THE MERRAINE BRAIN

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Medical Facilities: “To Merge or Not to Merge, That is the Question”

As many philosophers have told us throughout the ages, “There is nothing so stable as change”. In other words, change is inevitable. In every field, including healthcare, the environment shifts. The question for many health organizations is whether to embrace modernization, or to stay clear of it. To decide this, they must figure out whether merging is a positive, or negative force.

merferFor there to be an effective merger, there needs to be a gradual process that takes place. There is, perhaps, no better people to ask than those CEO’s and CFO’s who have firsthand experience of being involved in a merger; such as Jeff Rooney, CFO of Saint Agnes Medical Center, in Fresno, California.

Rooney believes that there needs to be a period of adjustment which cannot be hurried. Just like with any relationship, it is best to move to first base before completing a homerun turnaround. One of the main adjustments that a health system faces is a cultural transition which is experienced by both parties. (http://www.beckershospitalreview.com/hospital-transactions-and-valuation/10-lessons-from-leaders-who-have-merged-or-acquired-hospitals.html)

blog-hospital-mergers-antitrust-training-700x300Russ Guerin, VP of Business Development and Planning at Carolinas HealthCare System, concurs with Rooney that there needs to be a period of adjustment for both hospital, and healthcare system. He also adds that for both sides of the merger to be satisfied they need to “feel there is a balance between the benefits of an acquisition, merger or affiliation-whether financial, economic or clinical” and the negative effects that may arise.

For many hospitals, especially small not-for-profit hospitals, mergers are a way of improving financial stability and expanding their service lines to safeguard their margins. There are plenty of successful stories of mergers. One example is when, in 2011, St Luke’s Hospital and Health Network acquired Warren Hospital in Phillipsburg. This allowed Warren Hospital to revitalize their maternity services, accruing $6 million for an intensive care unit. The benefits for health systems is that it allows them to extend their network of hospitals into another region. (http://www.healthcarefinancenews.com/blog/3-reasons-why-hospital-mergers-are-advantageous)

mergersHowever, like every positive change, there are certain dangers for the market and the consumer. Gregory Curfman, MD argues that the negatives of mergers outweigh the positives. He believes that mergers allow larger systems to dominate and monopolize the landscape of the healthcare market. This serves not only to minimize competition, but to increase the prices for consumers. He supports his argument by citing an article published in The New England Journal of Medicine, which tells of how the potential plans of expansion of one system can potentially lead to negative results. (http://www.health.harvard.edu/blog/everywhere-hospitals-are-merging-but-why-should-you-care-201504017844.)

Dr. Kenneth Davis, CEO and President of Mount Sinai Health System in NY, disagrees. He believes Curfman’s perspective “reflects an old way of thinking…” and misses the whole picture. Not only that, Davis adds, “…health mergers now offer the potential for high quality and more efficiency”.

For the hospital in the search for the ideal merger partner, there are definite guidelines:

  • First, is to ensure that the merger process is a gradual one. Like any adjustment, it will take time.
  • Second, is to ensure that there is a cultural match. The philosophy of health system and hospital must fit.
  • Third, is to ensure that there is time for complete understanding. There needs to be a period where both parties take time to understand each other and get on the same page.

mergedThere also need to be specific systems in control to safeguard against the monopolization of larger health organizations. These systems of control include regional boards to access the feasibility of future merges, assuring healthy completion and cost effective healthcare.

References

http://www.beckershospitalreview.com/hospital-transactions-and-valuation/10-lessons-from-leaders-who-have-merged-or-acquired-hospitals.html

http://www.healthcarefinancenews.com/blog/3-reasons-why-hospital-mergers-are-advantageous

http://www.health.harvard.edu/blog/everywhere-hospitals-are-merging-but-why-should-you-care-201504017844

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