Achieving Sustainable Value from ERP

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Medical the doctor healthcare and medicine concept in the hospital

By Lydon Neumann, CFCHE, Vice President, Impact Advisors

Implementing an Enterprise Resource Planning (ERP) system is a time-consuming – and candidly – an expensive process for healthcare organizations. But it’s a worthwhile investment if you concentrate on achieving and sustaining the value of the transformation, while effectively managing the change.

New ERP systems, when thoughtfully designed to serve healthcare, enable constructive business transformation, and can scale higher performance well into the future. Legacy ERP systems, typically delivered on-premise, provided basic functionality; but lacked the ability to readily accept lessons learned from peer organizations and introduce new, highly desirable capabilities, such as mobility and new functionality/modules in a timely manner. For an analogy, compare iPhones to landline phones.

How efficiently and effectively your ERP solution works for your organization is really a matter of what you invest in it. Gone will be the days of customized, limited programs. Today’s cloud-based ERP solutions have the flexibility and capability to increase performance and results inside the healthcare setting. In addition, there are several key factors which contribute to greater success by avoiding what stands between an under-performing ERP and a great implementation. Among them are business transformation, change management and operational governance.

Consider first that the new generation of ERP systems are notably helpful in combating operational inefficiencies in several areas:

  • Financial Management: Streamline activities and liberate information
  • Human Capital Management: Enable employee and manager self-service
  • Supply Chain Management: Lower costs and reduce supply and process variability
  • Information Technology: Deliver secure, scalable integrated cloud solution

However, it’s not as easy as simply installing a new ERP system and operating it. Creating longstanding, sustainable value from your ERP investment takes careful and deliberate attention to both governance and management. From senior leaders defining goals to the end users implementing them, an ERP solution needs to be tended to at every level to realize true value and greater enterprise performance.

In the past, traditional ERP systems focused more on automating each function rather than improving process flow, especially between departments and related functions. That left providers in a position where they struggled making timely and data driven decisions. They were unable to obtain economies of scale, produce consistent reporting, or achieve synergy across various departmental data sources.

But now, ERP systems are reemerging as more capable, value-generating transformation investments. That’s critical for healthcare providers who face margin pressure, talent leakage, M&A disruptions, and the need for IT modernization. 

The most significant factor driving demand for new-generation ERP solutions in healthcare is the strategic decision and direction by major ERP vendors, which are now fully committed to the cloud. Specifically, there is commitment to the SaaS (software as a service) licensing and delivery model. Industrywide, the move to a SaaS model was a game changer as it supports scalable efficiency, greater standardization, better employee engagement, and increased organization collaboration.

Despite the wide range of benefits, moving to a cloud-based ERP solution still presents challenges. That’s why it’s critical that leaders remain engaged – and end users remain attentive to adopting proven, effective workflows — throughout implementation and beyond. Here are a few ways to do that:

  1. Organize and conduct ERP focus groups. Engage leaders from your key areas: human resources, finance, supply chain, and IT. As major users who expect to benefit from your ERP solution, they will give you key insight on their needed requirements and current pain points. Each hospital and health system is different – the input from those departments will help you proactively manage likely issues and, as importantly, gain you early buy-in to decisions.
  2. Prioritize business transformation. The ERP system, in itself, won’t make the difference for your organization. It will, however, enable and support the changes that your organization needs to make. Successful transformation requires leaders who have a strong understanding of both their business objectives and how targeted benefits will be achieved.
  3. Map out your implementation. Plan your work, work your plan. Establish in advance all costs, where you will realize benefits, and which workflows will be affected.
  4. Account for everyone. Consider the range of users who will utilize your ERP system. Some will be operations experts you are relying on for your focus groups and validating the design, but others will be casual users who will need to understand how they will access and use the system. It needs to be simple and intuitive for basic use, but also sophisticated enough to present actionable information, integrate activities and interdependencies, and support ease-of-use.
  5. Maximize data and analytics. Performance can erode if compliance with new processes drops over time. It’s important to continually evaluate data to identify any diminished returns before they become systemic. It doesn’t matter if you have real-time dashboards, retrospective reports, or alerts directly embedded in the new system. They key will be getting that information into the hands of decision makers who can influence change and act on information.

In the end, implementing an ERP solution is truly just the beginning. To sustain the return on your investment, your organization will need to continue its ERP focus. Hospitals and health systems must invest time and resources to identify specific opportunities and pain points that align with their strategic goals. It’s only then that will you be able to design and rely on the workflow changes that truly maximize your ERP technology investment.

It will be up to your organization to establish what success looks like through your ERP journey. Identify areas of opportunity, such as self-service and value-based sourcing and purchasing, that you will enable with your new ERP system. Then define the specific benefits you want to target, such as reduced variation, and establish a way to quantify each benefit. Will it be through cost savings? Increased margins? Employee satisfaction and efficiency?

An ERP solution could be an expensive upgrade if the implementation is not properly planned and managed. It would be akin to buying a new smart phone only to make phone calls, while ignoring its smart features and internet capabilities. Remember, it is also routinely upgraded and offers an experience that is intuitive to even infrequent users. The result is greater performance and faster adoption by everyone in the organization, regardless of their role and responsibilities.