Why healthcare needs to consider ‘systemness’ now
After the dust has settled, many merged systems find their partnerships have failed to deliver the promised outcomes.
The last decade has brought challenges to health systems across the U.S. that include changing reimbursement models, increased reporting and compliance requirements for value-based initiatives, and other administrative burdens that have resulted in shrinking margins.
In fact, operating margins for many systems are under 3 percent, leading many organizations to partner with other providers to maintain market share and achieve new economies of scale.
In 2018 alone, there were 803 healthcare mergers and acquisitions and 858 affiliation and partnership announcements. And one recent survey found healthcare leaders cited industry consolidation as the most important healthcare trend of 2019.
But after the dust has settled, many merged systems find their partnerships have failed to deliver the promised outcomes. Individual departments and groups may continue to operate in the way they always have without thinking of themselves as part of a larger whole.
To achieve true savings, efficiency and improvements in patient care from consolidation, a system must function as a single unit in more than just its name.
How systemness can help providers
The concept of systemness is simple: We see it when an organization functions as one cohesive, collaborative entity, rather than the sum of its separate parts. For health systems with multiple locations, business functions and groups the operational benefits of system-thinking are a better ability to use data, streamline administrative processes and understand performance and costs.
According to one estimate, hospital mergers could reduce administrative costs by 15 percent to 30 percent—*if* the resulting entity is functioning as an integrated organization.
But because systemness requires the meaningful exchange of information through interoperability and data-driven decision-making with business intelligence and analytics, it is not a simple undertaking. Health systems must standardize both administrative and clinical procedures, regularly measure their progress toward their goals and integrate work cultures that may be at odds, according to one PwC study.
Problems occur when merged operations never fully meld, whether because of cultural, technical, leadership or other barriers.
What does successful integration take?
The following elements strongly contribute to a successful merger and system thinking:
• Willingness of each stakeholder to support the optimal good of the whole over its own goals.
• An innovation mindset.
• A clear understanding of what matters most: factors for success and how the organization will measure it.
• An appreciation for simplification and transparency.
• A focus on constant improvement related to processes.
• Enterprise commitment to evidence-based care, pathways and protocols.
As Advisory Board has noted, many mergers result in losses instead of gains. Integrating two IT systems, organizational structures is easier imagined than achieved.
Leaders who cannot make difficult decisions on a small scale, such as closing underperforming facilities, may also struggle when faced with similar decisions on a larger scale.
Applying systemness in one area can benefit others
One example of operational systemness is Dignity Health, now part of CommonSpirit Health, which focused on streamlining their revenue cycle under a common technology framework. As a result of making its revenue cycle operate as more of a connected function system-wide, Dignity Health saw an increase of $2 billion in cash realization, reduced their Accounts Receivable days by 34 percent and increased outpatient coder productivity by 116 percent, over a five-year period. Leveraging predictive analytics to help staff identify areas of performance opportunity, Dignity Health was able to improve its operational efficiency and create a more sustainable business.
Another example of the clinical and operational benefits of systemness is illustrated by Nashville-based HCA Healthcare which used its data warehouse to improve care and reduce costs. With 178 hospitals and thousands of outpatient facilities offering a wide variety of services, HCA has standardized its electronic health records system enabling it to leverage data from 32 million annual patient visits.
After analyzing that data, HCA adopted new processes that led to a 37 percent reduction of MRSA rates and other hospital-acquired infections over 18 months. The initiative also cut life-threatening bloodstream infections in the intensive care unit by 44 percent. System-wide changes to their infection prevention protocols not only saved lives by preventing patient harm but also reduced costs.
As organizations come together through mergers, consolidations or strategic partnerships, they must truly become systems in more than just name. Achieving systemness takes work and time but pays off with cost savings, higher margins and the ability to drive better outcomes.
In fact, operating margins for many systems are under 3 percent, leading many organizations to partner with other providers to maintain market share and achieve new economies of scale.
In 2018 alone, there were 803 healthcare mergers and acquisitions and 858 affiliation and partnership announcements. And one recent survey found healthcare leaders cited industry consolidation as the most important healthcare trend of 2019.
But after the dust has settled, many merged systems find their partnerships have failed to deliver the promised outcomes. Individual departments and groups may continue to operate in the way they always have without thinking of themselves as part of a larger whole.
To achieve true savings, efficiency and improvements in patient care from consolidation, a system must function as a single unit in more than just its name.
How systemness can help providers
The concept of systemness is simple: We see it when an organization functions as one cohesive, collaborative entity, rather than the sum of its separate parts. For health systems with multiple locations, business functions and groups the operational benefits of system-thinking are a better ability to use data, streamline administrative processes and understand performance and costs.
According to one estimate, hospital mergers could reduce administrative costs by 15 percent to 30 percent—*if* the resulting entity is functioning as an integrated organization.
But because systemness requires the meaningful exchange of information through interoperability and data-driven decision-making with business intelligence and analytics, it is not a simple undertaking. Health systems must standardize both administrative and clinical procedures, regularly measure their progress toward their goals and integrate work cultures that may be at odds, according to one PwC study.
Problems occur when merged operations never fully meld, whether because of cultural, technical, leadership or other barriers.
What does successful integration take?
The following elements strongly contribute to a successful merger and system thinking:
• Willingness of each stakeholder to support the optimal good of the whole over its own goals.
• An innovation mindset.
• A clear understanding of what matters most: factors for success and how the organization will measure it.
• An appreciation for simplification and transparency.
• A focus on constant improvement related to processes.
• Enterprise commitment to evidence-based care, pathways and protocols.
As Advisory Board has noted, many mergers result in losses instead of gains. Integrating two IT systems, organizational structures is easier imagined than achieved.
Leaders who cannot make difficult decisions on a small scale, such as closing underperforming facilities, may also struggle when faced with similar decisions on a larger scale.
Applying systemness in one area can benefit others
One example of operational systemness is Dignity Health, now part of CommonSpirit Health, which focused on streamlining their revenue cycle under a common technology framework. As a result of making its revenue cycle operate as more of a connected function system-wide, Dignity Health saw an increase of $2 billion in cash realization, reduced their Accounts Receivable days by 34 percent and increased outpatient coder productivity by 116 percent, over a five-year period. Leveraging predictive analytics to help staff identify areas of performance opportunity, Dignity Health was able to improve its operational efficiency and create a more sustainable business.
Another example of the clinical and operational benefits of systemness is illustrated by Nashville-based HCA Healthcare which used its data warehouse to improve care and reduce costs. With 178 hospitals and thousands of outpatient facilities offering a wide variety of services, HCA has standardized its electronic health records system enabling it to leverage data from 32 million annual patient visits.
After analyzing that data, HCA adopted new processes that led to a 37 percent reduction of MRSA rates and other hospital-acquired infections over 18 months. The initiative also cut life-threatening bloodstream infections in the intensive care unit by 44 percent. System-wide changes to their infection prevention protocols not only saved lives by preventing patient harm but also reduced costs.
As organizations come together through mergers, consolidations or strategic partnerships, they must truly become systems in more than just name. Achieving systemness takes work and time but pays off with cost savings, higher margins and the ability to drive better outcomes.
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