Healthcare consolidation: Four IT considerations to help avoid disrupting revenue operations

Mike Mast

In 2012 there were 418 mergers and acquisitions, totaling $32B within the healthcare market (55% of those deals were amongst healthcare facilities[1]). While M&A activity has slowed since its peak in 2012, it still represents a significant trend in the healthcare market.  It’s no secret; consolidation in the US market continues to alter the healthcare landscape.

This fury of consolidation activity is driven by a number of factors:

  • The pressing need to achieve economies of scale in the face of decreasing operating margins. While achieving profitability has always been a challenge, healthcare provider operating margins have decreased by 6% and the net income margin decreased by 9% between 2010 and 2013[2].  Furthermore, larger organizations are better positioned to make investments while expanding their care capabilities and access to patients.
  • The need to manage the health of regional populations and transition to risk-based reimbursement models. Consolidation puts larger health systems in a better position to control the costs and outcomes for a patient population as they can better manage the care and intervention that a patient receives.
  • Increased market share puts providers in the position of greater strength when negotiating contracts with payers. It also opens the door to entering into the payer market themselves.

The history of M&As are fraught with stories of promising organizations with loft goals that fell short of expectations and ultimately failed.  A significant contributor that determines the success or failure of M&A activities is dictated by the organizations ability to execute its expansion strategy while minimizing disruptions to revenue operations.

Specifically, there are four key success-factors to consider from a revenue cycle IT perspective:

Revenue cycle IT solutions and processes must be able to scale in order to accommodate additional volume while achieving the financial outcomes that are necessary to fund the organization’s clinical mission first,  and potential additional M&A activity second. Not all revenue cycle solutions can scale to take on increased volume without experiencing significantly degraded performance.

Full scale IT replacements are extremely disruptive, so healthcare organizations must ensure that their revenue cycle management system has the ability to interoperate with all clinical systems.  This is a strategic imperative for organizations looking to execute on an acquisition plan without experiencing catastrophic disruption.  A best-of-breed, interoperable revenue cycle solution that can manage both ambulatory and hospital billing operations can help ensure seamless integration with the acquired organization EHR and take on all billing operations more rapidly.

Ability to adapt to different reimbursement models
A primary reason for health system consolidation is the enhanced ability to take on and manage different types of risk.  It’s critical that the information technology ecosystem be capable of adapting to risk-based based models of reimbursement. Whether the organization intends to take on bundled payments, shared savings arrangements or full capitation, provider organizations must have the capability to manage the revenue operations

No two provider organizations are alike. Different payers, complex processes, diverse cultures…the list goes on.  And change is hard.  Absorbing revenue collection operations with minimal disruption requires a flexible IT ecosystem. The revenue cycle solution of record must be configurable so that additional claim volume can be added quickly. This is a great opportunity to engage the organization’s newest employees by enabling them to improve on their existing processes and provide them with a sense of ownership.

Consolidation is not going away and will continue to present IT challenges.  M&A is by its very nature a disruptive experience. With the right strategy and IT ecosystem an organization can successfully engage in M&A activity without putting revenue at risk.



[1] Frost & Sullivan, Analysis of Mergers and Acquisitions Trends in the U.S Healthcare Provider Industry. 2014

[2] Frost & Sullivan, Analysis of Mergers and Acquisitions Trends in the U.S Healthcare Provider Industry. 2014

Leave a Reply

Your email address will not be published. Required fields are marked *