Setting the standard: west coast healthcare network mandates ERP system to ensure business standardization in four states - Enterprise Resource Planning: case history

Health Management Technology, Sept, 2003 by Laureen O'Brien

Healthcare organizations are constantly challenged to seek new levels of operational efficiencies, improve the bottom line and improve quality of patient care--often with limited capital and IT resources. For 150 years, Providence Health System (PHS), a multistate integrated delivery network, has operated as four independent regions. To stay competitive in the healthcare marketplace, we needed to achieve a level of standardization that would help manage growth, reduce costs and improve the efficiency of our expanding business.

Time for a Change

PHS is a not-for-profit organization of hospitals, clinics, physicians, long-term care and assisted living facilities, and other services and programs with 33,000 employees located in Alaska, Washington, Oregon and Southern California.

Currently, our organization is structured as four regional operating companies with disparate IT systems and processes that vary from region to region and from hospital to hospital. We needed to take advantage of our size and collective expertise to improve our operational efficiency, better manage supplies and demonstrate continued fiscal responsibility across regions. Wall Street bond-rating firms also advised us we could raise our bond rating through improved cash management.

Our initial and most pressing challenge was the need to upgrade our old human resources system in Oregon. It was an out dated system that could not help us perform analysis, and, after more than 10 years of use, we had outgrown its functionality. Due to Y2K issues at the time, Alaska and our corporate system office in Seattle also needed new systems.

The real challenge was to agree on a standard set of systems across the organization. A solution for our 13,000-employee organization in Oregon might not work for our 200-employee system office. Even within regions, the concept of standardization was difficult to envision. In Washington, for example, we have five hospitals, each with its own separate departments (e.g., HR/payroll, finance and materials) and IT solutions.

Quickly, the issue evolved into whether we should look for a fully integrated enterprise resource planning (ERP) system that goes beyond HR administration to integrate all facets of the business including planning, finance and supply management. Our procurement and finance systems were not failing, but due to aging technology, we knew we had to replace them in the next few years.

A Meeting of the Minds

Overcoming these challenges and achieving our goals required technology that would enable the adoption of common standards across our network, allowing us to function as a single organization operating in four states. The first hurdle was agreeing on a vendor that could meet the diverse needs of HR, finance and procurement.

Representatives from all four regions and our system office worked with consultants to build an ROI plan for a new HR information system. After a six-month process, the HR team narrowed its vendor finalists from five to two--one of which was Lawson Software. When the HR team selected the non-Lawson finalist, the procurement team objected, saying the organization would be taking a step backward. That's when key stakeholders looked at all the criteria, weighed the procurement option with the HR option and agreed Lawson was the better choice.

Based on site visits, we knew Lawson had a successful history of supporting organizations similar to ours with multistate integrated delivery systems, and that it already serves eight of the top 15 largest healthcare systems, in the country. We learned that it had a reputation for quick implementation of its technology, good customer support, lower total-cost-of-ownership and robust materials management solutions. In the end, we chose Lawson because the company provided an integrated financial, HR and procurement system that we deemed critical to enterprisewide standardization.

Our executive steering committee concluded it would be cost-effective to purchase an ERP system for all of the regions, even without the full commitment from two of them. Oregon, Alaska and our system office purchased the enterprise license, which gave us the ability to implement the other regions if and when they were ready.

However, our business strategy evolved when senior management realized the value of an ERP system and how it could drive the organization toward consolidation, common business practices, and leveraging our size and talent across all regions. They mandated the implementation of the ERP system to the other regions, ensuring future standardization across our organization.

Going Live

A significant challenge was to convince our facilities, which had never worked together across regions, to accept a single system solution: one database and one server housed centrally. Because Oregon had the technical infrastructure to support these, we designated it as the application service provider for Alaska and our system office.

To begin the implementation as a single project, we created a team of representatives from the states involved in the initial conversion. Involving these key stakeholders in the process helped us overcome the natural initial resistance to standardization from multiple fronts.