Readers Write: IT Leadership: An Essential Consideration for M&A+

IT Leadership: An Essential Consideration for M&A+
By Laura Kreofsky

Laura Kreofsky, MHA, MBA is vice president of advisory for Pivot Point Consulting, a Vaco Company, of Brentwood, TN.

Mergers and acquisitions (M&A) has been a blanket term for the massive industry consolidation in healthcare over the last several years. Challenging operating conditions and shrinking margins, the shifting regulatory landscape, and the move to value-based care have spurred provider organizations to acquire typically smaller systems, independent hospitals, or provider groups. It has also led healthcare organizations that don’t have the capital to acquire assets outright to craft arrangements and relationships that are less than full asset mergers offering more autonomy to both parties.

In 2021 and beyond, M&A models are not going to be binary. Joint ventures, affiliations, and countless innovative options will change the operational landscape of healthcare, creating what could be called M&A+. The industry is rapidly creating new organizational types and service models that are designed to meet healthcare’s dynamic challenges and opportunities. These new business structures will spur IT innovation and also introduce new complexity.

While traditional M&A activity can be incredibly complex, the technology side is straightforward in its execution, at least in theory. The basic model is that the acquiring partner migrates the acquired entity to their technology, systems, and processes over a defined period. The goal is to create one big, happy family. Like all blended families, there are always compromises, but there is some conformance in the end.

With joint ventures, affiliations, and other hybrids, often the relationships and technology strategies are far less definitive. Each side may seek to continue to use their technologies and processes to some extent. The two entities must then decide which systems and processes to use in the new partnership.

The result is often hybridization and harmonization that meets the needs of both sides equitably. In some cases, the goal is a minimum value product (MVP) that is “just enough” to meet the relationship’s needs. In other cases, the new partners will co-create solutions that far exceed either party’s capabilities individually.

IT has a critical role in system and process integrations to bring measurable value to the partnership. However, IT teams are repeatedly brought in late in M&A. Critical IT decisions often go unaddressed at the strategic level. The individuals making the decisions may lack deep health IT insight. IT is often left to determine how to execute, not innovate or optimize.

In the M&A+ world, IT leaders must be engaged early to support initial assessment and planning. They can offer guidance regarding the best approach to building the new entity’s technology ecosystem encompassing the infrastructure, software, and services driving greater value and speed to execution.

In the M&A+ era, healthcare consolidation agreements will be more diverse, data more valuable, and technology more critical and complex. IT leadership engagement in assessment, planning, and overall transaction execution will help organization be better positioned for success.