When it comes to mergers and affiliations between not-for-profit behavioral healthcare providers, David Guth literally wrote the book. In his career spanning nearly 40 years, Guth has worked on more than 100 mergers, affiliations and acquisitions.
“I stopped counting after 100,” he says.
In his current position as CEO of Centerstone, a not-for-profit behavioral health provider based in Tennessee, he’s overseen 16 transactions. The ambitious growth pattern started in 1997 with a series of deals with other providers in Tennessee before branching out to other states starting in 2008. Today, Centerstone’s portfolio includes 198 facilities with more than 5,000 employees serving more than 180,000 patients in five states. The company’s projected revenues for the year are $343 million.
“You can look at what it takes to survive, or you can look at what it takes to thrive,” Guth says. “As long as you’re going for survival, go for thriving.”
In studying the behavioral healthcare landscape, Guth and his leadership team surmised that staying small would necessitate trade-offs in terms of expertise and capabilities—a risk not only to Centerstone’s survival, but also its ability to advance excellence in care, he says.
The most notable of Centerstone’s deals came in 2008, when it completed a merger with two Indiana-based behavioral health organizations, the Center for Behavioral Health in Bloomington and Quinco Behavioral Health Systems in Columbus—“the first time in our space that a multistate merger had occurred with non-contiguous geography,” Guth notes.
When evaluating potential partner organizations, Guth says he looks for three traits: shared values, complementary strengths, and a complementary vision of what a future together might look like.
“How does my organization joining with another organization raise the opportunity ceiling for our respective organizations?” he says.
What it takes
In 2013, Guth wrote Strategic Unions: A Marriage Guide for Health Non-Profit Mergers. The book, which outlines the process and potential pitfalls of joining with another company, was published by the National Council for Behavioral Health. Reflecting on learning experiences from past mergers and affiliations, Guth shares four traits he emphasizes in potential deals:
- Humility. “If you’re bringing organizations together, you’re creating something that, by definition, is bigger and more complicated than where you were before. Regardless of the scale differential in the affiliation, it’s uncharted territory for everybody.”
- Culture conscious. “The more attention you put into how you create, together with your new partners, a new culture that belongs to everybody, and the more thought and effort you put into that on the front end, the more effective and the quicker the organization is to coalesce around a new combined culture and for staff to be energized and enthused, rather than just overwhelmed by the sense of loss.”
- Focus. “Keep the goals of the two parties front and center during every stage of the planning and execution because in the end, if you’re not careful, you can end up making decisions around structure and such that get in the way of the goals the two parties are committed to.”
- Forward thinking. “Centerstone is still moving toward its optimal scale. We’re not there yet. If you think about most providers in the industry, you come away with the idea that even with multiple mergers and affiliations, for most organizations, that’s a good start, but it’s not the end. You can’t get complacent about that. Even as you are working together to achieve the goals of the merger or affiliation, you need to be collectively thinking about and planning for the next one.”