The emerging healthcare landscape is transforming the way provider organizations approach mergers and acquisitions. Determining how to leverage economies of scale and remain competitive amid increasing margin pressure remain relevant concerns during hospital transactions. However, the shift to value-based care and population health management has put an increased focus on clinical integration in the M&A process.
This enhanced focus on care coordination not only improves clinical quality, but it can also help the newly merged organization drive forward in the new value-based care landscape.
However, clinical integration is no easy feat. "It's tricky to bring two organizations together. It's more than just bringing them together and putting up a new sign," Jeff Ashkenase, executive vice president at Nexera, said in a webinar hosted by Becker's Hospital Review and sponsored by Nexera, a healthcare consulting firm focused on operational success and supply chain management.
The webinar provided organizations that are considering mergers, acquisitions, joint ventures, joint operating agreements or clinical affiliations with several considerations and strategies for success with clinical integration post-transaction.
1. Understand the key drivers and focus of the merger. This is one of the most important levers for success when crafting a post-merger, clinical integration strategy, according to Mr. Ashkenase. Organizations must identify and be able to articulate their needs and goals for a transaction with both entities and stakeholders. Perhaps they are looking to leverage size and scale to improve payer or supplier contract negotiations; maybe they see an opportunity to expand their geographic reach; or they want to acquire services they don't already have within their system. Understanding the initial drivers of a merger will help identify the priorities and the challenges an organization will face after the transaction is completed. While all merged organizations can benefit from clinical integration, if the focus of a merger is improving economies of scale, it may be a challenge to integrate operations and clinical pathways down the line, he notes. Knowing this can help providers prioritize decisions and correct their course as needed.
2. Look back before you look ahead. A historical perspective can offer beneficial insight, but providers should be careful not to weigh this information too heavily, according to Mr. Ashkenase. It is likely both entities have considered other mergers or affiliations before, so it is important to draw on the positives and negatives of those experiences to improve the process this time around.
However, when evaluating partners, organizations need to understand historical decisions and processes were based on historical situations, using the available resources and information at the time, Mr. Ashkenase notes. Systems should beware of thinking a partner is wedded to their processes. "Just assuming with additional resources they would do things the same way is probably a mistake," he said. "Especially with large organizations taking over small organizations, judging them based on these historical decisions is really going to be counterproductive to what you are trying to do."
3. Make the difficult decisions first. During the initial phases of discussion and in the aftermath of an affiliation, it is likely that staff at all levels, from environmental services to clinical providers, will be worried about job security and their role within the new organization. While it may be tempting to start down the path to clinical integration without addressing these concerns to ensure a smooth start for the newly formed organization, Mr. Ashkenase advises against this strategy. "As time goes by, if you haven't addressed those [workforce] decisions… that's going to become more challenging," he said. Addressing some of those challenges early on — such as whether a department will have one or two chairs, or how outcomes will be measured — will help make integration smoother down the line.
4. Prepare for cultural dissonance. About half of all terminated transactions cite culture as the primary reason for dissolving, according to Kristen Boehm, MD, Physician Advisor at Nexera, who joined Mr. Ashkenase on the webinar. This is why it is integral to examine the cultural fit — both positive and negative potential impacts — of the melded entities. "Cultures that are dissimilar can comingle, but it's a question of being prepared for the challenges that are inevitably going to come," Dr. Boehm said.
To mitigate cultural clash, Dr. Boehm advised organizations to spend time creating a unified mission and identifying a single administrative hierarchy to carry out that vision. This helps avoid confusion during transition and ensures everyone is on the same page, she said. Leadership must visibly and consistently support the new message and engage in ongoing dialogue with staff and clinicians throughout the process. "Only once the current and future states of the proposed transaction are adequately understood and developed can you really set in motion the deployment phase," she said, which includes governance, accountability planning, operational planning and process development.
5. Gain physician buy-in. Recognizing the different types of leaders throughout an organization and ensuring they are on board with organizational change can make or break integration post-merger. To do this, organizations must identify their physician champions, those who can balance their clinical responsibilities while serving as a "value strategist." These leaders will be democratic, assertive but not authoritarian, and "satisfied being an influencer rather than a renowned leader in their specialty," Dr. Boehm said.
Organizations should note that physician champions may come from unexpected places — they may not already be in a leadership role. "The physicians that can create and communicate [the vision] may not always be the ones selected to chair a department," she said. "In the case of merging hospitals, they may not necessarily be the physician from the larger institution or the academic powerhouse." It is critical, however, to take the time to identify and engage physician champions because they can help other staff truly embrace the tenets of a newly merged organization, according to Dr. Boehm.
These steps to integrate clinical pathways can help newly merged organizations address cost, quality and health outcomes goals called for by the current healthcare environment. A clinically integrated team improves care coordination and quality, creates efficiencies and reduces costs, in turn allowing providers to negotiate contracts more effectively and achieve value-based care goals. "Newly created hospital systems that are able to foster this are really going to be able to meet the three prongs of cost, quality and outcomes head on," Dr. Boehm said.
To learn more, watch a recording of the webinar here.