Content area
Full text
When healthcare organizations merge, their goal often is to improve operational efficiencies, with information systems (IS) a common target for cost reduction. These cost reductions usually are achieved by reducing staff, consolidating data centers, establishing standardized systems, and sharing resources throughout the system. During this process, however, several common pitfalls can cause merging organizations to stumble. By carefully evaluating their options, merging organizations can avoid these potential traps and reduce their IS costs.
Mergers and acquisitions in the healthcare industry continue at a rapid pace, with 53 percent of America's 5,200 hospitals either merging or affiliating with other hospitals in the past four years.a Information systems (IS) functions frequently are merged as well to reduce costs by reducing IS staff redundancies, consolidating data centers to reduce operator costs, increasing group purchasing discounts from vendors, establishing efficient enterprisewide systems and standards, and distributing the cost of strategic IS planning throughout the system.
Unfortunately, however, IS costs sometimes increase following consolidation. Some common pitfalls that can obstruct IS cost reduction after a merger are increasing IS management staff, letting size alone dictate systems, hiring the consolidation consultant as chief information officer (CIO), converting all hospitals unnecessarily, buying shared systems, "partnering" with vendors, and letting technology drive operations.
Increasing IS Management Staff
Creating a large corporate IS management staff can be a major pitfall for merged organizations. Consider a merge of two or three community hospitals, each with its own I director. In such a merger, a corporate CIO typically is appointed to give IS greater corporate visibility, show management commitment to IS, and provide a neutral manager to guide the standardization of systems. The cost of the corporate CIO, however, increases the annual IS payroll expense by a six-figure salary, plus benefits. Worse yet, the new corporate IS function tends to grow over time, with the addition of positions such as a secretary, "deputy" CIO, corporate system analysts, corporate network and PC specialists, and corporate database administrators. This burgeoning corporate IS staff can grow into a seven-figure payroll expense.
Healthcare executives should evaluate carefully whether a corporate CIO and staff are needed. Large recruitment and relocation fees can be avoided by promoting an incumbent hospital IS director to the corporate CIO position and then promoting another...