Connecting Infrastructures for Hospital Merger Success

The Healthcare Industry has recently seen an unprecedented rate of healthcare entity mergers into multi-hospital systems. A survey conducted by KPMG found that 84% of mergers &  acquisitions (M&A) professionals point to healthcare as the industry with the most M&A activity in 2015[1]. This spike in mergers is attributed to regulation and technological changes that were introduced into the health industry in years prior.

Recent legislation, such as the Affordable Healthcare Act (ACA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act have acted as catalysts for the merger of healthcare entities. Healthcare entities are treating more patients than ever with the expectation of retaining a high standard of efficiency and care quality.

Leveraging Economies with Consolidation

The widespread adoption of electronic health records (EHR), health information exchange (HIE) systems, and the recent enforcement of the HITECH Act’s Meaningful Use rules have also played a major role in the rapid consolidation of healthcare entities. The rules were designed to encourage the interoperability of EHR through the advancement of HIE systems throughout healthcare. However, implementing these systems can be costly, leading to an increase in mergers to alleviate costs through economies of scale.

A recent survey by Deloitte revealed that the top motivating factors of mergers between two or more healthcare entities are based on gaining a competitive advantage and meeting regulatory compliance[2]:

  • 48% Competitive Pressures
  • 40% Portfolio Diversification
  • 29% Healthcare Reform
  • 27% Increased Performance to Scale

Smaller hospitals and independent physicians in remote locations have seen improvements in the quality of their care as a result of mergers, allowing them to scale the cost of their HIE systems and other technologies. A study published in the journal of Health Services Research found that patients admitted to smaller hospitals within 100 miles of a large multi-hospital system experienced lower mortality rates than patients initially admitted into independent hospitals[3]. While the rate of mergers is increasing, their success is highly dependent on the consolidation of systems and their ability to operate in concert.

Technology Considerations for a Successful Merger

Healthcare entities interested in merging are continually running into the problem of incompatible data infrastructures, leading to major connectivity and compliance issues, jeopardizing the success of a merger.

The Integrity of Existing Data Infrastructures

A recent survey by Doctors Helping Doctors Transform Health Care studied the major factors that are preventing hospitals and physicians from complete system connectivity. The survey found that 71% hospitals and physicians expressed a lack of interoperability between diverse HIE systems and a lack of infrastructure support as the two biggest factors that are keeping their systems from complete connectivity[4].

Compatibility in Health Information Exchange Systems

Merging facilities with a wealth of diverse specialties within their facilities may run into compliance issues after consolidating HIE systems. Information that is protected by the Health Insurance Portability and Accountability Act (HIPAA) must meet strict regulatory standards in order to remain compliant.

A report published in The Journal of the American Medical Association found that 25% of facilities expressed concerns about their existing information security and liability, preventing them from fully utilizing their HIE systems[5]. Consolidating incompatible HIE systems with differing information formats, security measures, and conflicting layers of authorization can lead to a breach in compliance.

Utilizing Software-Enabled Solutions

Developing software-enabled connections between existing infrastructures is a cost-effective solution to issues with infrastructure integrity and compatibility. For example, cloud computing is commonly used for EHRs as it allows healthcare facilities to utilize a single, adaptable, and centralized data infrastructure. Using the cloud streamlines processes and opens the functions of other existing technologies to scale.

A major issue with older infrastructures is information siloing. Processes and information are created to function within its infrastructure, confining its function to a single space. This can be problematic during consolidation, as facilities must use extensive hardware to bridge a connection. With software-enabled solutions, bridges can be custom built to meet the compliance, security, and technological needs of a reliable connection.

Reaching optimal performance within a multi-hospital system requires the complete consolidation of data infrastructures. Processes that are incompatible or whose connections jeopardize the integrity of an infrastructure may lead to greater issues later on. To optimize the benefits of a merger, healthcare entities should consider software-enabled solutions that will allow them to bridge successful connection for the reliable flow of their HIE systems.

As electronic health records continue to centralize, maintaining reliable data infrastructures will be an increasingly important asset to the quality of healthcare. Tiempo Development offers pre-built software development teams to start working on strengthening the quality of your data infrastructure. Visit our Healthcare Solutions page for more information about our customized solutions at Tiempo Development.

[1] Sherrie N. “2015 M&A Outlook Survey Report”. KPMG.

[2] Reynold W. Mooney, et al. “M&A trends in life sciences and healthcare”. Deloitte.

[3] Kristin M. “Multihospital System Membership and Patient Treatments, Expenditures, and Outcomes”. U.S. National Library of Medicine National Institutes of Health

[4] “Docs name interoperability, infrastructure barriers to HIE”.

[5] Donald B. and Andrew H. “Eliminating Waste in US Health Care”. The Journal of the Amercan Medical Association”.