Supply Chain Integration Yields Big Benefits in M&A Deals

Updated on October 6, 2017

Gartner data indicates typical cost savings of 3% – 8%

By Greg Anderson

Healthcare M&A activity remains high in 2017 as providers consolidate to achieve greater economies of scale in the face of declining patient revenues. Margins are under pressure and consolidation is a popular strategy to increase bargaining power and manage costs more efficiently.

Recent findings indicate a real, but frequently untapped, cost improvement opportunity in provider supply chain integration. Successful integrations typically yield 3% – 8% cost savings per Eric O’Daffer, Research Vice President in the Gartner Healthcare Supply Chain group. These savings are achieved through purchasing contract consolidation, product standardization, workforce streamlining, and information systems rationalization.

However, this savings opportunity is often overlooked because supply chain’s role and impact in M&A is not well understood in many IDNs. Given their episodic nature, integrations are not a core competency for most provider supply chain teams and maturity in managing M&A varies greatly between healthcare systems. This capability gap causes valuable M&A synergies to be delayed or go unrealized altogether.

Pensiamo, a Pittsburgh-based supply chain firm serving healthcare providers, is staffing up to meet the growing need for M&A integration services. “We’ve been rapidly expanding our team to meet the market demand,” said Jim Szilagy, President and CEO of Pensiamo, “and the demand grows as industry consolidation continues.”

Pensiamo, a for-profit enterprise born out of UPMC’s supply chain operations, offers a unique service to providers: a dedicated team of experienced resources to focus exclusively on M&A integration success. “We deploy a focused team to manage the integration work so our clients can concentrate on the day-to-day operations of the system,” said Szilagy. “This enables providers to achieve the financial benefits of supply chain integration sooner and, in some cases, this adds up to millions of dollars in cost savings.”

As revenue pressures mount and the industry shifts to value-based care, it is imperative for IDNs to remove unnecessary costs wherever possible. Supply chain integrations present a valuable opportunity to capitalize on M&A synergies and rapidly improve operating margins in this era of relentless system consolidation.

Greg Anderson is EVP Sales for Pensiamo, where he collaborates closely with the leadership team to build and maintain strong, value-based relationships with Pensiamo’s healthcare clients.

About Pensiamo

Pensiamo is the pioneering cognitive supply chain company helping healthcare providers and suppliers succeed in an industry rapidly transitioning to value-based care. The vision of Pensiamo is healthcare transformation through supply chain elevation.

Pensiamo advances each client’s supply chain to deliver best-in-class value by applying innovative approaches, informed by cognitive analytics, to achieve better patient outcomes at a lower cost of care. Pensiamo’s proven practices and deep healthcare expertise enable rapid transformation of supply chains regardless of their current state of maturity.

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