Challenges

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Consolidation is inevitable as healthcare systems seek to survive in today’s challenging environment.

The healthcare industry is experiencing an extraordinary level of merger and acquisition (M&A) activity.

The trend is expected to grow in magnitude as hospitals and medical practices struggle to survive in a period of unprecedented uncertainty. Statistics from the American Hospital Association and Towers Watson show year-over-year increases in M&A of:

  • 15% from 2011 to 2012
  • 20% from 2012 to 2013

While there are numerous challenges for any acquisition or merger, the biggest hurdle often takes place after the transaction, not before. Studies show that between 50% and 75% of all transactions completed in the U.S. fail to meet the projected or desired financial results.

Integration Key to Success

There are abundant factors that can contribute to failed objectives, but the improper integration of the two entities is often quoted as a primary reason.

Why does integration so often fail? The fact is there are usually many reasons related to the vast number of challenges that must be identified and addressed in a coordinated way, including:

  • Strategy
  • IT systems and network design
  • Process and workflows
  • Human resources and culture

Strategy – Having an understanding of the motivations behind a transaction and the true potential of the combined entity allows the organization to identify clear objectives, which then guide the creation of an integration plan.

IT Systems and Network Design – It is important for healthcare systems to understand that outpatient ambulatory practices have different needs than hospitals, and consequently often require different or supplemental IT systems. IT systems should be assessed in conjunction with processes and workflows to ensure peak efficiencies. A proper complement of IT systems that not only support a practice, but help it optimize operations, is a critical objective of each integration.

Processes and Workflow – The goal should be to identify best practices that can be implemented across the ambulatory network to reduce costs, eliminate or reduce manual processes, enhance revenue and improve patient care. Best practices can come from existing entities, acquired entities or even outside sources.

Human Resources and Culture – General HR functions such as compensation models, benefits and job descriptions are obvious areas to address, but culture is a critical component that can be difficult to identify, measure and assess. If culture is not properly addressed, it can lead to critical turnover that negatively impacts both the return on investment and patient satisfaction.