What’s Fueling Interest in Healthcare ERP?
By Clifton Jay
Clifton Jay, MS is president of HealthNET Consulting of Burlington, MA.
I had to laugh when I Googled “ERP in healthcare” and got “Exposure and Response Prevention (ERP) is a form of psychotherapy!”
ERP stands for enterprise resource planning, which has manufacturing roots, yet is not a common term in healthcare. It covers what we might call general financials, including materials management (aka supply chain since the pandemic), finance (accounts payable, general ledger, etc.), and human resources / payroll. Then there are ERP’s extended functions of customer relationship management (CRM), contracts management, and decision support / analytics.
People have asked me, why would my hospital need customer relationship management? The easiest example would be that a CRM could be used for patient engagement. Now this also starts to create a mixture of what’s considered part of the EHR versus the ERP, which might affect integration or single platform thinking.
But back to my main point — what’s fueling the interest in healthcare ERP today? By my observation, there are three main drivers – age, evolution, and M&A. As you consider what to do regarding ERP, I pose some food for thought.
- Age. Many hospitals and healthcare organizations are still using the general financial systems that they installed 20 years ago, and many of these systems are showing their age, such as old-style report writers, interfaces, and setting up on the chart of accounts that we all started with in 1974 (I still have a copy of the AHA guidebook.) This raises questions, such as, is it time to replace the ERP software? If so some or all? Or, keep doing bolt-on new applications such as business intelligence visualization / dashboard tools and contract management systems?
- Evolution. New generation ERPs (most of the traditional vendors have come out with highly rebuilt systems and there are also new players) tend to be built upon single platforms that eliminate interfaces and redundant master files, making it easier to perform analytics across data silos which resonates like the “one patient – one record” mantra of EHRs. It is a large undertaking to revamp the ERP because it involves everything and everybody, from the EHR (remember that the orders / charge masters drive revenue), IT, and finance / operations. The question is, what’s the value of a single source of truth, access to information, and streamlined operations? I have not seen a tangible ROI. The “value analyses” that the vendors use seem to be too conceptual and vague to me. If someone has some tangible ROI, e.g. time saved in report writing, accounting time, supply chain costs or standardized payrolls, I would love to see it.
- M&A. Mergers and acquisitions and multi-entity organizations create a need for enterprise-wide accounting, contracts for goods, supplies, and services, and standardized pay practices. Again, I had to laugh but was truly impressed when I reviewed a mapping table for multiple GLs with seriously different COAs. I’m not an accountant, but it looked like a cost accountant’s nightmare to me. Additionally, centralizing functions would also lead to having these departments use single software systems. It raises a question of how much are we torturing our users in having to use cobbled-together systems?
I hope these comments might add some perspective as you plan and strategize on systems that support your users, your enterprise, and ultimately your patients.