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

John Commins, for HealthLeaders Media, May 23, 2013

"I thought these were two organizations that had concluded that they needed to combine forces to be more competitive in what has become a more dynamic and competitive regional market and I thought they had enunciated goals of improving quality and achieving efficiencies and reductions in costs that they thought they could achieve together better than separately," he said.

"Having said that, merging two organizations of that size and with different cultures and structures is obviously very difficult and at a certain point there were enough sticking points that they said they were better off walking away from the table than going any further."

Udow-Phillips believes that the merger talks were initiated last year more as a response to the Patient Protection and Affordable Care Act and other cost-containment and market share pressures brought forward by healthcare reform. Baumgarten says Vanguard Health System Inc.'s $1.2 billion acquisition of Detroit Medical Center in 2010 "stirred things up and was a major driver of Henry Ford and Beaumont to look for a marriage partner literally."

"Since Vanguard acquired the Detroit Medical Center, they have been pumping nearly $1 billion in capital into improving the buildings and the practices and challenging Beaumont on its own turf," he says. "Vanguard has now completed a major clinical center about two miles from the main Beaumont hospital at Royal Oak. Vanguard clearly has a strategy of trying to pick up more patients with better insurance than the inner city patients they have been seeing mostly up to now. They've been doing that by building new facilities and trying to acquire certain specific practices and had some success with that."

Neither Beaumont nor Henry Ford gave any suggestion in their brief statements to the media that they would pursue mergers or other alliances with other providers.

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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.