How Today’s Health Care Leaders Can Prepare for a Successful Merger, Acquisition or Partnership
As new technologies and changing consumer expectations transform health care, many organizations are looking for new ways to navigate the disruption.
The adoption of new technologies and changing consumer expectations are transforming nearly every sector today, and health care is no exception. As companies like Amazon and CVS continue to penetrate the health care space, today’s industry leaders and decision-makers should consider redefining their strategies by using non-traditional methods to position their organizations for success. Many are turning to mergers, acquisitions and partnerships to navigate the disruption.
According to the Bank of America Merrill Lynch and HealthLeaders 2018 Media Mergers, Acquisitions, and Partnerships Survey, 71 percent of respondents expect their organizations’ participation in mergers, acquisitions or partnerships (MAP) to increase within the next three years. Leaders cited financial stability (63 percent) and improving operational cost efficiencies (61 percent) as the primary reasons for pursuing MAP activity.
While financial sustainability serves as the underlying influence for building new relationships across the competitive health care landscape, a successful merger, acquisition or partnership begins with identifying the right culture and developing a patient-centric approach.
Organizational Culture is King
Identifying a health care entity that is aligned with your organization’s existing values and vision could be the difference between a successful or challenging transaction. In fact, the Bank of America Merrill Lynch and HealthLeaders survey reveals 54 percent of respondents cite incompatible culture as the leading cause of failed MAP activity. For a MAP to work, the transacting organizations must have similar visions and complementary capabilities and specialties that will allow the entities to merge seamlessly to meet short- and long-term goals. Leaders must step back and ask themselves: What are we trying to accomplish with this merger? What will we gain or lose should we form this partnership?
It’s no longer about the traditional, horizontal mergers, but rather blending services in new and unexpected ways. This will create mutually beneficial relationships that allow health care players to more effectively scale their services and better serve patients. Without some level of cultural synergy between the organizations, a MAP could be destined for failure.
“Without quality and a reputation of quality, earnings and growth will suffer, as well as the ability to reinvest and continue to be a high-performing organization.”
The Shift Toward Value-Based Care
As the industry continues to shift toward a value-based care model, enhancing the overall patient experience is top of mind for health care leaders and decision-makers. In the PwC Health Research Institute’s annual report, 49 percent of provider executives revealed that revamping the patient experience is one of their organization’s top three priorities over the next five years. Ongoing efforts to transform patient care are not only evident in medical practices, where the rise of business intelligence and data analytics solutions are revealing new insights and supporting population health management, but they are also reflected in the direction of the industry’s future MAP pursuits.
When it comes to patient care, respondents of the Bank of America Merrill Lynch and HealthLeaders survey reported improving clinical integration (55 percent) as the primary influence for engaging in MAP activity, followed by improving positioning for population health management (54 percent) and gaining care delivery cost efficiencies through scale (53 percent). Additionally, 48 percent of respondents say that their organization is interested in merging with, acquiring or partnering with a physician practice in the future.
As physician practices play a fundamental role in the day-to-day integration of patient data and new technologies, these entities are a high priority for future MAP activity because of the potential results that could further fuel investment for the services that patients are seeking.
Clinical and financial gains in a new partnership
For health care systems, overhead is still the most straightforward and nonclinical financial economy of scale. Organizations formed through a merger or acquisition can expect to gain efficiencies in accounting, human resources, revenue cycle, supply chain and other back-office services. MAPs also allow health care leaders to spread the cost of investment in health information technology and population health over a broader set of hospitals and a larger net revenue base.
Quality is always a priority. Without quality and a reputation of quality, earnings and growth will suffer, as well as the ability to reinvest and continue to be a high-performing organization. When considering a partnership today, providers are often looking for specific clinical competencies. For example, simply having an electronic medical record (EMR) isn’t enough anymore. How you use the EMR to make a difference in providing care is important to a potential partner. An organization that has mature physician integration and is advanced in how it uses its EMR system to impact care likely has physician leaders who have worked through the data sets to create best practices and has clinical care decision matrices embedded in the medical record, which enables greater standardized care.
Measuring MAP Success and Identifying Future Pain-Points
In measuring recent mergers, acquisitions or partnerships, respondents of the Bank of America Merrill Lynch and HealthLeaders survey reported positive outcomes from both a financial and clinical perspective with 35 percent reporting an increase in quality care outcomes and 74 percent citing an increase in their net patient revenue. With high expectations for MAP activity over the next few years, it’s important to measure both the financial and clinical results, the impact on each organization’s long-term goals and the dynamics of the health care industry overall.
While these results further heighten expectations for collaboration over the next three years, many individuals surveyed were not able to deliver clear results for the clinical impact regarding patient readmissions, the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores and quality outcomes.
By acknowledging this potential pain-point and working towards both positive clinical outcomes and strong financial results, health care leaders and decision-makers will be well-equipped to carry out a successful merger, acquisition or partnership in today’s evolving landscape.
John Hesselmann is head of healthcare/education/not-for-profit, global commercial banking, at Bank of America Merrill Lynch.
