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Kate Gamble: Today in Health IT, we're discussing hospital consolidation accelerates amid financial pressures and competition. This episode is brought to you by SureTest.

Transform your health system's application and reclaim thousands of hours with SureTest. Visit thisweekealth. com slash suretest to learn more. My name is Kate Gamble. I'm Managing Editor at This Week Health, where we host a set of channels and events dedicated to transforming healthcare, one connection at a time.

I've spent the last 12 years interviewing CXOs, and I'm excited to bring that knowledge into this community of leaders. So today we're talking about hospital consolidation and how it's accelerating amid financial pressures and consolidation. I'm joined by Sarah Richardson, President of This Week Health 229 Executive Development Community.

So consolidation can be either vertical or horizontal, driven by factors like rising healthcare costs and a shift toward value based care. As independent providers diminish, health systems are pursuing out of market acquisitions to avoid scrutiny from the FTC. Some of the recent mergers.

like the one between Jefferson Health and Lehigh Valley Health Network in Pennsylvania, exemplify the shift toward larger health systems that aim to enhance service offerings and operational efficiency. So we have a few key factors behind M& A, probably the biggest being financial concerns. So let's talk about that a little bit.

What type of organizations are looking to merge or become acquired and what are the drivers that you're seeing?

Sarah Richardson: Yeah, I'm glad you brought this article to the forefront because I have consistently worked in organizations where M& A, and we forget about the divestiture aspect of all of this as well, but M& A and divestiture are coming into play.

And then you also have to think about challenges and system unification and patient data privacy and instances of your EHR. There's so many pieces to bring together. And I lived in both worlds. I lived in a world where we did integration immediately and all the planning that went into play there. And I've also been organizations where acquisitions sat for longer periods of time before integration began.

I can argue both sides. I will say that my preference is if you were going to make a strategic acquisition, go for integration of core systems as soon as possible. The only time that gets sticky, and this is also something I like to say you can't make up, is if that deal does not go through. And you have already started these integration efforts, you're undoing some of the things that you've already done, and that becomes a little bit stickier in the process.

Now, someone would say, why would you start integration prior to a deal being closed? Typically, you would believe that it's going to go over the horizon pretty quickly, and it doesn't always happen that way. Choose a scenario, probably have lived through it in this space. And sometimes you're doing all of these at the same time.

You're doing a merger, you're doing an acquisition, you're doing a divestiture while you're doing upgrades or implementations or other aspects of running the business. IT gets hit from all sides on this one. So does legal, so does risk, so does compliance, so does security. And so that group, like anything in these governance structures, becomes a whole subset of what it looks like when you work in a system or an organization that has this type of strategy in its plan.

Kate Gamble: Yeah, that's a really good point. I think that we often don't think about the fact that the IT teams, it's not like they're given their plates are cleared so they can take care of this. That's a huge lift. And I would think that can be challenging for leaders.

Sarah Richardson: Oh, it certainly is. And so in, again, previous lifetimes, when I knew I was going into a greater M& A landscape, I made sure that the scalability of IT infrastructure was something that was understood, funded, and was first place.

And then that due diligence, really understanding, What is the infrastructure you are combining or bringing in to play, and how does that affect both the cost of what's occurring as well as the cyber implications? That's a big deal, because if you bring something in that is far less mature, has an incredible amount of debt that you've already been able to eliminate in your organization, you're now adding this huge risk factor.

And so do you keep them in a walled off garden? Do you start to bring pieces over at a time that makes sense?

The

ability to scale them more effectively, and that really goes into also the data sharing across larger health networks. What is that interoperability footprint look like in a local market, which could be easier with HIEs and others than it is if you're going across different states, and then you've got the regulatory scrutiny.

That goes with it as well. I live in California. We're more heavily regulated in some cases. And so you have to apply that level of intentionality across the continuum of anything you're bringing into your ecosystem.

Kate Gamble: Yeah, and another kind of angle to this is that mergers can result in workforce reductions to cut costs, which affects jobs, and I would assume that as soon as word hits that there is going to be a merger or acquisition divestiture, there's a lot of fear around job loss.

And that's another thing that I think would be difficult to to navigate. It is. You really go into retention bonus planning for some of these efforts. I've done that in multiple scenarios where you're like, Hey, we have to make sure these five people don't leave. And so what does that retention bonus perspective look like?

Sarah Richardson: And how do we make it equitable for some of the heavy lifting that's going to occur for for others that can get into a really sticky scenario. You got to make sure that your CFO and your HR teams are aligned on that type of philosophy, because. Yes, it can be tougher to just pick up and move to a different opportunity, except that when you're in that elite group of, oh my gosh, these five people are the ones we can't lose, those five people may be the most employable in other scenarios.

And so that also goes into the flight risk factor of them being there. The one thing I do think about, though, often is hospital consolidation could lead to quality care issues as well, in that if you don't have the competition to keep you doing the right thing, doesn't mean that health systems aren't always going to go for the best quality and outcomes.

And yet, When again, a market has a foothold in a certain space, they may decide to eliminate certain business lines that aren't as profitable. And that's where you get into the tug of war a bit between for profit and not for profit and what service lines are offered based on which ones are making money, which ones aren't.

So you may have excellent quality, you may have also cut three or four service lines that someone can't. Access within 50 to 100 miles. And so there's a delicate balance of making sure that the right services are being provided at the right cost and you have the people to continue to maintain them.

This is an ongoing process. effort throughout what we're seeing today, because even in our 229 communities, we have people that are being affected either jobs or otherwise by the fact that their hospital systems are being consolidated and fewer executive positions being available because of this trend.

Kate Gamble: Yeah, it does come up a lot. And I'm glad you touched on access to care because that's such a big concern. We were talking about areas sometimes where it could now take two hours, three hours to get to a hospital. And that's just a terrible situation that really needs to be avoided. And, so really there's so much that goes into this issue, but it's affecting so many hospitals, like we said, as well as the staff, the patients.

And as M& A continues to dominate the headlines, which it will. Any final thoughts for CIOs and other leaders?

Sarah Richardson: Yes, I would say we all know how important the technology aspect is of all of this, but it flows into the operations and the access to care, which as technologists, we also keep top of mind. So if you're going through significant M& A work and or divestiture is what service offerings are available in your communities.

And if you are buying systems to specifically provide access and different lines of care, IRIS. And I think populations pay attention

to what

they are because the technology is going to have to have to support it. And you want to be a part of an organization that is improving quality and improving access.

Versus reducing it for myriad reasons. So be a part of that conversation. It's important again, not just from a technology perspective, but also for the reputation of your organization and your ability to provide the care that you want to provide to your

Kate Gamble: Yeah. It goes without saying, but that should always be the bottom line, improving care.

All right. Thank you for a great discussion. Don't forget to share this podcast with a friend or colleague. Use it as a foundation for daily or weekly discussions on the topics that are relevant to you in the industry. They can subscribe wherever you listen to podcasts. That's a wrap. Thank you for listening and happy Thursday.