With the U.S. health care system in the midst of a significant period of consolidation, we’re getting more questions about hospital M&A strategy than ever before. Many of you are concerned about getting the details of the transaction process right—ensuring that you choose the right partner, conducting extensive due diligence, and so on.
And while those factors are certainly crucial, we believe that what happens once the ink has dried is just as important as the steps leading up to the deal itself.
Understanding the value of integration
Data has shown that many hospital mergers fall short of achieving their original goals. Few deals improve care quality and an alarming proportion newly acquired hospitals—about 1 in 5—actually start to lose money within two years of the transaction.
There’s a strong consensus across a range of industries that post-merger integration, which includes the way you align processes as well as people, is the largest determinant of a deal’s success.
10 tactics to guide post-merger integration
In our study of the top-performers, here’s what they do to ensure success in their integration efforts:
- Begin integration planning long before deal closure. Rather than holding off until the deal closes, begin the planning process as early as possible. Ideally, high-level integration planning begins as soon as you start evaluating specific targets.
Related: Find gaps in your care continuum with our Network Integration Diagnostic.
- Immediately identify a dedicated integration leader. While the existing leadership team will certainly contribute to the integration process, the most successful institutions select an individual to lead integration efforts on a full-time basis.
Register now: Learn 10 tactics to build a high-performance M&A team at our webconference on March 6.
- Assemble a distinct integration team. Because the transaction process also warrants full-time staffing, pull together a separate integration team to ensure sufficient focus on the integration process and enable integration planning to begin early.
Related: Read Unlocking the Value of Network Integration to go from silos to an integrated network.
- Use early wins to establish credibility and build momentum. Early successes boost morale in a time of uncertainty, enabling the system to create the momentum it needs to pursue more challenging goals across the long term.
- Pick your battles with IT integration. IT poses one of the most significant challenges to the integration process. Best-in-class institutions stage the IT integration process, prioritizing efforts based on the needs of the deal at hand.
- Over-communicate the benefits of integration. A comprehensive communication plan boosts morale and ensures that integration plans roll down to all appropriate constituencies.
- Establish baseline targets at the outset. Success across the long term depends on your rigor in monitoring your integration efforts. Identify performance measures early on, ideally during the goal-setting process.
- Instill accountability through defined scorekeeping. Once you’ve identified baseline targets, designate scorekeepers and create a clear evaluation process to establish accountability throughout the organization.
Related: Three strategies for instilling frontline accountability.
- Create clear pathways to readjust the integration plan. The most effective systems establish standardized processes for gathering and disseminating best practices to target areas of underperformance.
- Hardwire learning processes to inform future integration. Retain best practices by establishing a permanent integration team or—for those who cannot justify this investment—by ensuring the business development team is involved throughout the process.
More on Mergers and Acquisitions
To learn more about the Advisory’s Boards resources to support hospital mergers and acquisitions, read our research briefing, Best-in-Class Integration of Newly Acquired Entities.
Then, check out our full suite of M&A resources at advisory.com/corporatestrategy.
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Tom Cassels directs strategy and best practice research for hospital and health system executives across the nation on topics ranging from hospital finance to strategic planning and clinical service innovation.
See all of Tom's blog posts.