Becker's Hospital Review

68 Executive Briefing Sponsored by: M ajor health systems today are quickly becoming sprawling networks of facilities due to growing rates of mergers and acquisitions throughout the healthcare industry. While many health systems scale up to remain competitive, such organizational growth presents logistical challenges, especially when it comes to onboarding and managing new facilities. "You see a newly formed health system that's trying to come together and operate as one, but you look under the covers and they have different systems, databases, reporting environments and processes," says Bill Marquardt, Vice President of Cost Management Solutions at Premier. "It's really hard to unify all that operationally." Enterprise Resource Planning (ERP) platforms, which run the back- office operations of a health system, are one of the most significant solutions for health systems to unify. These software solutions play a major role in managing the daily operations of a health system — such as finance, supply chain and human resources — and are key to driving efficiency across the enterprise. But what happens when a hospital merges with a facility on a different ERP platform? "Much of the efficiency that organizations hope to realize from a merger is dependent upon standardizing processes, centralizing services and eliminating waste," Mr. Marquardt says. "To do that, you really need to get to a standard system as quickly as possible." Historically, it has been cost-prohibitive to deploy a new ERP platform at newly acquired facilities. The time and effort to make that switch were so significant that organizations deprioritized those projects. As a result, many health systems continue to use outdated systems that struggle to scale with the growing Mergers and Acquisitions (M&A) landscape. Thanks to recent advances in technologies, health systems now have new cloud-based alternatives that boast rapid, cost-effective implementations for their future acquisitions. Conventional ERP platforms struggle to scale with M&A growth Healthcare companies announced transactions totaling about $156 billion in the first three months of 2018, making it the biggest first quarter for healthcare M&A in more than 10 years, according to Bloomberg. The real work begins after the deal is closed. Newly affiliated facilities often use separate ERP platforms, and smaller non-acute providers or clinics may not have an ERP at all. This poses various issues for a newly merged health system, beginning with cost. When a health system uses multiple systems, it commits to paying for multiple products, which often require various cost-intensive upgrades at different periods of time or manual workarounds to share and exchange data. Having disparate back-end processes at each facility also means a health system's purchasing and analytics systems aren't able to communicate with each other. Without an integrated ERP solution across a health system, top healthcare executives stationed at the organization's flagship hospital may be left in the dark about purchasing behaviors or financial performance at each affiliated facility. At its core, the benefit of an integrated ERP solution across a health system is establishing a centralized place to manage operations and view analytics systemwide. Conventional, on-premise ERP solutions may take years to deploy and they include a range of costs to maintain, from purchasing on-site hardware to hiring a team of consultants. The scale of this type of investment leads many organizations to pause and delay efforts to integrate health system operations. "There's a bit of a culture shift that is required," Mr. Marquardt says. "The traditional model of deploying software was finding space for an on-premise data center, standing up the system and then bringing in an army of consultants to go customize it. … It's a massive shift in mindset to say, 'Instead of flying in the army of consultants, let me use a cloud-based provider.'" How cloud-based ERP platforms streamline consolidation and cut costs In the era of multimillion and multibillion dollar mergers and acquisitions, health systems need flexible IT systems that deploy at scale. A next-generation cloud-based ERP platform offers one answer for health systems looking to assimilate new facilities in a comprehensive and lower cost way. "Historically, ERPs were laden with hidden costs," Mr. Marquardt says. "It's the traditional iceberg model. You have to pay for the software, which is where everybody's eyes tend to go to, but you also have to look at all the costs underneath the surface." Time-consuming costs "underneath the surface" include on- premise hardware, disaster recovery, backup plans and on-site system administrators — not to mention the expense of hosting a team of consultants to implement the system. Since legacy ERP platforms are often pulled from other industries, health systems often must tap consultants to customize their ERP for healthcare, according to Mr. Marquardt. Cloud-based solutions tend to have a subscription fee model that is much more predictable and scalable. As you grow, your fees grow. So you don't have to overbuy, and hope to grow into an out- sized solution. Cloud-based solutions also tend to include future enhancements, so you can avoid costly upgrades down the road. This approach offers a low total cost of ownership, in part because updates are baked into the fee a health system pays. "It gets back to that iceberg analogy," Mr. Marquardt says. "In a traditional [on-premise] model, you get on version eight, and when you want to move to version nine, you have to bring on all those Considering moving your health system ERP to the cloud? Why now is the right time

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