Oct 06 2022

3 Tips for Healthcare IT Teams on Navigating Due Diligence

Early planning is key to healthcare IT integration success during a merger or acquisition, and questions about IT should be considered during the due diligence phase of a deal.

Mergers and acquisitions come with inherent business risks, which makes the due diligence phase of the process especially important. During due diligence, the buyer conducts a thorough process of investigation, verification and auditing of the target healthcare organization to identify risks and confirm information. While financial information may be of high interest during due diligence, it’s also important for a healthcare organization’s team to consider the IT implications of a deal.

IT leaders need to consider all aspects of the technology environment when planning integrations during the merger or acquisition process, from networking and security to electronic health records and IT services. The due diligence phase provides an opportunity for asking questions and discovering information needed when planning how to move forward.

Here are three considerations healthcare CIOs and other IT leaders should keep in mind during the due diligence phase of a merger or acquisition:

1. Understand Both Healthcare Organizations’ IT Environments

Healthcare systems’ IT ecosystems are often complex, with varying technology ages and levels of interoperability. Before two organizations can begin to integrate their IT environments, there needs to be an understanding of major systems and identification of security gaps and technical debt, says Jason Joseph, chief digital and information officer for Corewell Health, a new Michigan-based health system created following the February 2022 merger between Spectrum Health and Beaumont Health.

Forming a holistic view of the technology landscape during due diligence will help IT leadership determine, for example, which technologies or processes will require remediation or how to handle the EHR integration.

M&A visual sidebar

Often, the biggest pain points for healthcare organizations during a merger or acquisition are the unknowns and the people aspect, says Dr. Lacy Knight, chief health informatics officer at Piedmont Healthcare, which acquired University Health Care and its three hospitals in Georgia in March.

“Unknowns include software, hardware, the local culture and what the leadership structure is like,” he adds.

While many of those things will be behind the curtain until the integration starts, it’s important for IT leaders to try to ascertain what software applications are being used by the other healthcare organization and to assess how the other’s software compares with their own. In addition, IT teams will need to know what technology is remote versus onsite, and how people use the hardware within the IT environment.

Getting the list of technologies and processes being used is just the start. IT teams should then focus on understanding the other organization’s clinical and business objectives; what it views as the strengths of its program; its advanced surgical programs and physician employment structure; and basic information about the patient population, such as methods of patient communication. Knight points out that doing so will give insight into why the organization has certain technologies in place.

Integration can be disruptive to patient care if not handled well, making it critical for clinicians using any new software to be trained on the new programs so the integration goes smoothly.

“Without the right planning, you can break the communication framework among clinicians, patients and physicians,” says Knight.

2. Align on the IT Integration Strategy Early

“Some of the longest poles in the tent are started before the merger happens in order to meet the timelines set by leadership,” says Joseph.

Once the deal is closed, integrations will move quickly. That’s why Joseph emphasizes the importance of planning integrations as early as possible to ensure a long lead time rather than a rushed effort.

“During due diligence, there are limitations to what the organizations can and can’t have conversations about, so leadership is often leery of overstepping,” he says. “This is the perfect time to align on the organizational strategy and understand the goals and level of integration desired.”

Organizations should start to consider the level of investment, timing and overall strategy for different aspects of the integration while ensuring alignment between IT and business strategies.

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“If you have more alignment up front and early, you’ll have an easier time of it when you get into integration,” says Joseph. “If you’re asking these questions in months two or three of the process, you’ll have a long runway to get things done.”

The biggest risk to successful IT integration is misaligned expectations, he adds. Not having early alignment can lead to delays in decision-making or prerequisite approvals, which can impact costs and timelines.

However, aligning on goals can be a difficult task when the merger organizations are in different states or have differences in patient population. It’s critical that the organizations identify those differences and work toward alignment as soon as possible to overcome that hurdle.

“If you’ve seen one merger or acquisition, then you’ve seen one merger or acquisition. The goals of each M&A activity are unique. It’s important that healthcare leaders spend time to clarify their goals, agree on investments, and determine risk tolerance and expectations of those investments,” Joseph says. “Doing that work up front and creating a clear goal makes the planning process smoother for all parties.”

3. Foster Collaboration Between IT and Organizational Leadership

Due diligence is typically led by the healthcare organization’s leadership, a legal team and accountants. While IT teams are not the ones leading the conversation, they should be bringing forward IT implications to the organization’s leaders early in the process, Joseph says. This allows the stakeholders to align on technology priorities as they relate to business decisions and future efficiencies.

Joseph emphasizes that those efficiencies shouldn’t focus on cost alone, especially when it comes to IT. Cost savings aren’t enough to justify IT investments.

“If you’re just integrating because the two organizations need to share an email, you’re missing the boat. Typically, healthcare organizations will come together to create something new or different, with a greater scale or impact. They’re not doing it just to save money in IT,” he says. “While you will get some IT efficiencies, the investment from your operational budget to create those efficiencies will likely be as big as your eventual savings. There’s greater potential for growth or efficiencies in the clinical space, the back office or the call center. It is important to ask what the business model of the future is and what IT strategy it will take to get there.”

Jason Joseph
Typically, healthcare organizations will come together to create something new or different, with a greater scale or impact. They’re not doing it just to save money in IT.”

Jason Joseph Chief Digital and Information Officer, Corewell Health

Knight explains that, typically, the IT team will first engage as a smaller group at the senior level before expanding to progressively larger groups. Engagement is vital to a successful IT integration. When an organization is acquired, its people shouldn’t hear every message from the buyer’s leadership team. Some announcements should come from local leadership, with support provided to address questions that come up within the community.

Each entity should address questions in its own way, whether through meetings, email, marketing events or internal communication networks.

“That’s the start. Part of that structure includes ongoing contact. When appropriate, much of the senior leadership team within IT should make a habit of going out to facilities on a regular basis so there are in-person contact points,” says Knight. “There’s time between meetings for the teams to get to know each other better by sharing additional contact information and having conversations outside of the larger integration.”

At Piedmont, the organization uses a structured integration process. Knight explains that Piedmont has designated people to lead key integration areas and project managers to support data gathering. The group meets on a regular basis to bring up topics with senior leadership and update them on the integration’s progress and pain points.

“We could find out that something important on the human resources side might dictate the timeline for the IT team. You need a dedicated team involved in the integration and structure to identify these issues,” he says, adding that it’s also better to have one person who is familiar with the incoming organization’s executive leadership, values and perspective to serve as the primary interface between the organizations.

UP NEXT: Tips from CIOs on navigating mergers and acquisitions in healthcare.

Illustration by David Vogin

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