Mergers Are Hard, Dicey. And Yet Hospitals Can't Stop.
This article first appeared in the March/April 2018 issue of HealthLeaders magazine.
Businesses merge or acquire other businesses for one reason only: growth. When the path toward organic growth seems narrow or a new competitor edges into your market share, the temptation is to look for a way forward, or out.
When health systems merge, they most often tout advantages of increased scale and efficiency, or their ability to provide a better experience and range of services for the community.
What's usually absent from the initial press release is clear evidence that the history of such mergers has indeed made care for a community of patients less expensive or more efficient. If all healthcare is local, as the saying goes, then are mergers counterintuitive?
What's always missing in the stampede to merge are the operational, financial, and cultural realities. Back-end systems may indeed be analyzed for redundancy and then streamlined, but the process itself is long and expensive. Physician staffs that once competed must now come together to share data or streamline care protocols.
Hospital campuses that once had clearly defined, local leadership and accountability may now report to a centralized executive team, in some cases, in another state.
The hard part is the human side. Always. Any good health system culture is held together by investment in relationships and trust. Any CEO will tell you that turning around a hospital culture is much more difficult than turning a balance sheet.
Mergers hit all of those reset buttons. Strong cultures and strong leaders can usually survive a merger. But struggle will follow those systems where there are already cracks in the key intersections of trust between executive, clinician, and community.
The view from the stratosphere may be that this recent round of large regional mergers is the inevitable continuation of years of local market consolidation.
HealthLeaders Media senior editor Philip Betbeze poses the question, "Healthcare M&A: Is It Different This Time?" as a feature in this issue. The article raises impactful questions about the reasons behind mergers, and new facets, including the concept of asymmetric mergers.
My answer to the questions is the reasons behind mergers are not different this time, but the outcomes may be.
We have a generation of healthcare leaders now who are perhaps tempered by failures of the past and aware of the pitfalls of chasing scale blindly. There is better data. Process improvement skills are much more ingrained. Consumers and external competitors are pushing for innovation.
The mix is just different this time, and maybe that's enough for the industry to get this one right.