The Healthcare Hub
There’s been a surge of merger and acquisition (M&A) activity within the healthcare industry. During the first quarter of 2018, there were M&A deals totaling nearly $156B, the strongest start in over a decade.1, 2 While healthcare companies view mergers and acquisitions as strategic growth initiatives, how do they impact their customers – healthcare organizations – and their patients?
Many times, the procure-to-pay process and customer experience get lost in the turmoil of an M&A transaction, including exception management on orders, pricing and shopping locations. During the 2018 GHX Healthcare Supply Chain Summit, Therese Grossi, Cardinal Health SVP for Enterprise Contracting, moderated a panel where participants discussed best practices around transition execution to achieve operational efficiencies quickly. Here are some of the key learnings from that session.
Do No Harm
“First, do no harm – don’t lose sales revenue because of M&A activity,” said GHX Manager of Consulting Services Darrell Padilla. “Think through important considerations such as how you will manage contracts and price differences between the merged companies.”
According to GHX AVP of Supplier Sales Denise Odenkirk, the number one pitfall for suppliers is losing purchase orders (PO) on the first go-live date when they switch over to the other company’s enterprise resource planning (ERP) system. She stated:
“Poor execution issues and inadequate communication to providers can result in providers continuing to order from the original entity. If you don't have the right solutions in place to capture POs, they’re lost and you’ll never get them back.”
Steps to a Successful M&A
When planning for M&A, it’s critical to take into account what technologies and order channels are in place between the two companies — and be prepared for all of the changes that can impact your customer’s experience explained GHX Director of Service Delivery Aaron Barrett. He stated:
“Have the expectation that everything will go missing. What will you do when an order goes to the wrong place? How will you manage unexpected situations? How will you align pricing?”
Odenkirk said companies must understand how products were historically ordered in order to plan for future state, stating:
“Don't assume orders came in the same way because it could have been different across multiple SKUs and product families. You need to spend time understanding how products were ordered (e.g. GHX Exchange, email, fax, phone etc.) so that you can set up appropriate mechanisms for orders to come to you moving forward.”
Kristen Miles, director of GHX consulting services pointed to the types of information provider organizations will need ahead of a supplier’s merger or acquisition, including how it will impact customer numbers, shipping, tax IDs and item specific data.
All of this requires a strong communications plan, explained Padilla. Look at how customers new to the acquiring organization would require different messaging from those already accustomed to doing business with the company.
“Customers don't always know which products are affected,” said Padilla. “It’s not about sending letters and emails. You need to activate the entire organization: Sales, the executive team, customer service, etc. They should all be involved in your communications strategy.”
“A form letter won’t do it,” added Miles. “You need tailored communication to every customer telling them exactly what is going to change from their perspective.”
The work doesn't stop when the merger or acquisition is completed. Post go-live, the company must have resources in place to handle day-to-day, specific activity around the M&A, according to Padilla, who stated:
“Prepare for your customers to react negatively and have empowered resources across your organization to address those issues. Work toward the goal of a ‘one call resolution’ to best serve customers. And provide the same level of service to your new customers as your existing customers.”
All of this M&A activity obviously has an impact beyond the two primary entities involved. Taking a hard look at transition execution and key learnings from prior experience will go a long way toward your success.
We've been covering M&A activity for providers and suppliers in healthcare from the beginning of this trend. You can read more on our blog the Healthcare Hub.
[1] https://www.morganstanley.com/ideas/5-acquisition-trends-investors-should-watch-in-2018
[2] https://www.bloomberg.com/news/articles/2018-03-28/health-care-m-a-booming-in-busiest-start-in-more-than-a-decade