Strategies for Ensuring Hospital Post-Merger Success

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WAVES OF CHANGE DRIVEN BY ECONOMICS

Hospitals are experiencing all-time lows in Medicare reimbursements, from negative 3 percent in 2003 to negative 9 percent in 2015

Care providers are expecting 800 billion dollars in planned Medicare cuts over the next 10 years

CONTINUED GROWTH IN CONSOLIDATION

Healthcare merger and acquisition activity increased 14 percent between 2010 and 2017 due to increasing competition, lower margins and need for scale.

THREE PRIMARY M&A STRATEGIES EMERGE

Collaborative
Partnerships

Hospitals and health systems remain independent, but create legal partnerships that allow them to pursue common goals and mitigate financial and clinical risks.

AffIliate
Partnerships

Hospitals combine with each other — or even health plans and specialty clinics — to pursue joint ventures. Primarily designed to improve performance of value-based care, data analytics and population health management.

Full-Asset
Mergers and Acquisitions

The most commonly pursued approach is to merge or buy peer organizations that have complementary capabilities, market reach and brand reputations. This strategy typically provides the quickest path to financial gains — if the integration progresses smoothly.

HOW CAN HOSPITALS IMPROVE POST-M&A
INTEGRATIONS AND OUTCOMES?

3 New Ideas to Build Culture and Achieve Financial Goals

Immediately Bridge Previously Siloed Departments

Success in the emerging value-based environment will require a detailed understanding and measurement of various processes across the hospital — especially in patient care areas. Most hospitals today do not have the visibility to accomplish this, largely because of silos between areas such as nursing, supply chain and clinical engineering. The problem is compounded when trying to standardize service across the disparate processes of two merging organizations — from patient care to equipment management — and it can generate significant waste.

Providers can save 5 percent to 15 percent by implementing better strategies to control goods and services purchased, such as medical equipment

Key concept: Ensure all process-standardization efforts engage team leaders across nursing, supply chain and clinical engineering. By leveraging best practices to re-engineer equipment processes, you can ensure internal teams have the transparency, visibility and control they need to better manage costly equipment rentals and capital purchases.

Empower Clinicians to Focus on What Matters Most

Because hospitals will be graded largely on patient satisfaction and quality of outcomes in the value-based reimbursement era, a key to success will be talent retention. Hospitals with the best clinical talent will likely build the best reputations and earn the highest reimbursement scores. Retaining top talent through the M&A process is critical, as broken processes and working environment challenges can prompt talented nurses to look elsewhere for employment.

Caregivers generally spend only 37 percent of their time with patients. The target should be 65 percent.

Key concept: Focus on increasing the amount of time nurses spend at the patient bedside by eliminating unproductive and non-value added tasks. For example, by eliminating the need for them to search for infusion pumps, beds and ventilators, you can increase both face-time with patients and job satisfaction. Ensure these processes are ready to go from day one of the integration phase.

Target “Low-Hanging” Cost Reductions to Jumpstart Savings

Forward-thinking hospitals are targeting “quick win” savings by recovering millions of dollars in wasted medical equipment spending. Infusion pumps, ventilators, specialty beds and other medical equipment are typically mismanaged to the point that utilization rates only average 42% in U.S. hospitals. This problem is compounded during M&A activities, as a lack of visibility and differing equipment processes can impede standardization efforts and drive unnecessary spending. As a result, equipment management processes tend to spin further out of control.

There is a perceived shortage of moveable medical equipment, yet only 42 percent of equipment is typically in use at any given time. The target should be 70 percent utilization.

Key concept: During the M&A process, conduct a study on equipment utilization, spending and management of mobile medical equipment. Consider leveraging end-to-end equipment management services and deploy best-practice-based processes in the first year after the deal closes.

OTHER INSIGHTS AND RESOURCES

Elevate Your Team — Improve Your Hospital

Prepare for Growth

Key strategies to minimize disruption
and ensure post-M&A success

Raise HCAHPS Scores

Tips for improving HCAHPS scores
through streamlined care delivery

Empower Happy Nurses

Drive a culture that inspires
happy, productive nurses

STRATEGIES FOR ENSURING POST-M&A SUCCESS