Hospital executives are still learning to operate in a world where computer systems need to work well together to accommodate such things as population health management. As a result, unexpected costs related to integrating computer systems are popping up when hospitals merge or are acquired, and the numbers can be relatively large, experts says.
The costs of integrating information technology systems could add 2 percent to annual operating costs during the integration period, threatening to delay or negate the benefits of doing the deal, according to consultants at PricewaterhouseCoopers.
“We’re sounding the alarm that you cannot go into these integrations and think you’re done by putting a new name on the building,” says Ben Isgur, director in PwC’s Health Research Institute.
The added costs are coming from both the clinical and business system sides of the hospital and are not confined to the implementation of electronic health records.
In its 2015 annual “Medical Cost Trend” report, PwC estimates the annual added IT costs during integration to run $70,000 to $100,000 per bed, with a typical integration lasting three to five years.
Dwayne Gunter, president of Parallon Technology Solutions, a consulting firm owned by the Parallon Business Solutions division of HCA, says in his experience the added costs often have been even higher than PwC’s estimate. “You can easily see 2 percent. I think 2 percent’s being very generous,” Gunter says. For example, if the purchased hospital’s IT infrastructure is in bad shape, the expense of replacing it will raise costs significantly, Gunter says.
The increased demands of payment for quality and capitated reimbursements are among the major drivers of the costs, while some of the additional hidden costs are related to the people side integration.
Many purchasers of hospitals neglect to address an IT labor problem, Gunter says. He says a big chunk of IT spending already goes toward labor.
As a result, hospital executives should enter into merger and acquisition agreements with the added IT integration costs in mind.
“As much as we’d all like an easy button that technology would provide, there’s actually a lot of workflow redesign and re-engineering” to be done after a deal is closed, says Kulleni Geb reyes, M.D., director in PwC’s health industries practice.