is a delivery network with health systems in 19 states. The organization has achieved its growth primarily through acquisition and internal expansion. CHI, which saw $7.7 billion in operating revenue for 2007, desired a footprint in New Jersey and Saint Clare's fit its criteria for M &A.
"My goals as CIO were to maintain a high-performing team whom I was very loyal to and were loyal to me," said Temple. "I wanted to ensure everyone landed on their feet and also continued to derive satisfaction from their jobs. I also wanted to maintain a very low voluntary turnover."
The IT synergies between the organizations were very strong. CHI and Saint Clare's both had standardized Cerner clinical information systems, a Cisco network infrastructure and an Avaya telephony system. However, Saint Clare's had a strong in-house development team with expertise in custom configurations and business intelligence tools.
"One of my challenges as CIO was to figure out a way to have what I believed to be unique and special talents with the Saint Clare's IT department recognized and contribute to having a significant footprint in the new organization with CHI," Temple said.
Temple's strategy was to identify and understand areas of commonality and compatibility between the two organizations in terms of platforms and applications. He then spoke to the distinctive competencies that Saint Clare's might be able to offer to CHI and that CHI might be able to offer to Saint Clare's.
Because CHI had federalized its IT governance structure--both to maximize cost savings from economies of scale and ensure responsiveness to local hospital IT needs--it was resistant to ad-hoc customizations. In contrast, Saint Clare's had a focus on ad-hoc customization in order to bring additional and personalized value to its physician and administrative customers.
"We have been able to demonstrably positively impact the lives of patients and employees at Saint Clare's through what we have done in IT," Temple said. "Think about how exciting it will be to leverage what we have to have this kind of impact on stakeholders nationwide."
His passion for his team's work caught on with CHI executives, who investigated their toolsets and elected to retain them as part of the organization's national IT services group as well as budget some of their time to maintain Saint Clare's deployed solutions.
According to Brown, the combination potential for the CHI-Saint Clare's M &A is high; however, the competitive environment is still facing increased pressure on healthcare costs and quality as well as uncertainties about healthcare reform at a national level.
Temple offered advice for CIOs and chief medical information officers (CMIOs) who will have to face integrating one or more facilities' existing IT