Healthcare blueprint for mergers & acquisitions: 9 tips for a smooth transition

In today's business world, mergers and acquisitions are not uncommon – especially in the healthcare industry. In fact, according to McGladrey, a recent survey found that 88 percent of healthcare executives expected to pursue some sort of M&A activity in 2014.

 But it's important to note, they are not always easy. Sometimes the littlest things can make the biggest difference in a merger, like paying attention to organizational culture or being sure employees are informed of everything that is happening throughout the process – from start to finish.  In 2015, there will be four key drivers of M&A activity.

The bottom line
Facing a future of bundled and value-based payments, coupled with ongoing pressures to contain costs, providers are increasingly looking for strength in numbers. Mergers and alliances are a key way for capital-constrained organizations to survive and increase market relevancy, as well as implement needed technologies – such as electronic medical records and decision support tools – that facilitate evolved models of care. Hospitals and physicians, particularly those under financial duress, along with aging hospitals unable to make capital investments in new infrastructure improvements are prime participants in deal-making.

The quest for scale
Providers are looking for partners that can help them grow in scale and scope;  enhancing existing service lines by adding similar lines that “"expand the waterfront" of offerings to their patient base. Acquisitions that broaden the continuum of care and fill the gaps in pre-admission and in post-discharge services, including home healthcare, long-term care and rehabilitation will also be sought out.

The need to manage and measure health outcomes
New delivery and payment models that focus on population health management require new approaches to care and costs. Hospitals are looking to gain clinicians who can proactively manage the health of patients, minimizing and eliminating unnecessary utilization. In some markets, payers are acquiring hospitals, clinics and physician groups to become more involved in care delivery and cost control. They are also buying or merging with data analytics, marketing and technology companies to capture the information needed for better outcomes management.

The rise of consumerism
As consumerism becomes a driving force in healthcare, organizations are seeking vendor partners with deep experience in consumer behavior and engagement. At a premium are solutions that enable patients and health plan members to better manage their health, health information and care options.

The post-reform pressures leading to industry consolidation, including the need to demonstrate quality outcomes, reduce costs and deliver value, will continue to increase. Providers and payers will continue to fortify their positions through consolidation strategies that ensure their viability, add breadth and depth to their service offerings and transcend silos in the move towards more integrated, managed systems of care. As M&A activity continues to heat up, it's important to have the right partners in place to get you to the light at the end of the tunnel. Thus it's important to keep the below tips in mind when companies are in the thick of things.

1. Communication is key. From the very beginning of the M&A process, communicate the transition plan clearly and consistently across both organizations. Engaging both parties from the start is a great way to set a solid foundation for the merger between the two organizations.

2. Involve IT. A merger is bound to effect the IT department of one or both organizations involved. When the CIO is involved in planning and discussions right from the start, he or she will have a better understanding of how the new partnership will impact the department's structure and processes.

3. Adjust data security protocols. Security is extremely important to the healthcare industry, and when IT systems undergo changes some of these security issues must be addressed and even changed. This could include issues like how access portals and personal health information will be managed.  

4. Have clear governance and administrative processes. While administrative guidance is crucial in any business venture, it is especially important during M&A transactions. Many different issues will arise during the transition, no matter how great of a plan is put in place. Having a process in place to resolve any issue quickly and decisively will be an absolute must for any organization going through a merger.

5. Drive performance and create metrics. Stakeholders in the businesses must also agree on a set of metrics across both parties that will drive overall performance toward the new organizational goals. In order to get the most thorough record of ongoing progress, analytics should be focused on metrics that can be measured frequently. Examples of these could be cost-per-patient episode or average length of stay.

6. Make the new goals known. As soon as the goals for the new organization are agreed upon, leadership should begin articulating them to the team. Leadership should explain how these goals will be measured and what steps will be taken if the goals are not met. M&A transactions have a dynamic nature so stakeholders must be clear about what role each organization will play in the transition, change processes if need be and agree upon new objectives as the transaction moves forward.

7. Review processes and goals. Conducting regular process and goal review meetings is essential when forming new partnerships. Reviews ensure that the objectives of both organizations, and the new organization, are being met. It may be easy to overlook little things like the compatibility of IT systems, but seemingly insignificant things like that can cause big problems if they are not properly addressed. When systems don’t work together, they impede the ability of both parties to do all the work that needs done and share necessary information across organizations.  

8. Mitigate culture shock. Any time two organizations come together there is a potential for difficulties when blending the cultures. Even with the best merger plan in place, if the employees do not fully embrace the new organizational culture and organizational arrangement, the plan will have trouble succeeding. The last thing a new organization needs is two separate organizations simply sharing the same logo.

9. Manage expectations. M&A transactions do not happen overnight. Most deals are conceived by boards that do not have extensive M&A experience. Because of this, timelines cannot always be followed and complete integration may take longer than expected. Leaders in the merger need to be sure that there is enough capacity and endurance in both organizations to make the merger a successful one.

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