M&A: Finding the Right Match
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In assessing their deals, Novant, PWHS, North Shore-LIJ, and Lenox Hill Hospital looked beyond current circumstances and existing needs to take a longer view of the deal’s potential. Dowling has been in the M&A game long enough that he knows it doesn’t always matter how a hospital looks today; what matters is its potential. There are five criteria Dowling usually considers in assessing each possible North Shore-LIJ merger.
Strategic synergy. Dowling says his team always asks itself, What can we do with this hospital that we couldn’t do without it? “We’re looking for a strategic fit that meets our goals.” That might include developing new service lines, expanding into a geographic market, providing facility upgrades for physicians, growing market share, or improving quality.
People and culture. One of Dowling’s favorite parts of working a merger is getting to know the people at the other hospital. He wants to know that the right people are in place throughout the organization and not just at the top. He wants to understand the hospital’s culture and how it operates. Do they believe in collaboration and teamwork? Are they entrepreneurial? Are they trustworthy?
Accepting change. Dowling says this is key: “If a hospital wants to join us but we get the sense that they want to keep doing things as they have in the past, then we know we have
Physicians. Physicians are important to the bottom line. Dowling wants to know that potential exists in the hospital’s physician community. That means his team has to be confident that the hospital can attract and retain the right mix of physicians and specialists.
Quality. Dowling wants to see successful quality programs in place. “We want to know that it’s important to
Kick-starting an M&A deal usually involves an RFP. Depending on the M&A experience of your staff, you may want to hire a consultant to guide you through the process.
Think of the RFP as a strategic document that will be sent to a targeted audience—potential M&A partners. While the RFP can present straightforward, just-the-facts information about your hospital, the message you really want to convey is that you’ve taken a look at your organization and its strategic needs and decided that a merger or acquisition is the way for your hospital to move forward to meet its goal of paying off debt or increasing market share or whatever that need is. You’ll want to emphasize your locations, facilities, service lines, payer mix, and physician relationships.
Be clear about what you’re looking for from a potential M&A. Auburn (NY) Memorial Hospital, a 99-staffed-bed nonprofit hospital in Upstate New York, released an RFP in August to identify “a strong partner willing to make a financial commitment to us and the community.”
The RFP includes a half dozen items the hospital is looking for, including access to capital, expansion of key services, improved quality and safety scores, and high-quality specialty physicians. The RFP was sent to five nonprofit hospitals in nearby Syracuse and Rochester that, during informal talks, had expressed an interest. Scott Berlucchi, the hospital president and CEO, explains that Auburn Memorial wants to remain a community-oriented hospital and thinks a local match is its best option.
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