A financial rationale for merging is always part of the equation in such a business move, but more and more, healthcare businesses are choosing to merge for strategic reasons.
In, “To Partner or Not?”, a panel discussion at HFMA’s ANI on Monday, Jim Haden, president and CEO of Martha Jefferson Health System in Charlottesville, Va., and Mike Lauf, president and CEO, of Cape Cod Health System in Massachusetts, shared their experiences in trying to align their strategic goals with a partner.
Like healthcare organizations across the country, administrators at both Martha Jefferson and Cape Cod looked around as other health systems began merging and asked themselves if they, too, should look into a partnership.
[See also: 2011 will be record year for mergers and acquisitions.]
As the board of Martha Jefferson formed the strategies that would take the health system into the future, Haden said, the members asked themselves “… could we be a better hospital with the right partner than we could be by ourselves?”
Ultimately, Martha Jefferson did decide to form a partnership – with Sentara Health, but Cape Cod did not.
While Martha Jefferson found a partnership that would meet the institution’s goal of, among other things, becoming a better hospital, Cape Cod found that it was, at the time, better off to stay independent. “There really wasn’t a compelling reason to go (into a partnership),” Lauf said. Cape Cod couldn’t find partners that fit its culture and its strategic goals, which were focused on improving quality.
Even though Cape Cod didn’t partner with any organizations when it went through the process of reviewing possible partnerships, the health system’s board hasn’t closed itself off to future partnerships, Lauf said. It is using its time now to make internal improvements that will make it a more desirable “date” when it tries “dating” again, said Lauf.
Cape Cod and Martha Jefferson took different paths, however, Lauf’s and Haden’s experiences yielded similar conclusions about mergers, including:
- cultural fit is the biggest determiner if a partnership should happen;
- be transparent with all stakeholders – including employees;
- decide what you want to achieve with a partnership and if achieving those goals is worth sacrificing other things, like local control;
- mergers are a lot of work – before and after the merger takes place;
- do not be reactionary – develop a plan and conduct due diligence; and
- going through the process of vetting possible partners doesn’t need to lead to a partnership – the experience is valuable in and of itself.