Mega mergers. The phrase doesn’t sound good. It hints at corporate behemoths and world domination, if you want to be a little dramatic. However, it describes exactly what is happening in the provider world. The combination of large systems from different geographies – sometimes internationally, like the latest deal announced by Bon Secours Mercy Health and Bon Secours in Ireland (the country’s largest private health system). Of 115 health system and hospital mergers announced in 2017, 10 were mega-deals involving sellers with net annual revenues of at least $1 billion, according to a report by Kaufman Hall. Here are some of the latest from 2019 – and we can expect more to come in the second half of the year. In fact, a new Healthleaders survey found that 73 percent of health care executive respondents will be exploring potential M&A deals during the next 12–18 months, so buckle your seatbelts.
What’s the impact for hospital communicators? M&A activity comes with increased scrutiny from internal and external stakeholders, and recent mega mergers have shown that the management of these issues can become a nearly full-time job. Is your organization considering a merger? We’ve outlined three challenges that you might encounter when your organization opens that Pandora’s box:
Impact on Pricing and Quality
The rising cost of health care and the call for increased transparency are already familiar issues for provider organizations. Add a proposed merger to the discussion and the community and regulators escalate their concern. Despite the promise of better efficiency and a reduction in cost from removing redundancies, especially around the non-care delivery side, the research shows that at least in the short-term, consolidation increases prices because of negotiation power. How much? Different sources estimate 40%, 44%, and 50%. It’s safe to say that it is enough to cause community uproar.
What about quality? The research isn’t helping us out there, either. According to Martin Gaynor, a Carnegie Mellon University economist who is an author of several reviews exploring the consequences of hospital consolidation, “evidence from three decades of hospital mergers does not support the claim that consolidation improves quality.”
Ouch. This data sure takes the wind out of the sails when claiming that mergers will increase quality and reduce cost. What’s a hospital communicator to do? When you can’t extol pricing and quality benefits, you can have a frank discussion with community leaders about the brave new world in health care, which requires hospitals to take a hard look at the steps they need to take to provide continued access in the communities they serve. It’s not all sunshine and roses, but an ongoing dialogue with the community about the challenges faced by hospitals can help to “prime the pump” for change. An appreciation and understanding of the hospital’s economic impact and community benefit also helps.
Women’s Reproductive Rights
This is one challenge we can easily anticipate, but it often is the reason that mergers with Catholic health systems ultimately fail. The ACLU even has a dedicated page on their website about the issue. Catholic health systems are a major force in health care delivery: 1 in 6 patients in the United States is now treated in a Catholic facility, according to the Catholic Health Association. A MergerWatch report cites that roughly 30 secular institutions that have merged or affiliated with Catholic systems in recent years have agreements that require them to follow some or all of church directives which may prohibit procedures that are “intrinsically immoral, such as abortion, euthanasia, assisted suicide, and direct sterilization.”
No doubt, there is significant opportunity for fear-mongering. For secular organizations that have entered into agreements with Catholic health systems, it is essential to get out in front of this issue and set the facts straight. Consider important community groups to engage with before the issue escalates – because it’s almost sure that it will.
Mergers can cause uncertainty and extra stress for employees, which can decrease morale. Ultimately, it can even negatively impact patient care. Why? A multitude of things: the threat of layoffs, using dual systems, new approaches/procedures/operations, multiple changes in systems management, HR management, and newfound employee competitiveness between former competing facilities. It’s tough out there. Perhaps it is no wonder that a 2014 study found that hospital mergers create an increase in long-term sick absences in the first year and then again 2-4 years after the merger, significantly higher than normal.
Research shows that managers account for more than 70 percent of the variance in employee engagement. It’s these leaders who are a conduit of information (to and from employees) and who can make or break your employees’ ability and willingness to adapt quickly during times of change. Be sure to plan to engage and equip your managers with the tools to help communicate proactively and allay concerns. And, remember that communication is a two-way street. Leverage their insights to maintain a regular pulse on emerging issues.
When M&A activity is on the horizon, hospital executives need to ensure that the Communications team has a seat at the table. A 2011 study cited that nearly 25 percent of announced hospital merger letters of intent failed – and communications issues are at the heart of many failed deals. Communications has a strategic role in the success or failure of any change – especially M&A – and must be brought in before issues emerge, not after they escalate.