Why medical mergers fail and how to prevent expensive crashes

A small community hospital merger begins with hope. Being acquired by larger health systems could be a lifeline, assuming their arrival will be welcomed, or even celebrated. Instead, staff feel identity and autonomy. “We think they see us as saviors,” the acquisition of CIO later admitted. “They see us as dictators.” This change is top-down and has little communication or cultural sensitivity. As a result, trust quickly eroded and turnover soared. Halfway through the process, the organization unplugged and completely relaxed the transaction. It's an expensive, painful lesson that I play regularly across the country.

According to Kaufman Hall's recent year-end report, hospital and health system acquisitions have reached record highs in recent years, with a considerable percentage of the acquisitions (about 30%) involved one party in financial difficulties. Some mergers went bankrupt, but among those who did pass, most did not provide guaranteed care, patient experience or improvements in costs, and even reported a decline in these measures.

Despite good intentions and strong leaders, which is at the heart of these possible deals, not to mention the need for a stronger healthcare system in rural or underserved areas, many healthcare mergers have underexpected expectations and some have completely collapsed. Why? The merger fails not because they are bad business, but because of unrealistic expectations and lack of plans around key basic details.

The secret to merge success lies under our noses, and regular operations and departments do not always appear in acquisition project plans or financial ledgers. However, executing it requires diligence, attention and motivation.

Medical merging anatomy

Mergers are much more than logos, budgets and EHR transitions. They speak as much as finance and action. However, after years of leading acquisitions, I learned that these areas are often overlooked or ignored in transition plans. We know that things like leadership, culture and talent programs are essential to the success of any organization, especially in the healthcare field of teams with technical and medical expertise. So why not prioritize these things when managing organizational changes that are as important as acquisitions?

A successful health care merger must include personalized rollout programs for all operational areas, active talent programs, leadership and mission consistency, and consider the resources needed to successfully resolve all issues. While you may have a plan to integrate EHR, the invisible reality is that the team will merge, the roles will change, the culture will conflict, and the team members will leave, whether or not you have a plan to deal with it.

The success of the merger will depend on the plan and its execution.

Why the medical merger fails

Organizations often underestimate the complexity and importance of integrating people, cultures, and processes. Acquisition systems often view merged integration as a law, operation or list, ignoring the changing aspects of humanity. However, the smaller aspects of the practical aspects of the operation are aspects that can be made or broken.

In my career, I have stepped in to help with the finish line many mergers. In the process, obvious factors have emerged that will hopefully be distinguished from projects that require serious correction.

• Lack of attention to people and culture: Organizations often prioritize legal and IT integration over human integration. Failure to consider cultural differences between merged entities can lead to friction, distrust, disengagement and turnover.
• Leadership misalignment: Mergers often trip when leaders of two organizations do not have a unified vision or have a clear future role. When leaders can’t see their place, they tend to get in the way or get out of the process because they are distracted and can’t help but perform anything designated as leaders.
• Ignore change management: Failure to plan and communicate changes in various actions and cultural fields can lead to chaos, resistance and turnover. Simple wrong steps, such as impersonal technology promotion, can burden and alienate employees.
• Resource limitations and bad plans: Many organizations cannot handle the complexity of mergers and acquisitions, especially in rural or underfunded environments. IT and operations leaders try to merge systems while running day-to-day operations.

The reason these elements are so fatal is that they are easy to ignore and difficult to measure. Most importantly, these factors can also be unpredictable, as each organization has its own unique culture that takes time to understand, while leadership members bring unique advantages (and blind spots). If you want to succeed, you must resolve these issues.

How to avoid merge failures

It's one thing to put your merged organization into the place where you have checked the technical box needed to provide care. Participating in the team and carefully calibrating the shared culture makes it a completely different kind of way to be able to succeed and top-level patient care.

The good news is that we can learn a lot from the merger that fails and succeeds. After seeing many different approaches, project planning and best practices over time, this is what successful approaches are in common.

• Start early, start overall: Attracting teams of experts before trading ink can even dry out, not only shape post-plan execution. They start thinking about culture, governance, people and actions from day one.
• Investment Communication: Transparent messaging, consistent updates and clear answers “What is for me?” and “What will happen next?” help build trust and buys for all departments and employees. The change management principles of trial and testing provide an effective communication framework.
• Use scripts and customize: The organization that takes advantage of established best practices and then customizes them for each department is more successful. This step gives leaders clear expectations and flexibility to consider unique processes or teams.
• Consider the unique characteristics of rural and small systems: Rural hospitals have unique needs and are often lacking in resources. Mergers must retain local identity and talents while providing a wider range of capabilities. They also have to find ways to leverage their unique (and often cross-functional) skills to create career growth opportunities for valuable talents.

The story of rewriting the results of the merger

If all of this sounds like a huge investment in time and resources, it's because of it. And high bets should be given. Failure to invest time and resources to plan and communicate changes in the operational and cultural fields can lead to chaos, resistance and resignation. Simple wrong steps, such as impersonal technology promotion, can burden and alienate employees. Unfortunately, many organizations are inadequate in resources to effectively handle the complexity of M&A projects, especially in rural or underfunded environments. Additional resources dedicated to providing them with support and operations leaders ensure successful merger of systems and cultures when running day-to-day operations.

Alternatives to these investments are more expensive for the parties and communities involved. Successful mergers are not just merging services. They unite people who work together to serve their patients. If we want lasting success with healthcare M&A, it’s time to stop leading with a list and start leading with people. Invest in managing it intentionally and proactively, not only for the business, but for the patients and communities you serve.

Photo: dmitrii_guzhanin, Getty Images

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