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When a merger works for good

January 19, 2016
by Richard Leclerc
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Richard Leclerc

It’s no secret in business that mergers and acquisitions can either go well or go the other way. Management and employees of Gateway Healthcare learned that on July 1, 2013, when we were acquired by Lifespan, Rhode Island’s largest health system. 

Historically, non-profit Gateway has provided community-based behavioral health for all ages, individuals and families, serving approximately 15,000 clients a year since its inception in 1995. The acquisition has enabled us to assume a more prominent role in providing services in a coordinated fashion, which in turn ultimately benefits patients and improves affordability even as healthcare costs continue to increase.

We take our responsibilities seriously, since the state’s residents struggle with mental health and substance abuse issues at higher rates than the national average.

Gateway is also now better positioned to more fully integrate mental health and substance abuse treatment with primary medical services that include interdisciplinary care. At the time of our acquisition, our management knew Gateway’s track record in a variety of health settings—including hospitals, community health centers and private practice—would appeal to a new partner, which like us, was plotting its course in an uncertain health care environment.

Lifespan had realized annual revenue of $2 billion when it acquired Gateway, with its 42 statewide locations and $60 million annual revenue. The newer, broader system is comprised of four hospitals: Rhode Island Hospital/Hasbro Children’s Hospital and the Miriam Hospital in Providence; Bradley Hospital in East Providence, and Newport Hospital in Newport. Lifespan operates clinics throughout the state and sustains affiliations with primary care physicians and physicians’ foundations.

It’s been 2.5 years since our merger, but truthfully, we began quietly seeking a partner more than four years ago for specific reasons. At Gateway, we believed standalone behavioral healthcare clinics might play a less effective future role with diminished value as systems make population-based improvements and focus on whole-body care.

It was also apparent that a tremendous investment in information technology was needed.

As we contemplated future repeat enhancements for security and privacy, as well as e-prescribing and telemedicine capabilities, it was clear we needed more. Access to that kind of capital wouldn’t come without an infusion from a larger system such as Lifespan.

Lessons learned

Now that the acquisition dust has settled, here’s what I learned:

Admit it’s a first: Combining two companies was not without its challenges, since for most of us, it was a first time experience. Companies don’t have a lot of chances to be acquired, and you don’t know what you don’t know. Try to iron out as much as possible in due diligence while you’re still “dating,” before anything is finalized. This also sets both companies up for better long-term communication.

Assume nothing: One would think management and staff of such a large system automatically come with all the answers. Instead, there really is no crystal ball. Current challenges in healthcare will puzzle the big guy as much as the little one.

Accept the invite: You’re in this together. Following the announcement, Lifespan welcomed Gateway’s management, seeking strategic input on how to best integrate community-based behavioral health care into the fabric of general medicine, both inpatient and outpatient. Share and share alike for the greater good.

Do it now: Titles and responsibilities can blur during a merger of two corporate entities. We wondered who on Gateway’s senior staff would be integrated into Lifespan. Who on our board would serve on the new board? Valid questions, yet inherently difficult to broach due to their sensitivity. Address these issues before agreements are finalized because it’s difficult to do later.

Meet your match: I thought I’d maintain operational control over my own entity. After we all evaluated existing structures and operations of affiliates, that wasn’t to be the case—especially with healthcare reform’s emphasis on centralization. We would ultimately undergo governance change and organizational change to determine who would control finances, personnel, IT systems and more.

Cultivate culture: Perhaps, like me, you “feel” your corporate culture, but can’t define it. Have those joint culture discussions early on, not only about how to merge cultures but also how to preserve them.

Trust: It may be difficult to fathom initially, but remember the acquiring company is not the competition.

Notable results

We’re proud to have made notable improvements in:

  •  Our residential program and inpatient units, both psychiatric and medical/surgical, to facilitate discharges
  •  ER evaluations at hospitals, triaging for inpatient care or community services
  •  Better teamwork to help reduce inpatient lengths of stay and readmissions
  •  Putting patients on a more efficient trajectory for recovery
  •  Determining how to keep one foot in the medical profession and another firmly in social services

As healthcare systems transition from volume to value, and from fee-for-service to population-based medicine, they’re trying to “figure it all out.” It’s going to take time, innovation, and experimentation, and maybe even some failures—but that’s how we learn.  

Would we do this all again? Absolutely. We’ve enhanced coordination of services, improved access and promoted efficiencies throughout the system, and we know there’s so much more to do. Now we’re in a position to get it done.

Richard Leclerc is president of Gateway Healthcare in Providence, R.I.