The Huntzinger Blog


Tech Blog: Mergers & Acquisitions

Welcome to the Huntzinger Tech Blog. Our goal is to provide some insights and perspectives on various technical topics that CTOs, IT directors, and other healthcare IT professionals deal with from a technical infrastructure perspective.

Chris Holda
Senior Management Consultant
Huntzinger Management Group

For this edition of the Huntzinger Tech Blog, I am writing about mergers and acquisitions (or affiliations, associations, or whatever flavor of relationship you are having to support).

Mergers and acquisitions are nothing new in healthcare. However, the recent trends have seen an across-the-board increase of activity. Whether that is due to the realities of trying to compete in an ultra-competitive market place, financial pressures due to declining reimbursement rates, strategic growth, or other myriad reasons, there is always some technical component involved that will need to be addressed. 

First off, we should probably ditch the old M&A or mergers and acquisitions name because many relationships between health systems, hospitals, or providers fall on a much broader spectrum of potential agreement types. So instead of M&A, I will use the generic term of “relationship.” Here are some common examples, but the list of relationship types can be as varied as your imagination: 

  • Corporate affiliation
  • Clinical affiliation/professional services agreement
  • Regional collaboration
  • Clinically integrated network
  • Joint venture
  • Acquisition

It is important to understand the relationship type up front because the technical demands for any given scenario will absolutely change depending on how the relationship is structured. A corporate affiliation or regional collaboration may be structured such that there is limited technical work required, whereas a straight-up acquisition may require extensive due diligence on the technical end, and require resource planning and budgeting to meet organizational goals. 

It Starts with Security
Going into any type of relationship, one of the key due diligence areas for technology must be around security. The security of any organization is only as strong as its weakest link. When you go in and evaluate a potential opportunity, you need to make sure you spend a significant amount of time understanding where they are from a security and risk perspective. Do they have adequate perimeter security in place? Do they patch on a routine and regular basis? Do they have an inventory of their hardware and software? Some of the basics that larger organizations take for granted are still an ongoing struggle for smaller physician practices. 

I had the opportunity to be involved with several dozen different physician practice relationships (mostly acquisitions, but some clinical affiliations and professional service agreements) and these deals are dramatically different then a full-blown hospital acquisition. They are much quicker, there is less due diligence, and the technology involved is much more straight forward than a hospital acquisition. However, the risks associated with these acquisitions were disproportional to the size of the environment. Many practices had little to no technical staff — typically it would be a part-time contractor or service provider who worked on a call-by-call basis. This lack of thorough management of the technology infrastructure left these organizations extremely vulnerable. Our goal was to make sure that we remediated all that risk prior to taking over that responsibility. While there are several ways to accomplish that, the easiest (but definitely not the cheapest) would be to just rip out the old IT environment and replace it with our own. 

Rip and Replace versus Status Quo
Removing the old IT environment and replacing it with your own is a great approach if you have the time and resources. It allows you to maintain your existing standards and ensure that the security is consistent across all your environments. However, sometimes the rip and replace approach isn’t possible. Either because of time constraints, budget constraints, or other practical purposes, it may make more sense to just stay with the status quo. Staying with the status quo is much easier to handle if the IT environment being acquired has a strong security presence and the infrastructure has been well maintained. 

Sometimes the type of organizational relationship or objective of the relationship will drive the approach you should take. Ultimately you will want to understand what the relationship goals of your organization are so that you can help tailor your technical solutions to fit them. It probably doesn’t make sense to rip and replace all the technical infrastructure for an entity where you are merely going to have an affiliation. 

Your timeline is always going to be too short with unrealistic expectations! With countless numbers of these types of projects under my belt, the data circuit/connectivity is always one of the top time-limiting factors. There are always going to be some hard dates that can’t move much (like getting a circuit installed) but flexibility and creativity are often required when up against some difficult deadlines. Ordering hardware can be almost as critical, so you need to make sure you understand early in the process what equipment you will need. Phone systems are another, often overlooked, area that can have some longer lead times. Figuring out what you are doing with any legacy phone system and phone numbers (are you keeping all the old ones?) can trip you up if you are on a tight timeline. 

Of course, the flip side of that is when you just hurry up and wait. The deal is signed, but there is no guidance as to the goals. Maybe the goals aren’t clear to the organizational leaders, or maybe there are other factors preventing work from progressing. Sometimes parts of the deal change and what used to be mission critical now gets moved to the back burner. That can be tough on resource planning, but it happens, so be prepared. Make sure you do as much pre-work as possible. Use the time to put together a detailed list of what equipment you need to purchase, what systems you may need to migrate, and what your decommissioning plan is for any systems you need to retire. 

Be Open Minded
Because some of the technology requirements can drive how the organization moves forward with a new relationship, the IT team is often brought in early to give some guidance. That is great, but you need to make sure that your staff understands the importance of discretion. The old saying “loose lips, sink ships” applies here. Sometimes a seemingly innocent off-handed comment to the wrong person, especially BEFORE the deal is signed, can turn things sideways and cause the deal to go south. So, make sure your team knows the dos and don’ts before sending them into do a technical assessment of a potential deal opportunity. 

Being open minded and flexible is a key trait for managing your IT responsibilities when diving into a new relationship with some organization you may not know much about. While you are probably laser focused on the work you and your team must accomplish, there are tons of other moving parts that need to be in place for any new organizational relationship to work. Sometimes you have full insight to those areas and all the challenges they face, other times that work is behind the scenes and you just have to go with the flow. Understand that any new organizational relationship is seldom achieved with a straight line, linear progression. There are frequently stops and starts. Times where you need to rush, other times where you are waiting for key information. Being flexible helps you manage your resources better and cuts down on a lot of frustration. 

Flexibility is also important when coming up with your strategy and plan for supporting a new organizational relationship. As I mentioned above, relationship and organizational types come in all sorts of shapes and sizes. Because of this variety, there is seldom a one-size-fits-all approach for how you will address the IT needs. Coming up with some standard guidelines will help you and your team plan and provide estimates to the business at an early stage, but ultimately you need to come up with a plan that will address the business needs for that particular opportunity.

The Huntzinger Management Group has the necessary experience to help your organization navigate mergers, acquisition, and whatever other relationship types get thrown your way. We can work with you and your team to setup a strategy and playbook to help streamline the process and ensure that you have the right data at the right time to make the right decision for your organization.

Topics: Tech Blog