Is it time to ?refresh? your merger strategy?

Wednesday, February 7, 2018 | Anne Beekman

 

Hospital mergers and acquisitions (M&A) hit an all-time high in 2010 as they spiked 33% following the announcement of the Affordable Care Act (ACA). In 2016 M&A continued to rise with 102 hospital transactions occurring. With all this merger activity, did your hospital system join the ranks and enter the merger frenzy? If yes, did you see the expected results? For most early mergers the goals were primarily focused on financial benefits. Expectations were that with the right merger, market share would grow, cost for care would be lowered, payer negotiations would be stronger, and quality would be top decile. The University of Minnesota’s research on some of the early hospital mergers showed hospitals that achieved the most benefits of a merger were low occupancy, non-teaching, similar in size and had the greatest opportunity to eliminate duplicative services. The results were modest with the best performers showing a cost reduction of 7% and labor reduction of 1%.

If it seems like your program went through a merger, but realized no tangible benefits, you are not alone. The reality is that leveraging the new business relationships provided by mergers requires a tremendous amount of planning and resources. In today’s healthcare environment, we must ask: are programs too over extended or unsure how to start tackling the work needed to be done to drive the merger strategy? Merger work includes addressing different program cultures, community loyalty, clinical consolidation and leadership/staff redundancy between hospitals—each of these is a considerable project. Not only are hospitals leaders trying to implement the strategic plan around a merger, but new priorities − such as evolving payment models, consumerism, coordination of care and technology gaps – are surfacing every day.

Notably, despite the added pressures on leaders, there is a renewed focus in reaping the intended benefits of a merger. Two areas showing the most activity are program consolidation and care standardization. There is an increased interest in what services can be consolidated, especially with community support. For most programs a major driver of this work is cost reduction. Examples of cost reduction include elimination of duplicate roles at different levels such as leadership roles, medical directorships, scheduling and accreditation leads. Duplication of services and location of services have high potential to drive cost down. Merged programs in close proximity may be able to have a single primary PCI center reducing call cost and burden and equipment costs while maintaining safe access for the community. If the merged programs have two or more open heart surgery programs, can one be closed? Consolidating open heart surgery not only consolidates resources and costs, but by combining these elements, it may make offering higher level services such as VADs a new possibility. Consolidation activity need not only address cost reductions, it can also support the merger growth strategy. These are highly complex questions that involve multiple service lines and stakeholders, but they are necessary if the merger strategy included lowering costs and growing new market share.

The need for standardization of care has been talked about so frequently that most forget the hard work required to do this.

Equally productive work is being done around standardization. Standardization of protocols, guidelines and order sets help merged programs benefit from a shared EMR, provide actionable clinical metrics and achieve best practices to be shared over multiple sites. The need for standardization of care has been talked about so frequently that most forget the hard work required to do this. Standardization requires significant time commitment from physicians and the clinical team, and it needs administrative support to prioritize EMR development and compliance across the system. Standardization activities achieve the initial goals of the merger strategy by better positioning systems for dealing with alternative payment programs and assuring quality metrics can be measured and acted on with greater consistency.

If you look back at the merger impact in your system and see two hospitals functioning the same as they did before – you have an opportunity. If your merger strategy has gone stale – brush it off and review the benefits of two proven merger wins: duplicate program consolidation and standardization across the system.

  

Anne Beekman, RN and Vice President of MedAxiom Consulting, has extensive experience in new program development in interventional cardiology, peripheral, EP and structural heart as well as working with programs on cost management, updating staffing models and office-to-hospital efficiencies. Anne’s experience includes opening and managing multiple Cath and EP Labs, Prep and Recovery Departments and CCUs.

Anne has a Bachelors in Nursing and is credentialed as a Nurse Executive by AACN.

 Contact Anne at [email protected].

 Illustration: Lee Sauer

 

 

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MedAxiom Consulting is the nation’s leading cardiovascular-specific consulting group, working with a range of private practices, hospitals and health systems across the country to improve the delivery of CV health care. To learn more about our team, please visit our website.