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3 Methods for Managing Concern in a Community Hospital Acquisition

A community-owned hospital is often the largest asset of the community. Unfortunately, with decreasing reimbursement and climbing costs, more and more community hospitals have been struggling. Residents need a local hospital to remain operationally viable in order to protect local access to healthcare services. For this reason, an increasing amount of community hospitals have been looking to hospital operators or large health systems to partner and/or acquire them, evidenced by the influx in hospital mergers and acquisitions over the past few years.

Concern is high with hospital acquisitions, buyouts of community hospitals
When a local hospital is acquired it can raise concerns among the residents, hospital employees and physicians. "Residents can be very leery of somebody coming in from the outside and buying their largest asset — the local hospital. Apprehension is high with staff, community residents and physicians," says Jim Rolfe, managing director of VMG Health's transactional services division.

Most often the fear stems from concerns over job security and decreased services: Will they have a job under the new owner or operator? Common fears also involve worry that the operator will strip the hospital of services and employees and send most of the profits back to the corporate office.

While these concerns may appear  legitimate, Mr. Rolfe points out that a hospital operator or health systems want to maximize their investment, thus creating a high performing hospital that has a focus on quality and patient and employee satisfaction is the primary goal. Experienced health systems use benchmarking to ascertain the correct formula in services offered and expense ratios (salaries and supplies) in order to make the newly acquired hospital as efficient as possible. "Normally, every employee and resident in the community deep in their heart knows [the hospital] needs to be operated by an experienced operator with access to capital. At the end of the day, the acquiring hospital wants to continue to offer quality healthcare and grow market share of the hospital, "says Mr. Rolfe.

Hospital executives — on either side of the transaction — need to be aware of methods to ease concern surrounding a hospital acquisition. Having worked with Franklin, Tenn.-based Community Health Systems as vice president of acquisitions and development, focusing on acquisitions/divestitures of acute-care hospitals, Mr. Rolfe is familiar with three methods — in no particular order — to assuage fears of the residents, employees and physicians once the letter of intent is signed.

1. Hold meetings with community, hospital leaders. According to Mr. Rolfe, a major key to managing concern among the community and the hospital staff is to hold meetings with key leaders. "Hospital executives from both ends should tell the leaders, employees, residents and physicians why the deal is positive. It should be stressed that the ultimate goal is to increase services, operating more efficiently, thus increasing access to healthcare and consequently a growth in employment. You can't continue to put a strain on the county or community. Clearly detailing a plan for growing the hospital and ensuring its continued viability and success should reduce some fear," says Mr. Rolfe.

2. Connect with each physician. Hospital executives need to pay particular attention to physicians to ease their concerns because they are vital to a hospital's success. "You want to convey to physicians that they are a vital part of the hospital. They need to understand the plan and feel involved so they are willing to work with the new operator or owner. It is a good idea to communicate with each physician independently and make sure they are comfortable with the transaction and the new direction and culture of the acquiring hospital," says Mr. Rolfe. "An experienced operator and its management team will know how to maintain and cultivate the relationships with physicians and other clinical staff. That is where most of the revenue is generated. How you effectively communicate with them is important," says Mr. Rolfe.

3. Communicate, communicate and communicate. According to Mr. Rolfe, hospital executives can never communicate too much with the staff and the community about the future of the hospital. "Giving examples of what the hospital operator or owner has done with others in the past and what they would like to see occur helps understanding," says Mr. Rolfe. Understanding eases fears. Mr. Rolfe recommends multiple channels for communicating, such as: messages through the hospital's intranet, hosting a website for questions and presentations from the CEO and department leaders.

More Articles on Hospital Acquisitions:

5 Key Decision Points in Hospital Transactions
5 Best Practices for Cultural Changes Following a Transaction
Motivation Behind a Strategic Partnership: Q&A With Summa Health System President and CEO Thomas Strauss

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