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Mergers: 85% of you are doing it wrong

July 16, 2014
by Julie Miller
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Behavioral Healthcare Leadership Summit Preview: BH06
Mark Monson

Influenced by reform, the healthcare industry is now buzzing with merger and acquisition activity, including the consolidation of provider systems, the acquisition of smaller health insurers by larger ones, and the acquisition of provider systems by insurers. The behavioral health segment is no exception.

 “Now is really a time of disruptive change,” says Mark Monson, MS, FACHE, president and CEO, Fairbanks Hospital in Indianapolis. “We have not seen mergers at this pace for a number of years. And it really crosses the entire healthcare spectrum.”

Monson will be presenting “Mergers, Acquisitions and Partnerships” on Sunday, August 24, 2014, from 2:15 p.m. to  3:45 p.m. at the Behavioral Health Leadership Summit in St. Louis, Mo. He will provide a snapshot of the motivation behind the merger activity as well as several examples of freestanding addiction centers and hospitals that have experienced mergers.

Nationally, about 10% of community hospitals have been acquired in the past year or so, which is a huge number, indicating the pace of the activity, Monson says. He believes the pace will continue in the near future.

Ubiquitous budget deficits and macroeconomics are driving the need for providers to consolidate for scale as well as to add new capabilities. Even if parts of the Affordable Care Act are eventually dismantled, health reform’s inevitable paradigm shift will continue to have providers looking for new ways to remain solvent. Monson also says the high spending in the United States compared to other countries is adding to the pressure on providers.

“Those pressure points are lower prices, higher quality and a focus on population health,” he says.

His presentation will also provide practical strategies for planning a partnership or merger, including due diligence, goal setting and evaluation. There are several models for vertical and horizontal integration that range in degree of independence among the entities, and the first choice a behavioral healthcare leader will have to make is who to consider partnering with and which model to pursue.

“Eighty-five percent of mergers fail to meet their objectives,” Monson says. “How do you plan and make the right decisions? Every market is different.”

Culture is a key consideration that is too often overlooked. He says some merged organizations can take five to seven years to combine company cultures into one, and some don't combine at all.

“Mergers and acquisitions are made at C-level, and no one takes the time to see if the culture is a fit,” he says.  “And if not, it can be a disaster.”

Another part of the due diligence process is to consider the technology systems that each entity relies on. In the era of EHRs and data analytics, a merged organization must be able to meld data and workflows. Monson says interoperability is a serious issue to evaluate within the process. Even though some systems might appear to talk to each other, real-world testing will ultimately provide the answer. Beyond just melding data, the company will need to store and access historical data as well, which can add to the complexity.

“I’m not suggesting everyone merge and consolidate,” he says. “It’s marketplace driven and based on what you want to become.”