Three System Integration Strategies to Ensure Post M&A Success
The challenges and opportunities for health systems in today’s era of consolidation
Joe Damore, FACHE, assists physician groups, hospitals, health systems and health plans in implementing strategic business initiatives, clinical integration projects, value-based payer arrangements, quality and financial improvement efforts, and population health management core capabilities. Damore has previously served as the President/CEO of Mission Health System in North Carolina and Sparrow Health System in Michigan, which included several successful merger and post-merger integration efforts.
How are consolidating health systems faring?
JD: Many health system mergers have not lived up to their expectations in enhancing quality, improving satisfaction or reducing costs. While some newly formed entities are making significant progress, others are challenged with aligning leaders, staff and providers to attain common financial, clinical and operational goals. Further, new market dynamics and rising costs continue to challenge organizations as they work through the broad-based changes that are needed to ensure financial success. Several health systems are identifying issues and postponing mergers before pen even goes to paper.
In those cases, capital requirements, financial and organizational stability, as well as implementation risks often become major issues. However, others face operational challenges after closing the deal that can delay progress and place their organizations in difficult financial situations. Merging health systems must achieve true system integration based on the organization’s overarching mission and vision to ensure success. This means bringing together various units into an organized, cooperative and unified system of care. When accomplished effectively, Premier members have been able to succeed in achieving financial, clinical and quality gains.
Why are they facing challenges?
JD: After completing a merger, there are difficult decisions that must be made, such as standardizing clinical care plans across multiple entities. This requires the organization to be in sync at all levels with every stakeholder relying on one another in becoming aligned around the new system’s collective goals. As scholar Steven M. Shortell, PhD, MPH, MBA, addresses in a Health Care Management Review article, “the distinction between economic integration and clinical integration of care becomes critical in terms of consolidation.” Developing a comprehensive financial and clinical integration strategy that includes an infrastructure for growth and prepares the organization for change can be challenging for even the most progressive organizations. In many cases, they lack the internal bandwidth, objectivity and/or expertise to take on the complex integration work required for change. Additionally, time is of the essence and moving too quickly or too slowly can lead to organizational dysfunction.
What strategies can they follow to ensure postmerger success?
JD: Post-merger success requires functional, physician-system and clinical integration across the continuum, all overseen by a governing board and leadership team whose roles are clearly defined, aligned and supportive of the system’s mission and vision. These components can be assessed within a healthcare delivery system to determine the degree of horizontal and vertical integration, or “systemness.” Premier has identified the critical factors for assessing, planning and successfully operationalizing a post-merger transition, and is working with health systems to make timely strategic decisions to accelerate excellence in three ways.
1. The first step is to complete a diagnostic review of the degree of system integration, which involves engaging leaders across 21 key functional areas. Premier’s assessment tool is based on its experience and research, including the extensive research of Dr. Shortell and others. We take a holistic approach to understanding an organization’s current state, which includes measuring more than 120 operating activities across four major domains:
• governance and operational management;
• functional alignment and operational integration;
• physician-system integration; and
• clinical integration and effective outcomes.
2. The next step is to identify the priorities and opportunities for organizational integration based on a set of criteria and the desired level of systemness, such as return on investment, the implementation resources that may be required and quality/satisfaction goals.
3. Lastly, a strategic roadmap based on the organization’s criteria can provide leaders with a coordinated and prioritized guide as well as a tool to measure, reassess and sustain change and improvement efforts.
To achieve success post-merger, the most effective health systems are those that focus on horizontal and vertical transformations that measurably and comprehensively meet the new entity’s mission and vision.
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