Author: Jason Rose, CEO of Clearsense
Healthcare organizations are becoming much more deliberate about where they invest and which facilities, markets, service lines and capabilities belong in their future. But that same discipline needs to extend to the technology portfolio.
M&A should be an opportunity to modernize the application portfolio, not simply integrate another set of systems and costs. Finance and other deal leaders need to bring business and IT stakeholders together early to determine what the combined organization needs moving forward.
That discipline is becoming increasingly important as healthcare M&A activity picks up. In Q1 2026, 22 hospital and health system transactions were announced, the highest Q1 total since 2020. Three qualified as “mega mergers,” and 15 of the 22 transactions, or 68%, involved a divestiture, up from 45.6% of all announced transactions in 2025.
Kaufman Hall describes the trend as continued “portfolio rationalization.” Health systems are exiting underperforming or non-core markets, freeing capital for new capabilities and seeking combinations that can strengthen resilience, expand access and position them for what comes next.
Treat M&A as a Modernization Trigger
M&A also creates a natural inflection point for application portfolio modernization (APM). Health systems need to seize the opportunity to determine what belongs in the future-state environment before zombie apps, redundant technology and their associated costs are carried forward.
That requires more than building an inventory of what IT owns. APM is a cross-functional assessment that brings finance, clinical, operational and technology leaders together to evaluate what each application does, what it costs, what workflows depend on it and whether it still belongs in the future-state organization. Those decisions directly affect recurring operating expense, integration speed and ultimately the economics of the deal.
Too often, however, technology decisions are brought into the process too late. After the deal closes, IT is charged with untangling inherited systems, separating data, supporting lengthy transition service agreements (TSAs) and finding savings.
At that point, much of the technical debt has already come along with the transaction. Gartner estimates that 20%-30% of IT system resources within merged health systems are redundant or obsolete. These systems can remain operational long after close because they contain historical data, support existing workflows or simply lack a planned path to retirement. As long as they remain live, licensing, infrastructure, maintenance, support and cybersecurity risks will continue to compound.
Assess Before You Integrate
APM changes the sequence. It identifies what to standardize, consolidate, migrate or eliminate, creating lasting technology cost reduction and stronger governance. Business and IT leaders need to answer three basic questions together: Which applications are running? What do they truly cost? Which ones should remain?
Health systems should start by assigning a disposition to every application. AI can help accelerate the process, but people must review the findings and make the decisions. The assessment requires facilitated dialogue and interviews with business and IT stakeholders for each system. Finance, clinical and operational leaders need to help evaluate the workflows it supports, the requirements any replacement must meet and the dependencies that could affect a change. From there, leaders can assign a score against agreed criteria and use it to make deliberate decisions about what to consolidate, modernize, archive or retire.
Gartner’s TIME framework gives those decisions structure, with four possible dispositions:
Tolerate: Keep the application as it is unless business needs require a change.
Invest: Add functionality where the business requires it.
Migrate: Modernize the application to improve its technical fitness.
Eliminate: Replace or retire the application based on business requirements.
The goal should not be to integrate everything that comes with an acquisition. It should be to build the application portfolio the combined organization needs. For the executives leading the deal, that roadmap should address three priorities:
Minimize Transition Costs Early
An early application portfolio assessment can identify which systems may need to remain available under TSAs, where dependencies can be eliminated sooner and where costly transition arrangements can be shortened or avoided altogether.
Reduce the OpEx That Comes with Inherited Technology
Acquisitions do not just bring new capabilities. They also bring licensing, infrastructure, hosting, maintenance, support and security costs tied to the applications being inherited. APM gives leaders visibility into that recurring expense and helps determine what should become the enterprise standard, what can be consolidated and what can be retired rather than carrying unnecessary cost into the combined organization.
Standardize the Operating Platform Quickly
The faster the combined organization can move onto a common set of systems, the faster it can operate as one enterprise. Standardization reduces duplicate technology costs, simplifies data flow and creates a more consistent operating model across the organization. That requires a repeatable process for assessing, rationalizing, archiving and retiring applications rather than rebuilding the approach with every transaction. The process should not end when integration is complete. Once established, the same operating model can be applied to the next acquisition, divestiture or major modernization initiative.
Health systems are already making harder decisions about which facilities, markets and capabilities belong in their future. The Kaufman Hall data suggests that portfolio rationalization is becoming an increasingly important part of how organizations prepare for the next phase of healthcare. Application portfolios deserve the same scrutiny.
In my view, M&A should be one of the clearest triggers for APM. Define the future state early. Preserve the historical data the enterprise still needs. Remove redundant technology before its costs become permanent. Then keep going.
In today’s financially strained healthcare environment, hospitals and health systems need to make APM a standing enterprise discipline. A repeatable process helps prevent technical debt from rebuilding, continuously remove unnecessary cost and keep the application portfolio aligned with the organization’s strategic priorities. In turn, that frees capital and capacity to invest in the technologies, services and capabilities that can differentiate the organization and position it to succeed over the long term.
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