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5 Critical Components in a Hospital's Search for a Partner

A successfully executed hospital transaction can make the process seem deceptively simple. But hospital mergers and partnerships are highly complex orchestrations that involve a considerable amount of risk.

Chicago-based law firm McDermott Will & Emery and independent investment banking firm Juniper Advisory collaborated to develop this whitepaper, which was co-authored by Rex Burgdorfer and Jordan Shields, both vice presidents at Juniper. The whitepaper covers five steps hospitals should take when developing a hospital transaction strategy and process, and it also focuses on the exploration of partnership structures and components that make for a successful partner search.

Although searches vary depending on the hospital, its market and local dynamics, the authors feel the following five items are universal components in the process.

1. The process should be gradual and comparative. The search process should allow time for hospital leaders to re-evaluate their market options as they learn more about each partner. Priorities may change over time, and the search process should allow for this and not attempt "to solve for the best outcome upfront and in a vacuum," according to the whitepaper.   

2. Hospitals should broaden their scope of discussions. Unless there is a valid reason to exclude a certain partner or structural arrangement from discussions, leaders should include all reasonable alternatives in their exploration. "A broad scope can help to demonstrate that the board considered all options to fulfill the charitable mission of the organization," according to the whitepaper. "Even if a given partner or structure does not ultimately prove to be the organization's best match, its offer may identify attractive alternatives that would not otherwise have been considered."

3. A timeline should be developed prior to embarking on a search. The timeline for a search should be crafted to benefit the searching hospital. Before beginning the search, leaders should design a detailed timeline that minimizes risks inherent to the search process. If something comes up midway through the process that interferes with the timeline, leaders should balance the risks and benefits related to that deviation.

4. Hospitals should consider developing a strategic options committee. A board committee established specifically to oversee the search process can provide consistent input. This committee should regularly report to the full board, and when appropriate, the full board and management should have ample opportunity to screen partnership finalists "for cultural, physician, operating and vision fit," according to the paper.

5. The process should be as competitive as possible. In many situations, competition can help hospitals maximize their economic and noneconomic value. "This can be helpful in demonstrating to state regulators that maximum value was obtained for the assets of the nonprofit," according to the whitepaper. "As important as ultimate regulatory approval, a well-run, controlled competitive process also assures the board that it has selected the option that best meets its objectives."

More Articles on Hospital Partnerships and Mergers:

6 Recent Hospital Transactions and Partnerships
How to Communicate With Stakeholders During a Hospital Merger or Sale: Q&A With David Jarrard
Religious-Secular Hospital Mergers: How to Make Them Work

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