Lessons learned in mergers and acquisitions.

IN THE CORPORATE, for-profit world, companies merge, go bankrupt, change owners, and restructure on a daily basis, but when this happens within healthcare, it tends to make front-page news. Despite multiple mergers and acquisitions occurring every year, we're still relative novices when it comes to such changes compared to our Wall Street counterparts. In the feature articles, Zuckerman and Rice offer clear guidance to assist facilities embarking on their own acquisition or merger journeys and provide a solid template for success. My first experience with a hospital merger occurred when I was in grade school in the 1970s, a time when this type of activity rarely occurred. My small Iowa hometown of 25,000 had two competing hospitals, each dating back to the early part of the century. One hospital was Catholic, the other Lutheran. A group of interested businessmen, led by my father, formed a committee to study the possibility of combining the facilities. Because of the controversial nature of their deliberations, the committee met in hotel rooms each week to keep the public from learning what they were doing. After several years, consolidation was recommended and, although it initially met much resistance, it ultimately was embraced by the community. Now, nearly 40 years later, the institution has become a robust, successful regional referral center. Of course, not every acquisition or merger story has a happy ending. In my more than 25 years of healthcare leadership experience, I've been a part of many mergers and acquisitions and have seen things go well - or not so well. I offer the following lessons learned for any organization considering such a venture. 1. Know the culture. It is important to know me culture of tiie organization you're planning to partner with and to make sure you're clear on your own culture as well. In Hospital Mergers - Why They Work, Why They Don't, Larry Scanlan (2010) illustrates the value of culture with two disparate examples. The first case study is of PROMINA Health System of Atlanta, which was made up of more than a dozen hospitals. The system went from being recognized as the top integrated health system in the nation to ultimately folding. At the center of the many reasons for the demise were cultural differences - of opinion and of practice. Scanlan also offers a converse example, Catholic Health East, a system of hospitals with a common purpose and nearly identical cultures. Decision-making is easier when die various parts of the whole are in alignment. 2. Be ready for resistance, no matter what the circumstances. Going into negotiations, plan for opposition and pushback from the other institution, regardless of the situation. For example, I was involved in the acquisition of a hospital losing $1 million per mondi. During negotiations prior to acquisition, the hospital CEO came to our health system to borrow money to make payroll. Despite the dire financial straits of the facility, the employees, the medical staff, and even the leaders remained somewhat resistant about the ownership change and felt they somehow still had a chance to pull themselves out of fiscal disaster. More recently, I experienced a similar situation when my health system made the decision to take over day-to-day operations of a critical access hospital through a management contract. Despite a near-heroic one-year financial turnaround, the need for change and the positive impact our health system had made were not universally recognized within the community. 3. Be clear on the reasons for the merger or acquisition. As Zuckerman states, the critical question for botii parties to ask is, "What could we accomplish together that we cannot do alone?" How will mis merger/acquisition benefit the organization, what purpose(s) will the arrangement serve, and how does this fit wimin the strategic direction of the institution? If the answers to mese questions are unclear, or if the reasons to partner become less compelling, it may be time to reconsider the venture. …