Why CIO Talent Can Make or Break Your Healthcare Deal

By Ben Millrood and Andrew Henry

It has been a busy year for healthcare industry dealmaking, with $51 billion worth of M&A transactions in the second quarter alone and a 10% increase in deal volume. Healthcare Services, including front-line providers such as physician practices and specialty clinics, have been a significant part of this activity, and as a result, the role of the Chief Information Officer (CIO) is taking on new significance. 

Today, CIOs in Healthcare Services are uniquely positioned to optimize business outcomes. CIOs can drive value through improving operational efficiency – enabling successful onboarding of new healthcare practices, fostering continuous innovation, modernizing practice/patient management platforms (application and data) and ensuring compliance, while minimizing cybersecurity risk. In the realm of private equity transactions, a strategic placement in this role can be a considerable asset for investors as businesses undergo significant M&A and/or roll-up strategies and need a CIO who can manage both cost and risk mitigation while driving efficiency to deliver value.  

A CIO with the right mindset and background is the key for unlocking significant value for healthcare investors. 

The Healthcare Services Market 

Multi-site Healthcare Services organizations, such as physician practice management companies (PPMs) managed services organizations (MSOs), and multi-site healthcare providers, have a deep need for a strategic CIO. While each business model is unique, the overall demands in this segment of the market pose challenges, particularly around platform integration, data, compliance, cybersecurity risk, and physician adoption.  

CIOs must navigate a complex landscape of regulations along with high stakes cybersecurity concerns due to the sensitive nature of personal health information. Physician technology adoption is also crucial, as clinicians need to engage with electronic health records and other digital tools that both directly impact patient care and are necessary for running the business, establishing RCM processes, and operating as a single entity. 

While most CIOs are comfortable designing IT systems and optimizing costs, those in multi-site Healthcare Services need to think bigger, standardizing technology across locations and offerings, not only to enable clinicians and staff to do their work, but so that the business can efficiently incorporate growth. This requires a modern, strategic IT leader, capable of both day-to-day systems management and big picture planning while carefully managing costs. 

An Ideal CIO Profile for Healthcare 

Given the unique aspects of the Healthcare Services business, the ideal profile for a multi-site Healthcare Services CIO includes: 

• Highly Strategic: CIOs need to be comfortable with the unique challenges of healthcare M&A and the requirements it puts on technology systems. CIOs with experience in regulatory compliance, optimization of services through technology, driving digital transformation, and efficiently implementing strategic initiatives are optimal. 

• Deep Knowledge of Healthcare and Related Technologies: Understanding clinical workflows, optimization of patient care, and developing physician buy-in for new technologies can significantly impact effectiveness. A great CIO will have the ability to assess the current IT infrastructure, identify gaps that hinder care and operational efficiency, and manage and integrate legacy applications and systems while navigating the complexity of data interoperability. 

• Experienced with M&A: CIOs need an understanding of the M&A process and a defined playbook to excel through the technical aspects of these transactions, from system due diligence to database management and more. This can be a challenge for CIOs without this background. 

• Tested Vendor Management: Typically, healthcare facilities run very light on IT staff, with coverage for data, applications, infrastructure, security and little else, often relying on vendors to fill any gaps. This means CIOs must have the capability to oversee and manage an ecosystem of key vendors that are doing much of the IT work for the business. 

• A Willingness to be ‘Hands-On’: As IT leaders, healthcare CIOs must simultaneously lead from the front, acting as strategic leaders capable of designing transformations and sharing updates with the board, as well as willing to get their ‘hands dirty’, doing the actual work building and maintaining IT systems.  

A strong CIO can serve as a crucial differentiator when transacting a multi-site healthcare business, as they can drive both valuation and positioning in the market. The right IT leader will eliminate potential hurdles and create resilient, scalable systems that ensure integration is not an issue when acquiring a new practice, ultimately making M&A easier for the business. For private equity buyers, this can mean the difference between a deal that closes and one that falls apart. However, given the critical nature of this role, private equity buyers who seek to deliver top value know that hiring and retaining the right IT leader is critical for short- and long-term organizational success.