1. Merging two hospitals with different missions and value systems. According to Mr. Hinkel and Mr. Parmenter, one of the primary factors that drives the culture of a hospital is the facility’s “mission, vision and values” — the role the hospital plays in the community and the overall objectives of the business. When two hospitals pursue a merger, it means taking separate roles and objectives and combining them to create a strong merged organization. This can be especially difficult if the two organizations come from very different ideological backgrounds — for example, Mr. Hinkel says, a merger involving a Jewish-based organization and a Catholic-based organization. “That’s about as dramatic as you can get from a culture standpoint,” he says. “It’s critically important that you have a strong leadership group to drive the merged organization and determine how the merged organization’s vision will impact the future of the overall hospital.”
Mr. Parmenter cites the successful 1993 merger that created BJC HealthCare, in which Barnes-Jewish Inc. merged with Christian Health Services. “They took a very collaborative approach and focused on the core issues of patient care that made [the organizations] more similar than different,” he says. “There was a lengthy collaborative approach and a lengthy integration process, and they gave it a lot of time and didn’t try to force too much too quickly.” He says patience is one of the keys to successfully merging dissimilar facilities: if the hospital’s leadership takes the time to talk over the hospitals’ differences and similarities, they can work with staff to explain the vision of the new organization and deal with problems as they arise. It would be a mistake to force organizations with different values together and expect them to function as a like-minded whole immediately, they say.
2. Aligning traditionally independent physicians with the interests of a merged organization. Over the last five years, Mr. Parmenter says the trend of physician employment by hospitals has grown tremendously, pushing back against the traditional model of independent, community-based physicians. “There’s been such downward pressure on physician incomes that if physicians are going to make less money, they want more work-life balance,” Mr. Parmenter says. “They feel like they can better achieve that work-life balance and receive a [predictable] salary and incentives as part of a larger organization.” He says physicians who are part of a large organization may also have fewer concerns about medical malpractice because the organization can manage physician liability and provide legal support.
Even though physicians are seeking out hospitals for employment, that doesn’t mean the process of aligning physicians with hospital interests is easy. If two hospitals merge and decide to pursue physician employment, the hospital must concentrate a lot of time and energy on making sure physicians are truly integrated with the merged organization’s goals. This means looking at two factors: culture and compensation. In terms of culture, many community-based physicians will be used to deciding the culture of their own practice, meaning it might take some time to get them used to the hospital’s expectations. The best thing a hospital administration can do is to get buy-in from respected physician leaders around the hospital, Mr. Parmenter says. “The doctors should be dealt with by the chief medical offer rather than human resources,” Mr. Hinkel says. “If there’s one thing we’ve learned, it’s that doctors like to talk to doctors.”
When determining how compensation works for newly-employed physicians, the organization should “strike there with balance between what the physicians use to have and are now going to have,” Mr. Parmenter says. “Oftentimes the compensation arrangements will vary quite significantly in a more corporate environment than in a group practice.” The organization should speak with physicians to determine how hospital benefits and financial incentives will work, especially as hospitals move toward “pay-for-performance” compensation structures and the advent of ACOs.
3. Merging two hospitals as changes through health reform approach. The impact of health reform on hospitals will be dramatic, Mr. Hinkel says, and hospitals planning to merge need to consider how changes brought on by health reform will impact their new organization. “This could mean changes in patient mix and changes in reimbursements,” he says. Mr. Parmenter adds that many hospitals considering a merger are currently modeling the predicted impact of healthcare reform on hospital A and hospital B. But he says hospitals need to go one step further and model the potential impact on the new organization — hospital C. “The new entity may be entirely different than either entity individually,” he says.
He says hospitals should start looking at predicted changes in patient mix, how many patients will be enrolled in Medicare and Medicaid, changes to payor mix and reimbursements and changes to employee benefits. If the hospitals plan to develop an accountable care organization in the future, they can start predicting what that organization might look like — even before the government releases an official definition. “The leading healthcare systems are already deep into the analysis of [what healthcare will look like],” Mr. Parmenter says.
Hospitals planning to merge over the next few years should look at the changes through health reform to be implemented in the next two years and determine how to handle the tangible impacts as a new, merged entity.
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