10 Critical Service Line Strategies Following a Merger, Acquisition or Affiliation


A significant increase in the number of hospital mergers, which reached a 10-year high in 2011 with an 11 percent annual increase, according to Moody's, suggests hospitals and health systems are positioning themselves to respond to a new set of directives built on value and not volume. Mergers, acquisitions and affiliations create opportunities to reposition organizations; however, success in realizing those opportunities is determined by the effectiveness of implementation at a clinical service-line level. The following is a prioritized list of 10 service line operational and growth strategies which must be applied following a transaction. Each is a tried and true step that reflects the practical realities of integrating physicians, clinical and administrative teams as well as the cultures of different entities. Collectively, they represent an integration blueprint.

1. Effectively engage physicians in leading the integrated service line. At the outset, align the service line subspecialists and other key physician stakeholders of the two merging organizations with each other and with administrative leadership through the formation of a co-management structure. Those physicians, in collaboration with administrative leadership, should jointly establish a fresh vision and strategic and operational initiatives for the service line. Together, establish the performance metrics consistent with success in the integrated service line. Through regular measurement of progress, transparency and incentives tied to those performance metrics, accountability among the physicians for the initiatives should be achieved. Maintain a flat organizational structure so that the physicians have direct involvement in decision-making. Ensure trust from the physicians through regular, honest communication and administrative leadership follow-through on completion of a focused set of commitments made to the subspecialists, as well as the provision of assistance to the physicians in their development as leaders.

2. Protect the core business. Devote initial resource commitment to and place emphasis on clinical quality and operational performance enhancement to ensure that the integrated service line has a high degree of appeal to and achieves retention of the subspecialists associated with the two original organizations. Reinforce and maintain existing patient referral mechanisms by ensuring ease of scheduling and expedited information technology  connectivity, enabling timely transfer of patient clinical data and care coordination. Establish retention initiatives for key nursing and other clinical staff as well as administrative personnel.

3. Establish a new culture emphasizing integration and innovation. Immediately assess the values, style of decision-making, risk-taking orientation and method for organizational learning and development inherent in the service line for the two organizations pre-transaction. Blend the best features of each into a new and distinct culture for the integrated service line. In doing so, work with a cross disciplinary team specific to cultural integration and utilize focus groups, message boards and one-on-one meetings to ensure stakeholders have multiple vehicles for having their voices heard during the transition period. Create an environment that rewards innovation consistent with enhancing value (improved quality, reduced cost, enhanced patient access and care coordination, etc.). Internal branding will be important. Establish an internal identity (brand) for the integrated service line (e.g., unique uniforms and lab coats, decor) and establish a budget for celebrating successes so physicians, nurses and staff consider the new environment to be a highly desirable place to work.

4. Consolidate clinical resources to achieve immediate cost savings. It is important to meet consolidation decisions head-on. Rapidly establish metrics for the specific scale, synergies and cost reduction to be achieved through the integration of the service lines. Take a bold stand regarding those inpatient and outpatient clinical services that will be regionalized (centralized) to maximize quality, cost-efficiency and strategic leverage, those which will operate in multiple locations to ensure ease of patient access and others that will be discontinued. Through the use of incentives directly associated with the metrics, engage the service line physicians and nurses in streamlining the use of resources (clinical supplies, service and management contracts, etc.). Redefine and streamline administrative positions and eliminate redundant roles and functions. On a regular basis measure progress on the metrics (i.e., "show me the money").

5. Optimize the service line's clinical operations. From the two original organizations, identify informal service line physician leaders passionate about value-based care and care redesign. They should be empowered to implement a standard set of clinical and operational "best practices" that reflect adoption of evidence-based protocols. Ensure that they are supported in this activity as needed by the service line medical director(s), the vice president of medical affairs/chief medical officer and administrative staff. Proactively work with hospitalists and case managers to determine those care delivery steps that will be retained and enhanced and those that will be eliminated to increase care efficiency and throughput. Together, design a standardized approach to care management that achieves reduced clinical resource consumption, minimized readmissions and the timely transition of patients to the lowest cost appropriate care delivery setting. An important step is the definition of how technology will be used to enhance clinical operations. Fundamental to success will be linking (even through temporary "bridges") the EMRs of the physicians, the hospital and service line-related ambulatory and post-acute providers.  Innovative applications of technology such as the use of remote monitoring (table top, wearable, ingestible, implantable) and cell phone-based apps (educational, diagnostic) should be explored.

6. Implement aggressive growth initiatives to maximize revenue. Set a short-term (24 months) revenue growth target. Select a focused set of strategies (three to five) that have sufficient impact to attain the goal. Consider alternative approaches including: closing points of patient referral "leakage," implementation of new services that fill clinical gaps, penetration of new patient market segments (demographic, geographic, psychographic) and formation of new strategic partnerships (e.g., other providers, payors and narrow network health plans, retailers such as Wal-Mart, Costco, Walgreens). Design strategies that capitalize on the scale and differentiation achieved through the transaction.

7. Prepare for the longer-term by developing a growth plan consistent with population health management. In the long-term, the degree of growth achieved will be measured in terms of the size of the population managed through the service line on a longitudinal basis.  Accomplishing this necessitates that the service line include a full continuum of care (prevention/wellness, ambulatory, acute, post-acute), an extensive array of patient access points and effective care coordination across those elements. Thus, a comprehensive plan specifying which components will be developed internally, and those that will be added through alliances, contracts, and partnerships with other providers, payors and retailers is required. The plan must specify guiding principles as well as criteria to be applied in identifying, evaluating and selecting among potential collaborators.

8. Utilize a best-in-class branding and marketing campaign. Establish a clear message specific to the rationale for and benefits inherent in the transaction at the service-line level.  Develop a compelling brand identity reflecting value statements for the integrated service line and specification of how it is differentiated from the services provided by competitors.  Fine-tune these messages and the mode of communication to meet the needs, interests and preferred means of information exchange for each type of internal (physicians, nursing staff, board members, employees) and external (referring physicians, payors, employers, patients) stakeholder. Capitalize on internet portals, social media and traditional communication channels with a careful consideration of data demonstrating the cost-efficiency of each approach. Measure the impact of the campaign and proactively adjust it over time.

9. Establish a physician-led capital plan for the service line. The demand for funds is virtually endless at a time when access to capital is more limited than ever. This is particularly the case when a newly integrated service line must meet IT, clinical resource and other transformation needs. Thus the development of a prioritized capital plan is a critical step. Service line physicians should play a leadership role in establishing the capital plan. This necessitates that they have a clear understanding of the breadth of the capital needs (list of requests); an objective understanding of the clinical, strategic and financial impact associated with implementing each request; the magnitude of the potential funds available; and a set of criteria to use in evaluating and prioritizing the requests. The service line administrative leadership in conjunction with the hospital’s finance department should support the associated prioritization process but defer decision-making to the physicians. Doing so will enhance the likelihood of effective decisions and ensure the physicians remain engaged in a leadership role (strategy no. 1) and accountable for the success of the service line.

10. Retain and enhance philanthropic support. It is likely that prior to the transaction the service lines of each of the two original organizations had the benefit of philanthropic support. Success of the integrated service line depends in part on retaining and building upon that support. To achieve this, service line leadership must work directly with each of the major supporters to ensure they understand the value that will be delivered through the integrated service line as well as new fundraising objectives.

It is the nuts and bolts of integrating people (physicians, staff, patients) and culture that will determine a merger, acquisition or affiliation's success or failure. In using the steps above and understanding past trends, one can begin to see how physicians and other stakeholders might view the world around them. In order to truly integrate a service line across organizations and realize the benefits of the synergies identified, executives must anticipate how dynamics will unfold and the implications of those dynamics, then manage to a new equilibrium that offers measureable value to every stakeholder affected.  

Ms. Baggot is a vice president at The Camden Group and a nationally recognized thought leader in bundled payments. Mr. Dubow is a senior vice president of The Camden Group with more than 29 years of healthcare consulting experience. They can be reached at dbaggot@thecamdengroup.com and mdubow@thecamdengroup.com.

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