1.800.360.0603

GE Healthcare Camden Group Insights Blog

Stay Focused While Developing Your System Integration Plans

Posted by Matthew Smith on Oct 20, 2016 4:00:21 PM

By Brandon Klar, MHSA, Senior Manager, GE Healthcare Camden Group

As the healthcare industry continues to experience consolidation and health systems evolve to meet industry challenges, operational integration initiatives present great opportunities to enhance system-wide performance.

Many health systems speak to the integration goals as they design their strategic partnerships, but only a portion develop realistic, achievable, and sustainable integration plans and even fewer accomplish the goals set forth in those plans.

System integration plans fall short and occasionally fail to achieve their desired outcomes most frequently because they lack effective solutions, fail to consider the impact of system operations on the community, and don’t have the necessary support from the workforce. As much as a well-orchestrated integration planning process and an invested leadership team can work to position a system for integration success, a system integration strategy must be grounded in value creation, risk management, and employee engagement to ensure any integration plan to reach its goals.

Value Creation

To achieve success in a value-based world, health systems must actively seek to enhance the value of their clinical services. Defining value as healthcare outcomes per cost, a health system’s pursuit of value creation will involve enhancing the quality of its services while reducing the per unit delivery cost.

Value creation through health system optimization can be achieved through both horizontal and vertical integration strategies. Horizontal integration strategies are focused on reducing unnecessary duplicative resources, enhancing system operational performance, and aligning/optimizing clinical programs and resources. While duplication of select resources and clinical services may be warranted to maintain access in select geographic areas, plans must carefully balance community needs with efficient resource distribution to deliver high-quality cost-effective clinical programs.

Conversely, vertical integration strategies are focused on enhancing the value throughout the continuum of care by effectively positioning access points, redesigning the care model, and promoting information technology and data sharing. As systems form and evolve, seamless handoffs between system providers and multidisciplinary care plans will reduce unnecessary resource utilization and provide for the efficient navigation of patients through the system with high quality and high satisfaction outcomes.

Risk Management

Risk is inherent within every system integration initiative. The term “system integration” can often trigger employment uncertainties and high employee and physician anxiety which heightens the internal challenge to achieve a successful integration. Community resistance or concerns for the planned integration efforts are also possible based upon the drivers that prompted the system to take action. While identified risks may become realities and unanticipated challenges can arise with little warning, effective risk management planning is essential.

Identification and analysis of the integration risks by the system integration leaders and their teams are foundational to the planning process. Balancing the benefits of integration initiatives against the probability of the risk may prompt either the development of preventative and contingency plans, or the abandonment of the integration initiative all together. Regardless, every risk should be thoughtfully analyzed in the context of the benefits of the system integration plan and weighed carefully.

Employee and Physician Engagement

The third pillar to effective health system integration is employee and physician engagement. While system integration planning is overseen and led by senior system leaders, it is imperative that employees and physicians have a voice within the planning process to foster effective integration results.

Solicitation of ideas, involvement in plan development, transparency in the planning process, and frequent communication will provide systems with the best chance for developing an effective integration solution, and fostering acceptance, accountability, and alignment among the stakeholders. This planning approach will also provide the system with the platform to accelerate the change process, and achieve and sustain its integration goals and objectives. While some confidentiality is warranted in the integration planning and implementation process, employee and physician engagement is necessary for success.

As health systems take on their integration planning and implementation process, a focus on the three pillars will provide the foundation to strategically position themselves to be nimble and efficient in a value-driven world.

This is Part 2 in our System Integration blog Series. Part 1 may be found here. Part 3 will examine the 5 steps in a successful system integration planning process.

For more details surrounding health system integration planning, please download our PDF via the button, below:

Health System Integration 


B_Klar.jpgMr. Klar is a senior manager with GE Healthcare Camden Group with over 12 years of experience in healthcare management. Mr. Klar specializes in strategic and business planning advisory services, including service line planning, master facility planning, and transaction work (e.g., mergers, acquisitions, affiliations, joint ventures). He has extensive experience in the creation of strategic partnerships, the facilitation of inaugural health system strategic plan development, as well as the creation and implementation of business plans of operational efficiency, system-wide integration plans, and clinical programmatic alignment plans. He may be reached at brandon.klar@ge.com.

Topics: Business Plan of Operational Efficiency, BPOE, Mergers & Acquisitions, Health System Efficiencies, Brandon Klar, Health System Integration

Health System Integration: You Need a Plan!

Posted by Matthew Smith on Oct 3, 2016 1:25:10 PM

By Brandon Klar, MHSA, Senior Manager, GE Healthcare Camden Group

Success within population health is grounded in a health system’s collective ability to improve the health and wellness of those in its communities, and other patient groups it may serve. With a goal of achieving the Triple Aim, systems are restructuring their operations to strengthen the value proposition of their clinical services. With a desire to enhance access, improve quality, and control costs, many systems are looking towards formal strategic partnerships as a means to attain the necessary scope and scale to be successful.

As systems expand, they have the opportunity to achieve system-oriented efficiencies. Through both horizontal and vertical integration strategies, systems desire to position themselves within the market as high-quality and cost-effective providers to attract patients and payers. While many systems pursue these objectives, some fail to achieve full integration due to a lack of effective planning, poor management collaboration, or subpar implementation. Regardless of the reason, a sound integration plan focused on the goals of the system and dedicated true integration will increase the odds of success.  

System Integration plans can be developed both pre-transaction and post-transaction, as well as by systems that have been operating for some time, but in more of a “loose federation” model than as a truly integrated system. Below, you will find an overview of system integration plans, the critical factors in developing them, and associated benefits and limitations.

Pre-Transaction Integration Plans

The development of pre-transaction integration plans provides the aligning entities a road map to achieve their partnership goals and objectives once the transaction is final. Developed prior to the signing of a definitive agreement, these plans serve to lay the foundation for administrative, support, clinical, and service line integration across the continuum as it relates to the location of services, management and staffing, and the optimization of non-salary resources and contracts.

Pre-transaction integration plans allow the entities to build upon their shared strategic vision and construct a newly integrated operating model by which the two entities can optimize their individual strengths and maximize their collective resources. Recognizing that each entity brings with it their unique resources and capabilities, pre-transaction planning is focused on:

  • Cataloging the collective resources and capabilities of the newly proposed system
  • Understanding the existing operating models and functional area interdependencies
  • Framing a new operating model for the integrated system functions
  • Selecting horizontal and vertical integration strategies to align operations
  • Developing action plans with clearly defined goals, resource requirements, barriers, accountable parties, and quality and cost impact analyses
  • Designing an implementation governance structure to oversee the capture of short-term wins post-transaction while coordinating for long-term integration

In addition to preparing the system for operational integration, pre-transaction integration plans can also serve a role in supporting regulatory approval of the proposed transactions by Departments of Health, Attorneys General, and the Federal Trade Commission. While the burdens of proof and detail required may vary by state and regulatory agency, these plans illustrate that the transacting parties are committed to the transaction, have a roadmap to integrate operations at a systems level, and possess a plan to reduce overall system costs. These plans have been proven helpful in demonstrating the value that can be derived by a transaction for a community, but are limited in their detail as the parties are unable to exchange competitively sensitive information prior to the transaction.

In the preparation of these pre-transaction integration plans, parties have utilized both anti-trust counsel and a system integration consulting firm to prevent undue disclosure of sensitive information and support in the development of a more meaningful integration plan.

Post-Transaction Integration Plans

Post-transaction integration plans seek to enhance the integration of entities with a system both horizontally and vertically outside of the confines and limitations of the transaction process. These plans are developed to support system operational integration at two points in a system’s journey: (1) Immediately following a transaction, and/or (2) Years post transaction to optimize a system’s operational performance.

As systems pursue integration post-transaction, they should build upon their pre-transaction plans or previously completed integration initiatives. As the parties are now able to share competitively sensitive information, the integration plans can be further refined, enhanced, and validated. To efficiently drive system integration planning and implementation, the newly formed system should:

  • Activate a system integration governance structure to oversee operational integration
  • Establish an Integration Management Office (“IMO”) in line with an integration governance structure to manage processes, team collaboration, and track progress
  • Convene functional area integration teams to drive integration plan refinement and implementation
  • Engage employee and physician stakeholders to keep them informed and solicit ideas
  • Construct a community communication plan to highlight benefits and any changes to care design and delivery

Integration plan refinement and implementation immediately following a transaction can both position the system for success, or doom it for failure. While integration planning and implementation will drive efficiency, attention must be paid to cultural alignment. Individual functional plans and strategies should have their benefits objectively weighed against the cultural or political turbulence that could result. This process requires collaboration between the integrated management teams, and will require input from both internal and external system stakeholders if the plans are to successfully drive acceptance, accountability, and alignment within the system.

Many systems fall short of achieving full integration immediately following a transaction, and thus have opportunity to further optimize system performance years later. These systems may have either decided not to pursue specific integration opportunities in fear of cultural turbulence, stakeholder resistance, or a lack of guidance, will-power or resources to do so. Regardless of the reason, systems should reassess their degree of integration at least annually to identify new opportunities that may have arisen or determine if previous barriers to implementation or resistance to change have been mitigated. It is not uncommon for systems to achieve between 5 to 10% in sustainable, operational annual cost savings years after a transaction as a direct result of future integration plans.

As consolidation trends and cost pressures accelerate, the keys to a successful integration initiative are to focus on value creation, risk management, and employee and physician engagement in order to develop a realistic, achievable, and sustainable plan that positons the system for success.  

For more details surrounding health system integration planning, please download our PDF via the button, below:

 Health System Integration


B_Klar.jpgMr. Klar is a senior manager with GE Healthcare Camden Group with over 12 years of experience in healthcare management. Mr. Klar specializes in strategic and business planning advisory services, including service line planning, master facility planning, and transaction work (e.g., mergers, acquisitions, affiliations, joint ventures). He has extensive experience in the creation of strategic partnerships, the facilitation of inaugural health system strategic plan development, as well as the creation and implementation of business plans of operational efficiency, system-wide integration plans, and clinical programmatic alignment plans. He may be reached at brandon.klar@ge.com.

Topics: Business Plan of Operational Efficiency, BPOE, Mergers & Acquisitions, Health System Efficiencies, Brandon Klar, Health System Integration

A Business Plan of Operational Efficiency for a Value-Based World

Posted by Matthew Smith on May 17, 2016 10:34:14 AM

By Brandon Klar, MHSA, Senior Manager, GE Healthcare Camden Group

As health care continues its rapid evolution toward value-based reimbursement, health system leaders face escalating pressure to reduce their cost structure and enhance their value propositions. For many, the solution is to join forces with another provider through a formal partnership agreement. 

But once a new partnership has cleared the planning hurdle and avoided early pitfalls, it still faces a big challenge. How do you make sure the combined system achieves the full benefits of operational integration?

Our experience with providers nationwide has indicated that successful healthcare partnerships rely on one indispensable tool — a business plan of operational efficiency ("BPOE"). A detailed BPOE helps partnering organizations achieve the large-scale cost reductions necessary for value-based care and declining reimbursement.

The Business Plan of Operational Efficiency

A health system BPOE is a comprehensive, action-oriented system integration plan. It is designed by and for organizations that are forming a single corporate structure strategically and operationally. Simply defined, a BPOE is a road map for achieving the full benefits of an affiliation — operational efficiencies, cost savings and enhanced clinical value.

The most effective BPOEs are developed from the ground up. Departmental leaders identify detailed action items for aligning administrative, support, infrastructure and clinical functions. The key is to capitalize on the operational strengths of each organization and each department. A BPOE should:

  • identify and quantify specific affiliation-related cost-saving opportunities within each department;
  • identify barriers to achieving the efficiencies;
  • identify the resource and time requirements necessary to implement the action plans;
  • lay out a game plan for aligning specialty programs throughout the system;
  • ensure accountability by specifying the individuals responsible for implementing the plan.

Ultimately, the goal is to develop a clear list of achievable and sustainable performance improvement initiatives that will enhance efficiency and reduce the underlying cost structure of the system.

When Should You Develop a BPOE?

Many partnering organizations craft a BPOE before any affiliation agreement is signed. This lets system leaders proactively identify savings opportunities after the transaction. A pre-transaction BPOE also might be required for regulatory approval by the state department of health, state attorney general, Federal Trade Commission or the Department of Justice.

An inherent limitation of a pre-transaction BPOE is that the prospective partners are unable to share competitively sensitive information before closing. This limits the specificity and detail of cost-saving opportunities and action plans. But provisional BPOEs developed before the transaction are directionally accurate; they can also ensure that the prospective partners are strategically and culturally compatible.

A BPOE can be developed or refined with specificity and clarity after the transaction, even if the merger or affiliation took place some time ago. Many systems that have merged or affiliated in recent years have yet to realize the full benefits of operational integration. If this is your situation, commission a multidisciplinary team to revisit previous efforts. The team should develop a BPOE that identifies redundant costs as well as new strategies for better integrating, standardizing and consolidating functions.

Four Reasons to Invest in a BPOE

Every affiliation, merger or acquisition is unique. Every health system's story — and how it came to exist in its current form, with its current culture — is unique. In the background are variations within the consumer and payer markets, differences in strategic and operational strengths and weaknesses, and cultural nuances. These factors drive the need for a customized integration plan for every new partnership. A well-designed BPOE offers four important benefits:

1. A clear leadership structure. The most contentious point in transactions often centers on a single question: Who will be in charge? While it is critical to clearly define the executive hierarchy for the system and its business units (e.g., hospital, physician group, post-acute), it is just as important to outline the cascading leadership structure throughout all departments within the system.

Effective BPOEs identify the leadership positions most appropriate for consolidation; they also establish centralized management for all administrative, support and infrastructure functions. This not only creates consistency in decision-making, it facilitates and streamlines integration efforts. Adopting matrix organizational and reporting structures also will foster standardization of system processes, while allowing for moderate variation when needed to account for distinct organizational variables. In addition, developing a centralized leadership structure as part of the BPOE will help middle managers align interdependent integration plans through multidisciplinary teams.

2. Clear ground-level integration plans. For most system integrations, success or failure occurs at the department level. Effective BPOEs use a ground-up planning process to develop detailed departmental action plans that identify specific opportunities, obstacles and accountabilities.

Department-level plans set clear goals that are consistent with the system's integrated vision. Objectives should include standardization of policies and procedures, optimization of staffing resources, alignment of contracted services, standardization of equipment and supplies, and cost reduction through joint purchasing. Departmental plans also should address specific resource requirements, interdependencies with other unit plans, implementation timelines and responsibilities, and specific cost-saving targets.

Departmental action plans provide a detailed implementation path that can be monitored and measured. This establishes a platform for consistent and timely communication about integration activities and milestones. Collectively, the departmental integration plans will lead to a more integrated and streamlined system.

3. Realistic and sustainable cost-saving targets. Carefully developed BPOEs can lead to annualized system cost savings between 4 and 7 percent. However, during the development of the departmental integration plans, all savings opportunities should be validated by both the responsible department and the financial team prior to inclusion in the plan.

BPOE action items should be incorporated into budgets and could require capital resource allocation for implementation, so it is critical to quantify and rigorously validate cost-reduction opportunities in administrative, support, infrastructure and clinical departments. Operational and financial leaders should assess each savings opportunity to ensure it is realistic, achievable and sustainable. This applies to both salary and non-salary savings opportunities.

Non-salary savings opportunities are often easier to implement culturally. Health systems can achieve significant early cost reductions by standardizing equipment and supplies and aligning contractual services. These savings are not only typically achievable in the short term, but are also sustainable.

Salary savings typically are realized over a longer period. While centralizing management leads to early savings, staffing integration and optimization can take time and resources to fully achieve.

4. A strong foundation for a system-oriented culture. Joining two disparate business entities within a single consolidated health system is inherently difficult, and effectively integrating long-standing legacy cultures is a critical hurdle that can cause a partnership to succeed or fail. Leaders must encourage a cultural transition that moves the organizational focus from business unit priorities to collective system goals and overall performance. A robust BPOE process can aid this cultural transition.

BPOE development uses a structured approach that includes a blend of objective quantitative analyses and key stakeholder engagement. Stakeholder meetings provide a thorough understanding of the existing cultures and organizational barriers to integration. This helps to engage key stakeholders in the process while grounding discussions and action plans in organizational realities. Ultimately, the BPOE process challenges the existing provider organizations individually and collectively to think beyond current practices and strive collaboratively to improve performance as a system.

Protection Against Inaction

In a world that is becoming less hospital-centric, hospitals and health systems are trying to refashion themselves as care continuum organizations through strategic mergers and affiliations. But too often, good intentions fall by the wayside as inertia, politics and other obstacles prevent partnering organizations from realizing the opportunities of integration.

A well-designed business plan of operational efficiency guards against inertia by providing specific, achievable integration goals and action plans. Whether your organization is pursuing a new affiliation or is looking to maximize existing health system performance, a BPOE is an essential tool to achieving true system-level operational integration.


B_Klar.jpg

Mr. Klar is a senior manager with GE Healthcare Camden Group with over 12 years of experience in healthcare management. Mr. Klar specializes in strategic and business planning advisory services, including service line planning, master facility planning, and transaction work (e.g., mergers, acquisitions, affiliations, joint ventures). He has extensive experience in the creation of strategic partnerships, the facilitation of inaugural health system strategic plan development, as well as the creation and implementation of business plans of operational efficiency, system-wide integration plans, and clinical programmatic alignment plans. He may be reached at brandon.klar@ge.com.

 

Topics: Value-Based Care, Payment-for-Value, Business Plan of Operational Efficiency, BPOE, Brandon Klar, Value-Based Payments

Four Transaction Advisory Articles Available for Download

Posted by Matthew Smith on Apr 28, 2015 10:16:02 AM

ahla_shadow.pngThe writing on the wall is clear: more and more healthcare providers and payers will need to consolidate as we move to a value-based world. The burning questions remain...should you find a new partner, or can you go it along? Regardless, you will need to ensure that the decisions you make meet your financial and strategic objectives in the short-term as well as further down the line.

The Camden Group is pleased to be a part of the American Health Lawyers Association's ("AHLA") 2015 Health Care Transactions Resource Guide. Each Guide article offers valuable data and advice for all professionals who work in transactions.

This year, The Camden Group contributed the following transaction advisory articles which can be read as PDF documents by clicking on each article's respective button below:

Rethinking Independence: Is it Time to Affiliate?

Transaction Advisory, Rethinking Independence

 


 

Choosing the Right Affiliation Structure

Healthcare Transaction Advisory, Affiliation

 


 

Preventing a Merger Fail

Preventing a Merger Fail, Transaction Advisory 

 


 

A Business Plan of Operational Efficiency for Merging Health Systems

  • Brandon Klar, MHSA, Senior Manager (contact)
  • Gregory P. Shufelt, MBA, Vice President

Transaction Advisory, Business Plan of Operational Efficiency, BPOE

 



Key components related to transaction advisory include:

Transaction_Advisory_Puzzle.jpg

The Camden Group's transactions experts can help ensure that the decisions you make meet your financial and strategic objectives in the short-term and further down the line. To contact The Camden Group's Transaction Advisory team, please click the button below:

The Camden Group, Transaction Advisory

Topics: Mergers, Transaction Advisory, Affiliation Structure, Business Plan of Operational Efficiency, AHLA, BPOE, American Health Lawyers Association

Subscribe to Email Updates

Value Model, Health Analytics

Posts by Topic

Follow Me