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Religious-Secular Hospital Mergers: How to Make Them Work

From 2007 to 2012, approximately 10 percent (551) of the hospitals in the country were involved in a merger or affiliation, according to a report released in June by the American Hospital Association. Many of these mergers have been between faith-based hospitals and secular hospitals, and well-vocalized community groups that fear the loss of some women's reproductive services, end-of-life care options and the recognition of patients' same-sex partners through these mergers have put them in the media, and have put strain on current and upcoming transactions.

"There are a multitude of affiliations, mergers and acquisitions happening right now," says Carol J. Geffner, PhD, president of Newpoint Healthcare Advisors, a national consulting firm that advises many hospitals through such transactions, "and it's important to know how to handle the issues that arise."

Arnold Schaffer, who currently works as a healthcare consultant, has experienced several of these transactions firsthand. From the mid-1990s through the early 2000s, he ran a secular hospital within San Francisco-based Catholic Health West (now Dignity Health), and as executive vice president of Renton, Wash.-based Providence Health & Services, was instrumental in orchestrating the system's affiliation with secular Swedish Health Services, based in Seattle.

Both Mr. Schaffer's and Dr. Geffner's experiences reveal several lessons for executives contemplating a merger with a hospital or system with a different religious affiliation. "There's been enough of [these types of mergers and acquisitions] over the years to reveal some tried and true lessons," says Dr. Geffner. Following them "doesn't mean the merger will result in perfect union, but not following them could lead to failure," she says.

Consider the alternatives
Dr. Geffner says that often a smaller community hospital may believe it has to merge with a larger hospital or system to remain viable in an increasingly competitive healthcare market. "That is not always the case," she says. "During the due diligence process, there should be a thorough examination of what the hospital, and the community, will gain and lose" through a partnership.

The biggest mistake a hospital can make can be "jumping to the decision that a merger or acquisition is the right approach too prematurely or without sufficient analysis," says Dr. Geffner. "Don't assume because of healthcare reform that [a merger or acquisition] is the answer without having gone through the process" of evaluating all options, she says.

This due diligence process involves examining the implications of a merger or acquisition with all stakeholders, internal and external. "The board in concert with executive leadership should take into account multiple scenarios and determine what the community may lose if a transaction proceeds and how the mission and values of each hospital, and their delivery of care, would be changed," says Dr. Geffner.

Additionally, it is important to "engage the community in a conversation about what a merger or acquisition would mean and how it would impact the community at large," she says. "This is really a critical step if the hospital is viewed as a community asset" and any major care delivery change would have a direct impact on the health and well-being of the community, she says.

"Through a thoughtful diagnostic and due diligence process, the strengths and values of the hospital, the potential trade-offs in a transaction and alternative affiliation agreements that may get you where you need to go without giving away the farm can be determined," she says.

Know what will change, but remember to "significantly emphasize what won't"
Mr. Schaffer advocates knowing exactly what will change when faith-based and secular hospitals merge. "You need to understand how life on both sides will change, and how it won't change," he says. "This includes governance, management, patient care and community services."

"What limitations there may be are usually minimal, but the few that are there can often be perceived as very significant" by both employees and the larger community, he says.

Mr. Schaffer says it is important to understand, and communicate, any aspect of the organization that will change, but not to let any changes distract focus from the ultimate goal of the merger or acquisition. "It's important to not let people get all wrapped up in what's different between the two organizations, but keep the focus on what's the same — the focus on the patient and providing the best care possible," he says.

Once the merger or acquisition is moving forward, Dr. Geffner stresses the importance of executive leadership being as transparent as possible during the entire process. "There needs to be a balance between staying within confidentiality constraints and communicating direct and honest information that will help internal and external stakeholders understand what is transpiring and why," she says.

"A good rule of thumb is keep the messages brief and understandable, and to communicate frequently," Dr. Geffner says.

Her experience has shown her that an often-overlooked issue is a rising level of employee and community anxiety long before any transaction has been finalized. "A best practice for this situation is to be clear and state your message over and over again and get ahead of the issues that will cause significant conflict," she says. She recommends being as open as possible with all information that can be made public, and make a concerted effort to make sure the information is disseminated as well as possible. "Don't just rely on emails," she says, but employ other channels of communication to reach everyone.

With regard to external communication, "the CEO should be determining what can be stated and being visible in his or her communication." says Dr. Geffner. Whether holding town hall meetings or engaging community leaders, "meeting with people in the community, at the right time, helps to diminish anxiety and helps set the facts straight," she says.

Internally, "hopefully there is a team that has been developed in early stages of the process that is actively helping to facilitate communication throughout all levels of the organization," says Dr. Geffner. "You don't want to leave communication to the top of house — having this integration team working from the start with the different levels of management can be a real catalyst in helping to spread the word, stay focused and diminish rumors," she says. "The bigger the organization, the more critical this is," she says.

Additionally, Dr. Geffner says that communication should not be one-way. "Allow physicians, nurses and all employees to ask questions," she says. She says that good communication with employees during the affiliation, merger or acquisition process can help keep people focused on delivering quality care, and help keep patient satisfaction high. "There's a definite link between employee satisfaction and patient care," she says. "If employee anxiety increases and the merger becomes too much of a distraction, patient care suffers."

Don’t shy away from the tough issues
Dr. Geffner says that executive leadership needs to wrestle with the tough decisions that will be made, and make every effort to minimize any surprises. "If certain healthcare services are going to be eliminated due to the new arrangement, it’s best to involve the physicians in the discussions as soon as possible," says Dr. Geffner.

Dr. Geffner says the responsibility for bringing any potentially sensitive issues or changes to light lies with the hospital's leader. "The CEO has to raise the critical issues," she says. "If they're not being thoroughly addressed,if the executive leadership is not digging deeply enough into the tough issues, the CEO should keep the discussion alive until there is sufficient analysis and understanding of the critical issues and implications" and how they will affect the hospital's care and organizational culture, and then communicate this information as best as possible, she says.

Respect beliefs, understand cultures
"Everyone has to respect everyone else's culture and organization, both secular and faith-based" when two such organizations come together, says Mr. Schaffer.

For hospital administrators, this means recognizing that the religious affiliation (or non-affiliation) of the other organization may be why its employees chose to work there, making them even more resistant to change. "People in a faith-based organization may not want to be in a secular organization" and vise versa, says Mr. Schaffer. However, both religious beliefs and secularity need to be respected to create a workable culture for the new organization.

For it is culture, says Mr. Schaffer, that is often the ultimate determinate of a merger's success or failure. If the cultures of the two organizations can be merged successfully, than the two organizations can be merged successfully, he says. If the cultures of the two organizations are too disparate to be brought together, the sooner this is found out, the better.

"It doesn't matter if [the transaction] looks good on paper, if the cultures are not similar enough to be brought together successfully, it will not work. Remember the old saying — 'Culture eats strategy for lunch everyday,'" says Mr. Schaffer.

Stay focused
To maintain patient satisfaction, but really every operational standard, the CEO needs to keep the end goal the focus," which is continuing to provide the best care possible, says Mr. Schaffer.

"If the CEO gets wrapped up in the noise that comes with affiliations and mergers, everyone in the organization begins to see any arising conflicts as more important than they are, and everyone in the organization takes their eye off the ball," he says. "When all the hospital leaders are able to maintain clarity, and focus and simplicity in communication, it'll work."

More Articles on Hospital M&A Activity:

Consolidation Nation: Where Will the Hospital Industry Stand After the Tenet-Vanguard Merger?
50 Things to Know About the Hospital Industry
10 Critical Service Line Strategies Following a Merger, Acquisition or Affiliation

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