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Are shared ERPs healthy for academic medical centers?

Should academic medical centers and university partners try to manage the complex simplification of sharing ERPs?

RFP
ComplexityTo successfully manage an organization, you have to understand its resources – in real time.

That’s because the reality is that an organization’s people, assets, finances and other resources are in a constant state of change. And that’s part of why teams turn to Enterprise Resource Planning (ERP) systems to create management dashboards by integrating data from finance, human resources, procurement, student and clinical care delivery, project management and other disparate systems.

ERP systems not only unify resource data, they unify the systems and processes that control the data. Today, many organizations commonly begin an ERP implementation by first standardizing processes, then configuring the processes in the ERP and finally refining the processes to streamline and adapt them. Of course, those efforts require cross-team collaboration, system integration, user cooperation and clear business benefits that justify a budget. These interdependencies can be difficult for one institution to take on, let alone for two organizations working together on a shared ERP and can be yet more difficult in a university and academic medical center environment.

Some academic medical centers and universities have implemented a shared ERP system, but others have found that differences in governance, culture, business requirements, reporting and operations require separate ERP systems. However, the technical capabilities offered by modern cloud ERPs (combined with a focus on configuration of standard processes as opposed to the over-configuration that dominated prior, on premise implementations) are forcing universities and academic medical centers to revisit this decision. However, as with on premise implementations, the success or failure of cloud ERP initiatives is largely determined by early planning and alignment, including the determination of whether institutions will pursue their selection and implementation exercises jointly or separately. While there is no single answer for how to select and implement ERP systems in all university and academic healthcare environments, below are several key factors that institutions should consider, when going through this process. Although we have seen joint implementations performed by order of executive mandate, we recommend a more nuanced and business-driven decision making process.

An academic entanglement In the initial wave of ERP implementations, some universities and AMCs saw an opportunity to share IT resources through one ERP system. Today, many institutions are again evaluating ERP platforms in light of increasing financial pressure, changing data needs and the pressure of moving to the cloud.

Academic medical centers and their associated universities share a common mission to educate, research and serve. This mission forms an important collective identity for the organizations, and it’s partly driven by some shared resources. The concept of a unified ERP system is especially appealing to financial officers. On the surface, this can seem like a logical and prudent course of action to reduce overall IT spending, obtain greater control and improve visibility for both entities. When done correctly, there can be an initial economic benefit to procuring a single ERP system; however, the up-front cost savings can be offset by project risks and post-go live significant operating problems. Like so many other significant business decisions, a solution that is great for one organization might be a significant challenge for another.

The implementation of any ERP system can be a tenuous undertaking. Many systems have failed to achieve their promised benefits, and some ERP veterans would argue that ERP projects at colleges, universities and medical centers are challenging enough on their own. Trying to merge the complexities of both environments particularly the clinical needs, supply chain and labor nuances of health systems makes ultimate success even more tenuous.

Tricky terrain for medical centers Many hospitals and medical centers have embarked on a journey to implement ERP systems in the pursuit of standardized data and processes. However, achieving those objectives can be challenging without the right up-front work and analysis.

In typical academic medical centers and their clinical practice plans, the ERP journey must navigate tricky terrain of a complex environment and business requirements. Regulatory constraints, emergent access to clinical care, the complexities of being a tertiary/quaternary provider, round-the-clock service and outside clinic integration stake out non-negotiable requirements at the start. Academic medical centers have operational characteristics that include unique and complex supply chains, consumable goods and a highly complex labor management environment. Academic medical centers also have unconventional requirements for scheduling staff, tracking certifications and other mandated tasks. These various factors affect the institution’s procurement and labor management, financial systems, access and reporting. As a result, academic medical centers often implement ERP systems that accommodate the complexities of providing clinical care.

Learning the lessons of ERP ERP implementations are difficult in any industry. Universities and academic medical centers are no exception. While certainly some institutions have realized significant benefits, these are large-scale, complex projects. As such, Universities and AMCs across the country have provided lessons in the risks of implementing ERP systems. According to Matt Unterman, a Principal with Grant Thornton’s Higher Education practice, “Ambitious ERP plans can fail on a grand scale without the right level of project support and governance. Making expeditious decisions and receiving enterprise-wide support for those decisions, can be challenges at colleges/universities and AMCs.”

Some colleges and universities have certainly learned the lessons leading to of ERP success. However, consolidating and standardizing information with an academic medical center can introduce some new and very different challenges. While a university and its AMC may share part of their respective missions, each institution also has a much larger purpose with very unique needs, constraints, partners and other factors that drive its data architecture. While academic medical centers have the talent shortages, scheduling and supply chain challenges we've mentioned, universities track students, parents and alumni over the course of decades, while also maintaining organizational information such as course catalogs, prerequisites and grades. Further, universities and AMCs can have fundamentally different regulatory reporting, financial drivers and models.

When we consider the functions of finance, human resources, procurement, distribution, project management and other areas, we can see that universities and academic medical centers have critically different needs that challenge them to come to common agreement as to their unique approach for ERP implementation. That’s why universities and their academic medical centers often remain organizationally separate until they meet at the highest levels of administration.

Cloud migration provides opportunity Fundamental system differences initially prevented many universities and their medical centers from unifying within one ERP system. However, some ERP providers are phasing out their support for traditional on-premise systems in favor of cloud-based versions. This shift is forcing universities and their medical centers to migrate to new systems, and inspiring some to revisit the question of whether they can share an ERP system’s benefits – and costs.

Christian Lant of Grant Thornton’s healthcare business consulting practice said “Many universities are experiencing greater levels of financial pressure. On the surface, it makes sense to be on one ERP system, with all financials integrated. But, when you step back, what the university does and what an academic medical center does are two distinctly different business models.”

Cloud-based ERP systems also introduce some new factors to the equation. For instance, these systems typically allow less customization than traditional on-premise systems. So, while cloud-based systems offer ready access across multiple institutions, they also require more strict standardization across those institutions.

On the other hand, there can be significant advantages to jointly pursuing an ERP selection exercise with or without the implementation itself. Those can include pricing concessions, planning for processes that are similar, resource planning and collaborative governance/decision making. While there can be valuable opportunities for organizational alignment and process redesign, a major driver is bottom-line savings.

Weighing the decision for your organization Given the number of different ways that organizations can jointly pursue an ERP selection and implementation (e.g., integrating two distinct systems, integrating two separate instances of the same system and operating in one shared instance), there is no one-size-fits-all approach.

To consider a cloud solution, and revisit the larger question of a shared selection exercise or even a shared ERP, institutions can start by asking:

  1. Should the university have a higher-education-focused ERP solution, and should the medical center have a healthcare-focused ERP solution? Are these available in one branded solution?
  2. What are the benefits and risks of maintaining separate ERP systems, versus moving to one unified system? How do we decide if the benefits outweigh the risks (or vice versa)?
  3. How integrated do we plan to be from an operating perspective?
  4. Are we ready for the work required to adapt our processes to the constraints of a cloud-based system? If so, are we ready to enforce those processes across both institutions?
  5. To procure and/or to implement together, what governance mechanisms will we need? Given our organizational cultures, will that governance be successful?
  6. Even if we aren’t certain that we’ll pursue a shared implementation, is it valuable to jointly perform the pre-implementation activities, including system selection?
  7. Can the needs of the trustees be met with unified and integrated reporting versus unified operating processes on one ERP platform?

Determining a path forward Universities and their medical centers share an important mission, but they also have larger missions that are unique to each institution, with immediate and critical impacts for their distinct populations. Hiring nurses and physicians is very different from hiring professors and teaching assistants, and supply chain needs differ dramatically from an academic medical center to a university. Successful ERP systems can help organizations consolidate their data and streamline processes to better distribute resources and achieve long-term goals, but failed ERP systems can become bottlenecks with real-world impacts that can leave students stranded and medical staff forced to purchase supplies with P-Cards due to supply chain limitations.

According to Grant Thornton business consulting principal and healthcare industry leader David Tyler, “It makes sense to determine what is right for your organization. There are definite advantages to procuring together, enabling organizations to determine whether to then implement jointly or separately.” Even when the same brand of ERP is purchased, the implementation planning, timing and associated process changes should be different for the different business models. These differences might erode some of the cost savings for a single ERP instance, tipping the balance toward letting universities and academic medical centers select separate systems that suit their unique needs. “Consolidating results and financial data is more important than unifying processes, and that can sometimes be equally streamlined and cost-effective across separate instances or even platforms,” Tyler said.

Ultimately, any ERP implementation is an endeavor with great potential and great risk. While a common platform makes sense for some universities and AMCs, it is certainly not an assumed benefit for all. Due to their uniqueness and complexity, each organization should have a unique ERP journey that begins with a core pursuit of efficiency, consolidated data and reporting, a diligent focus and an honest pragmatism to help each organization recognize the most likely path to success.

Contacts:

David Tyler
Principal, Business Consulting
T +1 404 475 0180

Christian Lant
Senior Manager, Business Consulting
T +1 312 602 8168