The number of healthcare mergers and acquisitions (M&As) continues to increase at a remarkable rate, following a trend that began in 2009 with 50 M&A deals. The highest number of M&As in recent history was recorded in 2017 with 115 deals, and even more might be seen in 2018. But are the leaders of healthcare organizations doing all they can to maximize the value of M&As?
The importance of your CIO in today's M&A environment
Why M&A strategies of today, and tomorrow, need to be driven by a data-first mind-set
TZ: The role of the CIO is growing and evolving. Next-generation CIOs are expected to be transformational leaders–starting with harnessing organization data to surface actionable and predictable intelligence.
Digital health is all about patient-centered experiences. We can readily observe this from transformations already underway in related service industries. The increasing value of data-driven insights makes it critical for CIOs to stay current with new digital health technologies, data analytics, and interoperability of modern IT systems. This includes building the literacy and competency of your senior team to reimagine a digital future of healthcare, together.
Focusing on M&A, a key leadership task for CIOs is gaining the sponsorship to support data governance, definition, and stewardship across the new organization. All too often, the M&A focus is solely on harmonizing technology systems and achieving targeted cost reductions, leaving data and talent overlooked and undervalued. In other industries, data takes center stage equal to an organizational balance sheet. CIOs must prepare themselves from the onset of an M&A with strategies and tools to estimate and plan for the value of data.
TZ: Technology systems and related costs have historically been the primary metric used to assess the value of M&A activity. However, data needs to be considered an equal third pillar for M&A valuations. In fact, data and talent are foundational and enduring assets, whereas technology systems are transient with waning value. That said, there remains a need for CIOs to be deliberate in addressing the complexity of IT systems by simplifying the technology portfolio over time so as not to anchor the future with unnecessary cost and risk.
TZ: I'd give three pieces of advice:
- Establish clear IT strategic objectives with the leadership team, giving balanced emphasis on technology, data, and talent.
- Understand and align data-driven organizational strategies for early-stage execution.
- Enlist stakeholder leadership to strengthen data governance and consider the formation of an analytics center of excellence to leverage organizational capabilities.
Seek opportunities or early pilot initiatives to highlight the value of the newly combined data assets. Consolidating systems may be necessary to reduce the cost and risk of the new organization, but the path to value takes time and considerable investment. Data is a means to accelerate and demonstrate value early. It always brings new insights: How do I best serve the market with the newly combined organization? Where are the opportunities to improve quality, operational throughput, and cost? What is the health status of the patients we serve?
Being a transformational leader requires you to be a forward-thinking, proactive leader starting with offering an enriched view of the data of the newly formed organizational leadership team.
TZ: Organizations are never fully integrated until the data is integrated, and with the rip-and-replace strategy, that integration can take years and cost tens—if not hundreds—of millions of dollars. One alternative to rip and replace is better integration of data. Health Catalyst's Data Operating System (DOS) does just that as well as providing an open-architecture platform to enable your digital health strategies. The value of this approach is that individual IT systems can continue to deliver on their core transactional mission without cost or churn while harnessing data for strategic uses within the new organization.
To learn more about Health Catalyst, please visit www.HealthCatalyst.com/ModernHealthcare.