The Pervasiveness and Inevitability of Healthcare M&A
Sep | 24 | 2019 —
Healthcare is changing in macro and micro ways. This is evident both as consumers of healthcare and as participants in the health industry. A substantial indicator of change is the high volume of merger and acquisition activity. Specifically, within health systems and care delivery, consumers see that previously independently owned doctors’ offices now share MyChart URLs with marquee health systems, they routinely learn about large systems merging through newly constructed joint billboards, and new clinics are popping up on street corners around the country.
To capture the promise of innovation, increase revenue, and maintain (or achieve) positive operating margins, healthcare organizations leverage consolidation as a critical growth tool. KaufmanHall reports that in 2018 there were 90 healthcare-related M&A transactions. While this is down from a pure transaction perspective (there were 115 in 2017), these mergers grew in size as part of a trend toward “megamergers” where the big get bigger. Of the transactions announced in 2018, seven involved sellers with net revenues of $1 billion or greater.
Demands for innovation, transparency, more rapid adoption of technology, and regulatory compliance in healthcare are high. Inorganic growth offers an option for healthcare organizations to respond and strengthen long-term viability. It allows healthcare organizations to expand their reach across geographies, secure new payment contracts, comply with regulatory requirements, gain access to necessary infrastructure at a lower cost than they would independently, and vertically integrate to broaden services offered across the continuum of care.
M&A is a powerful way to help ensure longevity while giving patients the convenient one-stop-shop they want.
The Weight of Moral Obligation
Done well, consolidation affords healthcare organizations the opportunity to improve their financial health as well as the health of patients. With this type of consolidation, other industries experience economies of scale and healthcare will too. The opportunity, and the moral obligation that health systems have, more than any other industry, is to take these economies of scale and drive them back into a focus on patients. If the sole result of the momentum is that health systems save or add to their bottom lines—efforts have failed.
Healthcare providers have a moral imperative to improve health. While the industry has often struggled to control costs and prove value for effort, the appeal to celebrate financial progress is tempting…but, distracting. The momentum of financial progress paired with care innovation has the potential to drive a breakthrough, or invoke the flywheel effect, in improving health.
This momentum has to be about the patient, namely understanding and knowing your patients. But in some megamergers, there seems to be a hesitation to move on from the top-of-mind physical or financial growth to tackle how to deliver on the moral imperative- to improve health. In these instances, access is complicated, clinicians are strained, and patients leave with a disjointed experience.
After a large merger of two specialty physician groups and continued expansion via smaller acquisitions, Axia Woman’s Health faced an experience problem as a result of their unanticipated data integrity challenge: consolidating all patient data into a single instance of their EHR and accurately associating all of the data with the correct patients.
Axia had to overcome this challenge and they had to overcome it quickly because staff and clinicians were increasingly frustrated with data integrity issues. Axia solved this challenge with Verato’s Auto Steward identity resolution service; this service uses our referential matching. Verato referential matching discovered that 10% of the records in Axia’s consolidated patient database were duplicates of one another that were disconnected. Each duplicate needed to be merged in order to provide longitudinal medical record views.
Typically, addressing these issues requires manual remediation, intervention and action. Instead, Verato’s Auto Steward identity resolution service identified the duplicate records and then automatically resolved the issues. This saved already overburdened IT resources and improved clinician, staff, and patient experiences. Axia continues to use Verato to proactively address patient record matching issues.
In the midst of complex M&A integrations, an important task healthcare IT teams own is EHR consolidation or migration. The challenge of reconciling patient identities across IT infrastructures is often forgotten until after systems are consolidated. This frustrates (and makes unsafe) interactions for patients and clinicians. Avoid this by planning for patient data integrity resolution early on in any M&A transaction. This avoids negative downstream consequences for patients, clinicians, and the rest of your business. By planning early, your team will know who your patients are so that everyone can focus on improving health.
Dec | 06 | 2019
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