In the span of 5 days, we’ve had four blockbuster merger announcements: Optum/Davita, CVS/Aetna, Advocate/Aurora, and the definitive agreement for Dignity/CHI. This got me thinking… I wonder if the CEOs of each of these companies truly understand the technological implications of what they have acquired.
The Balance Sheet
The announcements are bold.
Aurora Board Chair Joanne Disch said of the Advocate/Aurora merger, “We share a bold vision for the future as we create a consumer-centric system to improve the quality of life for the diverse communities we serve.”
Kevin E. Lofton, the chief executive officer of CHI, said in a press release, “Our new organization will have the talent, depth, breadth, and passion to improve the health of every person and community we serve.”
These are inspiring statements. Each company brings talent, depth, breadth, and passion for the combined mission of the new union… but there is no mention of the technology. The CVS and Optum deals have strong technology undertones, but the more traditional hospital system mergers did not.
I’m sure each company did their due diligence regarding the technology. But what did they find? What were they looking for? Have the questions we are looking to answer for healthcare in the due diligence process been updated for a digital economy? What should we be looking for?
I introduced a technology balance sheet in my previous post, The Path of the Digital Hurricane. The premise is that, much like the financial balance sheet, there is a technology balance sheet for every company. This balance sheet states its assets, liabilities, and even equity, and will be a primary driver to realizing the potential of each of these mergers.
Let’s take a look at some of the components of a technology balance sheet.
Data includes: Data assets, practices, insights, algorithms
If data is the new oil and a digital economy is fueled by data, then it stands to reason that mergers will come to be about acquiring new data assets.
This may mean acquiring new sources of data, like in the case of the CVS/Aetna merger. The combined entity will now have access to a mother load of retail, pharmacy, clinical, claims, and social data. This is a seriously powerful asset.
I would also want to know if we have any practices or algorithms that can be scaled into the new entity to dramatically improve performance. Are we able to produce insights from data in a new way, that will unlock value in the combined entity?
Generically, I would want to know if we have a team that has a proven track record of operationalizing change. More specifically, the following IT team needs to be solid: Visionary CIO, Security Officer, Data Officer, Infrastructure and Operations, and financial management. The key question here will be, Can the people that run our current IT organization handle the scope and scale of the new company?
To have vision is to be able to see. I call out visionary CIO because I believe that technology is at the center of the future of each of these companies. The CIO will need to see what is possible and clearly articulate that to every level of the organization.
Scalable Architecture and Practices
Core Architecture: Data center, compute, storage, network, endpoint, security
Core Practices: change management, incident management, release management, Knowledge management, transition planning and support, and project management
These become the foundation on which the new entity will be built. If it isn’t working for the existing company, it will not get better with scale and more pressure.
As a side note, outsourcing during a merger is a horrible idea for so many reasons. The best analogy I can think to give is one in which you have a family member build a house for you. They do an awful job: the foundation is cracked, the windows have gaps, and there is a host of other problems. Plus, you have a move in date of three months from now.
What’s your next move? Well, I can tell you what it wouldn’t be: you wouldn’t then have the family member interview contractors to rebuild the home. If they didn’t know how to build it from the beginning, how would they know what to look for in a new contractor?
(Also, you shouldn’t plan on being in the home anytime soon.)
Is there some asset that you can leverage? Perhaps it’s a virtual hospital, such as the one that Mercy Health System has in St. Louis or the one Intermountain just announced. A place where physical hospitals are made more efficient by utilizing technology and centralizing skills.
Perhaps it’s AI around billing and claims that can be leveraged for immediate benefits. No matter what you find, take a look at your current technology assets and find something that you can work with.
There are a plenty of sources of liability in healthcare. In fact, here are a few of the biggest sources of tech debt in the industry:
- Application sprawl – EHR, PACS, EDW…
- Data quality, silos
- Interoperability – Longitudinal patient and consumer record
- Identity – Single source of truth for physicians, locations, patient demographics
- Security framework, monitoring, response, training
- Refresh practices – budgeting, cycles, operations
- Missing automation
Most healthcare can be exposed very quickly by asking for a complete inventory of certain things that you would expect to be a given. For example, you should request a list of:
- All organizations with whom we share data, and what data we share
- All end-user devices that have accessed our secure network in the past year, complete with OS and username
- Applications in our environment with use cases supported by the application
- All servers in the environment with their patch disposition (remember, Equifax was compromised by only one server)
In the Aurora/Advocate and Dignity/CHI mergers, there is a great deal of complexity being attributed to the EHR situation. And rightfully so.
The EHR runs the operational aspects of a health system. Running on multiple systems is not a sustainable, long-term model due to the cost and complexity. The good news is that there are tools that make discrete data-sharing and innovation possible on top of disparate EHRs that can be utilized to bridge the gap. This is definitely a liability for a merger that should have a plan prior to any decision.
Plan Your Move
Our pre-marital counselor gave us this piece of wisdom all those years ago: “You take your whole self into this relationship.” This was the foundation for honest assessment and communication. The point I took away was be honest now or found out later.
I have been amazed in my experience by how few times we were asked for a technology assessment of a potential acquisition target, or how little we were asked as an acquisition target. Acquisitions in a digital economy cannot afford to make this mistake. It’s imperative to look at the technology balance in order to determine your next move.