M&A in Healthcare Part 3: How A Shared Service Center Can Absorb The Impact of Healthcare M&A

In my previous blog posts as part of this Healthcare M&A series, I focused on re-thinking the strategic value of Information Technology (IT) during the process  (Part 1) and the advantages of focusing integration on your ERP platform first  (Part 2). At Velocity, we have seen the benefits of consolidated healthcare organizations that look at technology first, followed by processes and people. 

By using IT as a central function, healthcare systems are also able to develop a shared service model. Gartner defines a shared service center as a dedicated unit that is a combination of people, process and technology, structured as a centralized point of service and focused on defined business functions. 

The functions are supported by the technology platforms, either by the IT provider or a cloud service provider such as Velocity. 

Shared Service Center Benefits: 

  • Economies of Scale – Lower costs

  • Agreed-Upon Service Levels – Value decisions on what and how much to provide

  • Standardization of Processes – Best practices

  • Common Technology Platform – Enables coordinated transformation of front, middle and back-offices

  • Culture – People with the skill and mindset to optimize the model beyond the back-office

  • Operating units free to focus on their operations and external customers – Rely on shared services for support

  • Corporate free to focus on strategy – Rely on shared services for statutory compliance, controls  and information

  • Decision Support – Data analyzed and delivered as reliable and actionable information

  • Flexibility – Services can be sourced through multiple delivery channels and/or geographic locations

  • Scalability – The delivery model can be scaled for both acquisition/geographic and service scope expansion with relatively low incremental costs.

The potential cost benefits of shared service centers are tremendous. Figures  published by ADP found that within Human Capital Management, a shared service model can produce savings of 400 dollars per employee, per year. That means a company with an employee base of 5,000 can save $2 million every year. 

Developing Tiers of Service 

As you develop a shared service center, you’ll want to build in different engagement tiers. As a best practice, it’s best for the technology and self-service capabilities to handle as many things at the tier one level, while the more experienced members of the center can provide policy expertise. Ideally,  the two lowest tiers should handle 80 percent of the requests that come into the shared service center. 

Tier 0 - Self Service

  • Technology solutions manage self-service transactions

  • Usually requests for information or transactions

  • Ideally, 60-70% of initial inquiries are processed at this level

Tier 1 - Administrative Service

  • Customer service reps handle these calls using online knowledge bases or access to employee data 

  • These typically make up 25-30% of service requests

Tier 2 - Subject Expert 

  • Subject experts answer requests specific to areas of expertise

  • Experts may sit in HR centers of excellence 

  • Typically make up 10-15% of all requests 

Tier 3 - Policy Expert 

  • Corporate policy expert handles issues such as legal or policy specific and drive HR planning initiatives

  • Makes up 5-10% of service requests 

Shared service centers can provide everything from HR operations, payroll service, benefits, compensation, performance management and online services for employees. Putting all of these together enable consolidated healthcare systems to: 

  • Eliminate paper based processes 

  • Improve data accuracy 

  • Improve the employee experience from recruiting to hiring

  • Automate information processing 

  • Save money on HR costs per employee 

Fast Track Your Shared Service Center 

As a private cloud provider, Velocity can help healthcare organizations develop a shared service center more rapidly, in a secure and reliable environment. Our customer support provides complete application management for both instance and service requests. Our clients also gain a level of transparency through Velocity Zoom ® that allows them to see the benefits of the shared service center and an understanding of their HR costs. 

Velocity has partnered with several healthcare systems and hospitals that have created shared service centers in response to acquisitions and divestitures. 

In one Velocity use case, the client was experiencing multiple healthcare acquisitions that left IT unable to respond quickly enough to the integration challenges. The consolidated hospitals used the Velocity Private Cloud as the standard platform for Infor and Kronos, allowing the IT staff at the hospitals to usher in new innovations and meet regulatory requirements like ICD 10. 

In another Velocity use case, a hospital that had relied on shared services through a healthcare affiliation was essentially left without an IT department after a divestiture. Velocity standardized key systems including Epic and Kronos in a Virtual Private Cloud for the hospital. 

This helped the hospital accelerate the adoption of technology as well as meet regulatory, financial and operational goals faster than if they had to build and train their own IT department. 

Read more about Velocity’s Cloud Services and our expertise in serving the  Healthcare Industry.