As the merger and acquisition stampede among healthcare providers accelerates, board members and executives need to remember what they learned playing Monopoly: You don't win the game simply by making deals. Ultimately, the winner not only acquires properties but integrates them wisely.
By trying to be all things to all patients, by becoming a full-service business, by vertically integrating "to the max," are you truly making a contribution to society, to your community, to quality healthcare at a lower cost? Or are you just a healthcare behemoth with an unpronounceable name that's not making a difference?
Certainly, the concept of providing a seamless continuum of patient care is admirable. And to achieve it, services beyond acute care must be added to a healthcare system's product lines. But once they are acquired, how do you make sure they all work together?
Today's so-called integrated delivery systems need to look at "whether coming together has really produced value or just a much larger organization and higher salaries for senior management," said John C. Collins, executive vice president of Lahey Hitchcock Clinic Medical Center in Burlington, Mass.
Speaking at a recent annual meeting of the Center for Clinical Integration, an association of chief executive officers and their executive teams from hospitals and systems around the country, Collins questioned whether any truly integrated systems exist. "A collection of institutions is not a system," he said. "Lahey Hitchcock is as integrated as any organization in the country, and we're not really integrated."
Is the merger madness that gripped corporate America in the 1980s and is picking up speed again in the mid-1990s what we see reflected in healthcare today? If so, there are lessons to be learned.
Remember Allegis? When United Airlines attempted to offer travelers everything from vacation planning to rental cars to hotels, Wall Street's response was a resounding thumbs down. Each corporation that was folded into Allegis, analysts said, was worth more as a separate entity. In effect, the sum of the individual parts was greater than the whole.
When Humana extended its reach to the insurance industry, that didn't work either. The fate of Columbia/HCA Healthcare Corp.'s linkage with Blue Cross and Blue Shield of Ohio is unknown, but its evolution will be closely watched.
Just because you run an airline doesn't mean you can manage a chain of hotels. And just because you run a hospital doesn't mean you can run a successful home-care agency or manage outpatient clinics profitably. Clearly, the challenge of the next five years for boards and executives will be getting the pieces of their network or alliance to work as one.
Those health systems that seem to be enjoying some success with their integrated delivery system strategy have characteristics that offer guidelines to follow to success:
A philosophy of interdependence. Work to embed interdependence as a key component of the system's values so the philosophy of interdependence becomes a guiding principle for "together, we can do more." Employees throughout the system will begin to think in terms of interdependence, and true integration will begin to happen naturally at all levels of the system.
Tackling integration head-on usually stimulates powerful forces of resistance. Gaining acceptance and enthusiasm for the philosophy and value of interdependence first is a precondition for integration to work.
Hence, interdependence can be seen as the cause and integration as the effect.
Interdependence can be cultivated using a wide variety of approaches and techniques. Literature on organization development is rich with examples, including the use of participative planning approaches, incentives focused on system results vs. individual performance, and cross-institutional teams.
The key to all these techniques is building a strong sense of trust among the parts of the system. Trust is the foundation of true interdependence within any organization or team.
As Phil Jackson, one of the most successful coaches ever in the National Basketball Association, states in his best-seller Sacred Hoops: "Good teams become great ones when the members trust each other enough to surrender the `me' for the `we."' Jackson is describing the molding of the Chicago Bulls into a championship team not dependent on only one player (Michael Jordan).
The business imperative. Next, the deal should add strategic value, not just from a community health perspective but from a business perspective. It might be just geographic coverage, excellent information systems, clinical expertise or a successful track record of managing outpatient sites. If the arrangement adds nothing to the mix-such as capabilities, coverage or expertise-then let it go.
This is in sharp contrast to the ego-driven deal, generally initiated by those who simply want to get bigger and who embark on a series of mergers that do not represent a good fit from any perspective.
The one exception to the business imperative, however, is the mission imperative, the driver in many mergers of religiously sponsored institutions.
An example is the merger recently consummated by Catholic Health Corp., Sisters of Charity Health Care Systems and Franciscan Health System. Their formation of Catholic Health Initiatives triggered some criticism from Wall Street analysts who looked at the deal from a business perspective, saw three systems covering 23 states with a few overlapping markets and said: "This makes no sense."
What Wall Street failed to understand is that Catholic healthcare is fighting for its survival. In some areas of the country, the Catholic mission in healthcare is being threatened by the business imperative and is justifiably alarmed.
Thus, a strong Catholic healthcare organization may merge with a weaker institution in a move that appears to run counter to the business imperative. However, the church views such a strategy as building strength through unity and, indeed, as essential to the preservation of Catholic identity in healthcare.
Physician partnering. Physicians are a great source of energy for the work of integration, not only with respect to clinical areas but operational issues as well. Physicians have been educated and socialized to make decisions quickly and move forward. While most healthcare administrators and managers believe months of study and a team of consultants are necessary before any new project or strategy is undertaken, physicians can just move ahead.
Today, there are two converging phenomena. Enlightened CEOs are finally beginning to work at understanding how physicians think and are trying to view the changes in healthcare from physicians' perspective. And physicians are reacting to what they see as having been done to them over the past several years as a result of integrated delivery system formation and capitation arrangements. They're educating themselves about the business of healthcare and understanding their need for access to capital.
Even the American Medical Association, through its Physician Capital Source program, is providing assistance and financial expertise to physicians interested in starting up their own networks or other health plans (March 18, p. 16).
However, the majority of physicians, although entrepreneurial, still prefer providing patient care to running a business and are amenable to being linked with a system or becoming part of a network. And for those systems that understand how to partner with physicians, the result can be gratifying.
Integration as shared accountability. Recognize that integration is hard work and that the work of integration represents a legitimate function in itself. The CEO and the entire senior management team must feel a deep sense of responsibility for reinforcing the value of interdependence and making integration a priority. Some systems have had success with the appointment of a vice president for system integration and assigning staff to facilitate everything from the merging of clinical programs and processes to basic operations and information technology.
Ultimately, the board and senior management team must hold themselves accountable for making integration a successful strategy.
Recognition of accomplishments. Amassing the pieces of an integrated delivery system is revolutionary, but creating a culture of interdependence and integration is evolutionary. Thus, the process of integration must be nurtured and reinforced with great care.
Many case studies of integrated delivery system formation indicate little attention was paid to communications with employees, physicians and the community. Boards and senior executives must encourage the recognition and celebration of any event or accomplishment that signals progress toward becoming an interdependent and integrated health system. Put everything in a monthly newsletter devoted exclusively to integration news. Devote town-hall meetings to the progress achieved as well as the barriers encountered along the way.
Is "virtual" the answer? Recently, "virtual integration" has caught the attention of the provider community. Its appeal has to do with the ease of formation and the relative lack of risk and long-term commitment required. In effect, virtual integration does not "scramble the eggs" as required in a full-asset merger or acquisition. While it may be true that virtual integration means taking less risk, it also means relinquishing a significant degree of control to be successful.
But whether one approaches integration through a full-asset merger or by creating a virtual dream team of experts via contractual arrangements, the challenge of the next five years will be getting the pieces of the integrated delivery system, network or alliance to work together.