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Transparency is the Key: 3 Tips to Manage Physician Opposition to a Transaction

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Although transactions can be an effective method for hospitals to coordinate care, expand patients' access and add service lines, they may also generate anxiety and worry within the physician community and hospital staff. Since physicians play an integral role in hospital operations, they can be a strong force for or against a potential hospital transaction. If the physicians are not on board, their opposition could become a barrier and greatly slow down or stop a transaction.

Common physician concerns

Physicians may push back on transactions for a variety of reasons. Some community hospitals allow physicians a greater amount of freedom and this freedom may be threatened by a transaction. "[The physicians] may be concerned that a new owner may not value them as much as the current hospital administration. In addition, if the hospital has historically let the physicians practice in a certain format with certain services, they may be worried that this will discontinue under a new owner or operator," says Scott Becker, JD, CPA, partner at McGuireWoods.

In addition to concern over future services of the hospital, physicians may have a variety of questions that could spur anxiety over the proposed deal: Will the new owner recruit new physicians and bring more competition? Will the method of suggesting new equipment and medical devices change and affect physician control? Will the new owner change current hospital-physician agreements?

Problems with physician pushback
While physicians do not usually have legal power to stop a potential deal, they could become a barrier for the transaction's completion, especially if the hospital is highly dependent on a small number of physicians.

"Usually [the physicians] don't have a way to stop a deal. However, since transactions usually require state approval or attorney general approval, they could launch opposition in those ways," says Mr. Becker.

In addition, if a potential buyer hears about strong opposition from physicians or even hospital staff, they could lose interest, especially if that hospital is reliant on those groups. "If the potential partners perceive the staff or physicians as opposed to the deal, they could become concerned and quickly lose interest," says Mr. Becker.

Recent example: Abington Health, Holy Redeemer Health partnership
Toward the end of June, Abington (Pa.) Health — owner of Abington Memorial Hospital — and Huntingdon Valley, Pa.-based Holy Redeemer Health System announced their intention to partner and create a new regional health system. Under the deal, Abington Memorial Hospital would have stopped performing abortions to comply with Holy Redeemer's Catholic doctrine.

The plan spurred strong opposition from approximately 150 physicians affiliated with Abington Memorial. Abington Memorial CEO Laurence Merlis also received many letters, emails and social media messages from women's groups, professional organizations and community residents opposing the potential partnership. In addition, physicians complained that they were not consulted before Abington and Holy Redeemer signed a letter of intent.

Less than a month later, Holy Redeemer and Abington Memorial announced they were canceling their proposed deal. Although no specific reason was cited, it is likely that the strong physician and community opposition was a factor in the decision.

3 tips for managing transaction opposition

Here, Mr. Becker offers three tips for managing physician opposition so that a potential transaction is less likely to face physician opposition.

1. Be transparent. "The best [strategy] I've seen involved a hospital that was outrageously transparent throughout the entire transaction process. From the very get-go they explained what was occurring. They were able to mitigate opposition by bringing [issues to the forefront] early on," says Mr. Becker. While different hospitals have different strategies for how they deal with communication during a transaction, a lack of transparency can hurt the hospital, especially when the staff and physicians begin to worry. "Many times the board has a great reason for what they are doing, but if they are not transparent enough, the community is worried about losing jobs and physicians are worried about their security with the hospital. The more you can bring out in discussions, the less the staff and physicians have to be concerned over," says Mr. Becker.

Transparency does have its risks. The community or physicians could hope for potential elements that do not make it into to the final parameters. Mr. Becker recommends phrasing any elements of the potential transaction carefully so no promises are made. It is important to make sure communication focuses on things as potential and not definite. "Overall, the more in front of the transaction you are, the better chance you have of alleviating concern," says Mr. Becker. "Transparency is the overarching best practice," he says.

2. Conduct an admitter analysis. Mr. Becker recommends that a hospital also conduct a "top 25 admitter analysis" to determine whether high admitting physicians would be supportive of a transaction. "If you do a top 25 admitter analysis it will tell you how likely your top admitting physicians are to stay or go if a transaction develops. It will show you how aligned certain physicians are with the hospital," says Mr. Becker.

3. Capitalize on transaction expertise. Since push back from physicians is most likely going to be a new experience, hospital executives need to utilize experienced advisers — healthcare consultants, lawyers or investment bankers — who have been through a healthcare transaction multiple times. "When you rely on experienced advisers you may navigate potential barriers with more ease. They can anticipate what you will need for a smooth process, especially in the face of strong opposition," says Mr. Becker.

More Articles on Hospital Transactions:

3 Methods for Managing Concern in a Community Hospital Acquisition
5 Best Practices for Cultural Changes Following a Transaction
5 Critical Transaction Issues for Hospital CFOs

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