the challenges of post-merger integration-luis taveras, rwj barnabas health
TRANSCRIPT
Challenges of Post Merger Integration
March 2017
Luis E. Taveras, Ph.D. Former Senior Vice President & Chief Information Officer
• General Information
• Day-1
• The Role of Information Technology
• Summary
• Q&A
We will discuss the general state of the industry with a focus on how the Information Technology (IT) organization is impacted throughout all the phases of a merger or acquisition.
2
General Information
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In 2016, deal making in the US Healthcare sector continued though at a slower pace than prior years.
• 939 Deal – 1.4% decline vs. 2015 – 14 megadeals totaling $42.5B
• 4 less than 2015
• $71.7B deal value – 59.6% decrease vs. 2015
• Long-Term Care was most active sub-sector – 337 deals (36% of deals) – $14.4B (20% of total deals value)
• Physician Medical Group – Largest deal value growth (~385%)
• Rehabilitation – Grew most rapidly
Source: PricewaterhouseCoopers, LLC
Growth in Excellence and Lower Cost of
Care
Growth of Academic Mission & Centers of
Excellence
Operational Effectiveness
Physician Growth, Alignment and Management
Strength & Development of Brand & Reputation
The major drivers for hospital mergers are a search for financial and geographic scale but there are many other underlying goals.
Positive
Organizational
Culture
Receptive &
Responsive
Senior
Management
Effective
Performance
Monitoring
Building and
Maintaining a
Proficient Workforce
Effective
Leaders Across
Organizations
Expertise Drives
Practice
Interdisciplinary
Team Work
All of these goals, along with the overall strategy of the new organization will not be achieved unless there is a focus on culture.
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Operations
Performance Factors
…and it’s not just the system of culture that is seen above the surface but more importantly that which operates below the surface as a series of influencers.
Behaviors
Assumptions
Perceptions
Beliefs
Visible Organizational Culture
“The way we say we get
things done”
“The way we really get things
done”
Influence
rs Polices and Procedures
Traditions Stories
Feelings
Values
Unwritten Rules
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Components for gaining change adoption during the merging of two organizations
If done correctly, mergers and acquisitions can lead to the creation of a new culture that can bolster the organization to high performance levels never achieved by the merging entities.
• Change Management Guiding Principles: – Understand cultural differences between the two
merging organizations – Engage impacted personnel from both systems
(leaders and staff) early in the process – solicit their input
– Different stakeholder groups have different communications needs
– People’s engagement with communications changes over the course of the integration
• Change management must be embedded in the integration approach: – Communications help provide understanding of
the vision for change - “Why it’s important” and “What’s in it for me”
– Change Activities (Team Workshops, Mentoring One-on-One’s, Physician Leadership Councils and Town Halls)
– Training provides necessary skills to succeed
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Training
Programs Communications
Change
Activities
Skills Behaviors
Knowledge
Adoption
Day-1
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• Guiding Principles
• Governance
• Integration Process
• Integration Approach
• Leadership Team
• Planning Process
• Development of Action Plans
• Key Activities Methodology
– Prioritization Schema
• Metrics
At the onset of an affiliation, there are a number of critical topics that must be considered.
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• Clear and measurable success criteria
• Sequencing plans
• Funding and resources
• Key metrics should be tracked and reported on a regular basis
• While groups will need to define the appropriate metrics, some suggestions include: – Financial metrics, such as one time savings, cost avoidance, recurring
savings
– Clinical metrics, such as LOS reduction, quality improvements, lower cost of care, improvements in patient satisfaction, wait times reductions
– Human Resources – turnover, satisfaction, recruitment times
Among the first topics of discussion needs to be how success will be measured.
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After clearly defining success, the new Governance structure must include the creation of an Integration Management Office (IMO) to manage and track the measures of success.
Integration Steering Committee
Organization Culture Strategy Synergies
Work Groups
Supply Chain
Revenue Cycle
IT HR
Business Initiatives
Legal
Fundraising Bus. Dev.
Etc.
Integration Management Office
IMO Oversight
IMO Apprised
Process Benchmarking
& Metrics
SME & Resources
Analytics & Measurement
Charter
Savings Targets
Timeline
Givens
Boundaries
Organization
Operational
Budgets
Low Risk/Impact
Communication
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The Governance Model needs to ensure that all leaders are engaged in identifying the areas of opportunity for improving the effectiveness and efficiency of the combined organization.
Solution Sponsor
Technical Operational Cultural
Executive Sponsor
ESC
Operational – Integrated
Cross-Cultural
Office of Integration
Solution Teams
C-Suite SVPs VP’s
Ass
ess
ment
and D
esi
gn R
eco
mm
endations
Imple
menta
tion D
ecisio
ns
Local Directors
Supervisors Business Unit Leaders
Merged System
Leadership
Local Leadership
These opportunities must be evaluated based on an established collaborative decision making process.
Recommendations are developed
in close coordination with local and
functional leadership at each
operating entity
The decision to implement
and prioritize will be the
responsibility of combined
integrated leadership.
• Identify & Prioritize projects by degree of impact and degree of difficulty
As an example, the key activities that have been identified as the drivers of success can be scored and tracked on a grid in order to provide focus.
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Low Priority
Important but longer
implementation
Opportunistic Quick Hits
High Impact Low Impact
Easy to implement
Difficult to implement
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• PIPELINE – Pending project, not fully vetted but savings may be identified.
• VETTED – Savings have been identified and project has an approved Charter and Investment Summary
• ACTIVE – Project is in progress or launched
$
$XX
The key is to continuously have a funnel of valuable projects in the pipeline.
Example: Supply Chain
Role of Information Technology
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• No organization shall regress as a result of the integration – no reduction in the ability to provide the same or higher level of service.
• Whenever possible, staff will be given the opportunity to retrain in order to acquire the necessary skills to continue to add value and maintain employment.
• The operating environments will be consolidated when operational efficiencies are increased and cost reductions and/or avoidance can be achieved.
• The integration efforts will be undertaken with a primary goal of enhancing our ability to function as an efficient system as well as reaching the financial goals established for the affiliation.
• A business case will be developed for any major project required for integration. The business case must be approved by the Integration Steering Committee prior to making any contractual commitments or assigning
resources.
In information technology, we must define the key principles that guide our actions throughout the integration process.
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IT&S Guiding Principles
Those guiding principles are then applied in the identification of integration projects.
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Information Technology includes an evaluation of the following areas:
• Consolidation of data centers
• Consolidation of servers and networks
• Use of the centralized help desk
• Consolidation of clinical, business and administrative systems
• Consolidation of vendor contracts
• Merge into the tower organizational structure
• Corporate security management
• Biomed/Clinical engineering consolidation
• Desktop strategy
• Printer management consolidation
• Share Project Management Office (PMO)
• Operational processes and tools
• Policies and procedures
• Others
Examples of potentially high yielding IT projects include the unifications of applications along with several operational efficiency initiatives.
• IT must deliver on IT specific projects along with all the other projects that require IT participation
• IT must ensure that the organizations continue to operate while transitioning to a new operating model…IT must be involved in all aspects of decision making
• IT staff must be reassured that they have a key role in the new organization in order to avoid flight risk of critical staff…if necessary, put in place retention bonuses for key employees
• IT must avoid OWNING all projects and focus on serving as an enabler of the integration
• IT must deliver on short term operational projects that are required for the acceleration of the development of a single culture….email, policies and procedures, network consolidation, portals, etc..
In delivering these projects, IT faces several specific challenges that could results in shortcomings if not carefully managed.
Summary
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Integration Key Success Factors
The complexity of all integration efforts must be managed with discipline and focus in order to achieve the objectives of the affiliation.
IT projects, along with all other projects, need to be continuously evaluated and prioritized based on the value they bring to the newly formed organization.
Ensure feasibility of recommendations
Identify risks / mitigation strategies
High
Low
Example Low High Risk
Span of Control
$$
Service Line Rationalization
$$$
Market Share Growth $$$
Physician Alignment
$$
HR Pay Practices
$$
Elimination of duplicate
efforts $$
Supply Chain Physician
Preference Items
$$
Information Technology Integration
$$$
HR Benefits $$$
Vendor consolidation
$$
Supply Chain Consolidation
$$$
Organizational integration
$$
New Governance
structure $$
Eff
ort
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Ensure alignment to organizational strategy
Assign accountability for implementation
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