As merged providers integrate employees, facilities and technology, experts say many are neglecting the need to align crucial back-end software that manages finances, supply chain and human resources, among other functions.
Vendors and consultants alike say many health systems that have engaged in the M&A boom of the last decade have failed to integrate their enterprise resource planning software, leaving them with a tangled mess of different products that don't communicate with each other. That means providers may not be able to fully realize some of the synergies that they often hope to gain from mergers, like centralized purchasing and system-level analytics.
“(Health systems) are struggling day-to-day because their ERP systems don't match between hospitals they've acquired,” said Dan May, a managing director and supply chain expert at Huron Healthcare.
May said many systems have been more focused on clinical technology like electronic health records and haven't taken the time to look at their back-end processes. This isn't just a problem for smaller systems: May said he visits many large providers, some as large as ten hospitals or more, who don't have their ERPs aligned.
“I think it was neglected so much because of the electronic health record explosion, that organizations are saying, 'gosh, we can't even order online, and we don't have the ability to order from physician practices,'” May said.
As many health systems have acquired outpatient facilities like physician groups, they've been zeroing in on procurement for those locations. Before they're acquired, many physician groups aren't using an ERP for ordering, which can mean they've been using a credit card to purchase supplies on a distributor's website or even Amazon, making their supply expenses difficult to track, said Bill Marquardt, vice president of product strategy and planning at Premier.
Marquardt recently discussed ERP software with a large multi-hospital system in the southeast that had 15 different products. Premier, the Charlotte, N.C.-based group purchasing and performance improvement company, offers ERP software through its PremierConnect data platform, which can be purchased as a full suite or in separate modules that support health systems with supply chain, population health, and quality reporting, among other areas.
Having multiple ERP products is inefficient because it means a system is paying for multiple products and multiple upgrades, has different back-end processes at different facilities and has to maintain data in different places. But it also means that a health system doesn't have full visibility into its purchasing and clinical data, Marquardt said, and that means a system may not be maximizing cost savings or be able to fully monitor population health outcomes across its facilities.
“It's just really difficult to drive change,” Marquardt said. “Whether you're trying to standardize or get on the same (GPO) contract, it's very difficult to do that (with fragmented data).”
Premier, as both a consulting firm and a software vendor, often helps systems both align their internal processes and implement a new ERP system. It's possible an organization could do some of integration on their own, but the vast majority recognize they need some help, Marquardt said.
“Sometimes we're a tie breaker (between systems),” Marquardt said. “That's how we really designed our solutions here: How are you operating today, and let's provide that process map and identify breaking points in the process to identify how to figure out the new business.”
It's not usually a quick process, Marquardt said, especially because it can be a painful process for merged entities to compromise on how things should be done in the new company. A recent project took about 12 months, including the consolidation of ERPs and combining data and item-masters. Item-masters are extensive lists compiled by supply chain professionals that include all of the products that can be purchased within a health system. When hospitals merge, they combine item-masters and often try to compromise on certain items to limit the amount of items on a list and drive efficiency.
Although integrating data and items can take some time, Premier can often give providers visibility into analytics across their system within 50 days, Marquardt said.
Many organizations aren't planning for ERP integration, but some are doing due diligence to discuss the issue when facing a potential merger, said Tim Brown, chief business information officer for healthcare at Infor, an ERP vendor. Some do come to the company early to inquire what it will take to integrate systems once an acquisition is complete, which he said is a best practice for systems that want a smooth technological integration.
Even when two merging systems are using the same ERP, there can still be difficulties. When Bloomington, Minn.-based HealthPartners and St. Louis Park, Minn.-based Park Nicollet Health Services combined operations, the leaders were pleased to learn they were both using Infor for ERP, but soon realized they were using it quite differently, said Vini Manchanda, vice president of supply chain services at HealthPartners.
While HealthPartners had automated nearly all of the functions that go into its ERP, like purchasing, payroll and human resources, Park Nicollet still maintained a paper trail for certain functions. The systems are now reporting finances together in the ERP software, but there are still internal processes between the systems that are different, even though they have the same end-goal.
“These are still cultural struggles for us where people don't want to give up their old habits, and feel that the processes they had in place are sound and provide accountability,” Manchanda said. “That's still a daily battle.”
The integration with Parker Nicollet, which had a nearly 400-bed hospital and roughly 20 clinics, also made Manchanda realize just how hard the two hospitals would need to work on aligning their purchasing decisions. The combined system had an item-master of nearly 100,000 items, whereas HealthPartners' previous list included 60,000 products.
HealthPartners, now a six-hospital system, had previously acquired four smaller hospitals in its region over the past eight years. Although those integrations were somewhat easier because those hospitals often didn't have significant ERP software, employees at those hospitals were, like Parker Nicollet, often reluctant to transition to using ERP software for some of their backend functions.
“We found that the biggest issues in the smaller hospitals were cultural,” Manchanda said. “The acceptance of automation was very, very difficult for people.”