Planning for Success: Strategies for Effective Integration

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Stethoscope on prescription clipboard and Doctor working an Laptop on desk in hospital, Healthcare and medical concept, vintage color, selective focus

By Lisa Mathews

Hospital mergers and acquisitions activity in 2020 continues despite the significant impact the COVID-19 pandemic has had on healthcare providers. Merger and acquisition activity in the healthcare sector for 2020 is trending with 2019 activity, suggesting that the crisis created by the pandemic is not slowing the pace of transactions. As consolidation among hospitals continues, it is unclear whether these transactions will drive more value.

Hospital mergers and acquisitions continue to be appealing to healthcare organizations striving to achieve the triple aim of increasing access, reducing cost, and improving care delivery. Perhaps another trending driver is sustainability and viability for hospitals that are struggling to keep their doors open as they continue to encounter financial pressures. M&A is designed to help address these scenarios by providing opportunities for strategic, operational, and financial benefits for organizations on both sides of the deal. However, while the pre-deal diligence may justify the transaction, the real value of the transaction is often realized in the integration. 

While transactions may not be successful for many reasons, flawed integration management is often at the top of the list. This is understandable given that M&A integration is arguably the most complex, intense, and unpredictable event an organization can go through. Integration can impact all aspects of an organization, including human capital, business and clinical processes, and technology. Challenges that may come with integration include maintaining financial performance and avoiding disruption to business continuity; relying on many internal employees to execute integration while performing their “day jobs”; avoiding overwhelming and discouraging acquired employees; and managing a myriad of initiatives in an organized, timely fashion.

A recent research report by Berkeley Research Group and Juniper Advisory, Hospital Mergers and Acquisitions—Studying Successful Outcomes, provides insights from over 120 healthcare executives on keys to successfully integrate two or more hospitals. Organizations can avoid common mistakes that contribute to flawed integration by defining a clear strategy and vision for integration and investing time up front in pre-planning and developing a roadmap/playbook for execution. 

Defining the Integration Strategy

Creating a formal integration strategy and establishing the overarching guiding principles for integration are the first steps toward ensuring a successful integration. The integration strategy connects the business strategy and plan to the integration plan. It should be a formal articulation of the approach to integration that will guide implementation decisions and achievement of business objectives. It also should be a purposeful strategy with well-defined objectives and timelines governing each unique deal/transition. The guiding principles convey the core values of goals that will guide integration. 

The first step to developing the strategy is to achieve agreement among an organization’s executive team on the following critical elements for how the two organizations will align:

Value drivers of the deal

  • End-state goals: level of integration (full, partial), future-state operating model
  • Non-negotiables: including what you want and don’t want to happen
  • Timing for integration: pace of integration and key deliverable timing

The Importance of Integration Pre-Planning 

Integration often starts slowly and never recovers, resulting in failure to achieve synergy targets (value of the deal). These delays also can affect employee morale, resulting in loss of integration enthusiasm and momentum. Beginning the integration pre-planning in advance can help to overcome these challenges and ensure that integration activities kick off in a timely fashion, setting the tone for how the organization will execute the integration. Ideally, integration pre-planning should begin sixty to ninety days before the transaction close. 

Pre-planning core deliverables may include:

  • Defined integration strategy and guiding principles
  • Synergy goals and realization schedule
  • Pre-close communication requirements
  • Defined Day 1 deliverables
  • Integration governance and integration management structure 
  • Identification of integration resourcing requirements, functional area lead(s) roles, and responsibilities
  • Understanding of pre-close rules of engagement
  • High-level integration work plan with critical path milestones defined 
  • Cultural due diligence and change readiness 

Developing a clear strategy and vision for post-merger integration and investing time in pre-planning integration initiatives and resources lay the foundation for successful integration and help mitigate the potential operational, clinical, cultural, and employee pitfalls a transaction can present. The next step is to deploy a robust integration management program to oversee the execution of post-transaction integration deliverables. Read Hospital Mergers and Acquisitions—Studying Successful Outcomes for firsthand accounts of what works well when implementing the integration of two or more organizations.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.

Lisa Mathews is a director in BRG’s Healthcare Performance Improvement practice. She has over twenty-five years of experience in the healthcare industry and deep expertise in integration management focusing on pre- and post-close activities to help clients realize the value of the transaction.

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