These days, the need for sophisticated IT infrastructure and the shift to risk-bearing insurance contracts are increasingly favoring large, muscular players. Not surprisingly, healthcare industry M&A is reaching a new peak. Just about any substantial healthcare organization is facing the question of whether to acquire outside players and bulk up, merge with a bigger healthcare player or risk going it alone.
Particularly if you’re doing the acquiring, however, achieving critical mass is just the first in a long, difficult series of steps necessary to success. Health systems, in particular, face difficult management challenges when they try to integrate all of the moving parts necessary to survive as a next-gen organization.
A new study commissioned by West Monroe Partners, however, may shed some light on how to think about M&A integration issues. The study, which focuses on mid-market deals (between $300M and $2B) looks at post-merger integration across several industries, but I’d argue that its lessons still make sense for hospitals. Their tips for managing post-merger transitions include the following:
- Start planning early: West Monroe researchers found that companies which considered integration strategies as they began targeting and negotiating with merger partners were more successful in integration. Specifically, these companies were able to integrate more deeply than firms that didn’t began planning till pre-merger preparations were already under way.
- Pay close attention to cultures: Here’s an eye-opening stat: more than half of companies surveyed by researchers said that merger value was lost due to lack of attention to differences in corporate cultures. Clearly, giving lip service to this issue but failing to address it intelligently can be costly.
- Poor change management impacts future dealmaking: In a clear case of “sadder but wiser,” a whopping 94% of survey respondents said that they would place more emphasis on change management next time they managed post-merger integration efforts. The study doesn’t spell out why but it seems likely that their past efforts blew up on them. Given that many health systems won’t stop at one deal in this climate, this is an important point.
- Communicating change well is essential: About three-quarters of mid-market execs said that communicating change to their staff was one of the hardest parts of integration, and 62% said that communicating to outsiders was a major challenge. Many seem unhappy with the results of the past efforts, as 57% said this was a key area for improvement.
Some of these suggestions may be discouraging for hospital leaders. After all, required and important changes like the ICD-10 transition and ongoing EMR changes may already have staffers near burnout, and they may react badly to coping with added cultural changes.
That being said, the survey results also suggest that many of the integration challenges healthcare organizations face can be headed off somewhat by smart planning. At least there’s something execs can do to cushion the blow.