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$6.4B Henry Ford, Beaumont Merger Failed on Cultural Hurdles

John Commins, for HealthLeaders Media, May 23, 2013

A merger between two Michigan healthcare providers has been called off because of stark cultural differences between them, observers say. Those differences include the patient populations they each serve and the organizations' physician compensation models.



Henry Ford CEO Nancy Schlichting

Detroit's Henry Ford Health System and Beaumont Health System announced this week that they would let expire a deadline for merger talks that would have created a $6.4 billion integrated system. In the end, observers say, it came down to a clash of cultures that could not be overcome by the advantages gained from a merger of equals.

Seven months after telling a room full of journalists that Beaumont was "the absolute ideal partner for us" Henry Ford CEO Nancy Schlichting sent a note to employees saying the deal was off. "This decision was made because it became apparent that two very different perspectives had emerged for the new organization between Henry Ford and Beaumont," Schlichting wrote.

At Beaumont, CEO and President Gene Michalski said in prepared remarks that "we have benefitted greatly from our merger discussions and have great respect for our colleagues at Henry Ford. However, we found through our discussions that we are not aligned on how to achieve our vision for a model health system due to differences in our structures and business models."

Beyond those public statements, neither side was talking, which left the field free for speculation.

Signs that the deal was faltering surfaced last week when physician leaders at Beaumont reportedly asked the system's board to reconsider the merger.  

Marianne Udow-Phillips, director of the University of Michigan's Center for Healthcare Research & Transformation, says she was not surprised that the talks fell apart.

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1 comments on "$6.4B Henry Ford, Beaumont Merger Failed on Cultural Hurdles"


Mary K Parker (5/28/2013 at 4:19 PM)
If cultures of hospitals vary widely, it's no surprise the leaders would call this off. McKinsey & Company wrote in "Perspectives on Merger Integration" that "when integrating companies are in the same or similar businesses, their top executives tend to assume they are 'just like us' and dismiss the need for deep cultural analysis." According to McKinsey, most mergers are doomed from the beginning[INVALID]-roughly 70% of all mergers fail. In a way, it's probably good that this merger didn't go through at this point due to the widely disparate cultures.