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

John Commins, for HealthLeaders Media, May 23, 2013

"I was more surprised in the first place when they said they wanted to do it," Udow-Phillips says. "The cultures are so different between these two organizations. Mergers and acquisitions are hard to do generally and in this particular case when you layer on top of it two organizations that have fundamentally different backgrounds and structures, that makes it even harder. I was surprised it was on track for as long as it was."

For starters, Udow-Phillips notes, the two health centers served different patient populations and used different physician compensation models.

"Henry Ford Health System is a very integrated academic health center where the physicians are predominantly salaried. The main campus is in the inner city of Detroit. They serve a population that is predominantly Medicaid and uninsured," Udow-Phillips said.

"In contrast Beaumont Health System," she said, "while it has some staff physicians, the leadership is predominantly led by independent physicians and private practice physicians. Their traditional home is in the wealthy suburbs. Their Medicaid population is very small."

"The physician cultures are quite different. Henry Ford has been an owner of the Health Alliance plan and is very familiar with capitated systems and salaries and structures for physicians and Beaumont is a much more fee-for-service oriented environment.

Allan Baumgarten, an independent health policy analyst and author of the Michigan Health Market Review, acknowledged the vast operational and cultural differences between the two systems, but said he was still surprised that the merger talks flopped.

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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.