3 Ways Hospital CEOs Assess M&A Value for Their Organizations

Two hospital leaders share what goes into determining if a merger or partnership is worth pursuing.

Hospital and health system CEOs can't reap the benefits of a well-executed merger or acquisition without first identifying the right opportunities for their organizations.

What goes into that assessment and decision-making process can vary, but understanding if you should pursue M&A and then pinpointing suitable partners are necessary steps for a successful integration strategy.

Aspirus Health president and CEO Matt Heywood and University Health president and CEO Ed Banos delved into their own evaluation approaches in last month's The Winning Edge for Transforming Through M&A.

Here are three areas they highlighted for assessing if your organization is ready for dealmaking:

Build on care continuum

"The first thing we want is to make sure that it fits into our mission and our core," Banos said.

For San Antonio-based University Health, that mission revolves around managing the patient or the population through a complete continuum. When an opportunity comes up, Banos and the leadership team discuss how it would fit in one the three pillars of pre-acute, acute, and post-acute strategy.

An example of that is University Health looking at housing locations where they can keep patients in need of liver, lungs, or kidney transplants for a period while they're being assessed or post-transplant.

"We want to make sure that it helps us provide either a continuation of care or something that's a value-added service," Banos said.

Don't just bring in value, provide it

While CEOs ultimately pursue M&A to enrich their own organizations, knowing what you can bring to the table in a partnership is vital to landing a deal, according to Heywood.

Aspirus Health went through its own merger less than a year ago when the Wausau, Wisconsin-based health system combined with Duluth, Minnesota-based St. Luke's to form a 19-hospital entity.

"Before we partnered with St. Luke's, the question I asked the team was, 'What does Aspirus mean to you? What do you think makes Aspirus unique and what values do you think we can bring to another organization? And then we will go out and look at potential partners going forward based on that,'" Heywood said.

Aspirus was able to sell St. Luke's on its strength of being a rigorously structured integrated system, which allowed it to secure the merger and expand its presence into Minnesota, according to Heywood.

Aspirus continues to take that mindset as it seeks out other opportunities, asking what key attributes it's looking for and if it believes its own attributes can add to an organization.

"It helps us make decisions, but it also helps others when we're talking to them to see the value of partnering with us or choosing not to, depending on the value that they see and what we bring," Heywood said.

Recognize cultural fit

A deal can make all the sense in the world and look good on paper, but if it doesn't align from a cultural standpoint, then it's not worth putting pen to paper, both Banos and Heywood stated.

"Just buying something that provides a service but doesn't necessarily see the value of integrating within your organization would have a lot of disruption for us," Banos said. "So we're very, very careful when we look at a practice or look at an opportunity."

When looking at an opportunity that doesn't share similar vision or values, even if competing organizations may also be in pursuit, you have to be willing to say, 'no thanks' and move on.

"Even though we might need that service, it's just not a strategic fit from the culture of the organization," Banos said.

In the long run, that perspective, along with these other approaches to M&A, will lead you to a quality deal.