Why acquiring a cash-strapped hospital brings new levels of risk


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A look at the financial, branding and cultural considerations when deciding to acquire or merge with another hospital.

Mergers and acquisitions are common occurrences in healthcare. The impetus behind consolidation can range from shifting patient demographics to new and disruptive technologies, but financial concerns are almost always at the root — which means the acquiring entities always assume some modicum of risk when pulling the trigger on these deals.

Oftentimes, the acquirer will subsume members, who then become part of the larger system. This brings risk if the hospital being acquired is distressed. These hospitals either don’t have the in-house expertise or aren’t willing to hire outside expertise, or they take shortcuts with physicians and kickbacks, according to Roger Strode, a partner with Foley and Lardner, who said he has seen it time and time again.

“They tend to be so cash-strapped, and they’re in such dire need, that they’ll take risks that other systems won’t take,” said Strode. “You might not have a pool of indemnification, so it takes a lot to get these deals done. The other risk is that they’ve brought on a base of employees so you’ve got cultural risk.”

Cash-strapped hospitals, for instance, are likely to operate under a different culture than organizations that have the financial means to pay for strong leadership. And then there’s the risk of how the healthcare provider is going to be perceived in the community. Will they be looked at as the hero swooping in to rescue the struggling hospital, and keep its promises, like maintaining services in the community? There’s risk if the acquirer hasn’t done its due diligence and realizes only after the fact they they can’t keep all the services it said they would. The health of a company’s branding is on the hook.

There’s a tremendous amount of diligence to keep in mind when making these deals, said Strode. There are lawyers and outside accountants to hire. There’s understanding the material contracts. And there’s hashing out what the five-to-10-year financial plan is going to be.

“There’s a certain amount of mission-driven thinking that goes into this,” said Strode. “If you’ve seen one of these deals, you’ve seen one of these deals. Healthcare is local, markets are different, so every deal is a little bit different. Some feel that if they don’t grab it now, their competitors will grab it, so they’ll fix the problems after they get it. Sometimes there’s a concern they’ll go to bankruptcy, and then it’s really difficult to acquire them.”

Rob Fraiman, president of Cain Brothers, sees most merger and acquisition activity taking place among nonprofit entities, more so than in the investor-owned world. There’s certainly some of the latter — Tenet and Universal Health come to mind — but they’re generally the exception, and structurally, most of these nonprofit transactions are outright sales of a hospital. They’re essentially mergers with a membership substitution, so a tax exempt entity merges with another tax-exempt entity and substitutes the tax-exempt member of the company with the new business.

“They don’t pay any cash, typically,” said Fraiman. “And the acquirer essentially picks up all the liabilities as well as all of the assets of the system. As far as risks, they’re merging with an enterprise that may have financial stress, which may be what’s leading the board to choose to do a transaction. Those financials don’t go away just because a transaction happens. It happens if the acquiring entity can go in and make some significant changes.”

There are also elements related to what kind of payer contracts the entity has. When two systems join together, replacing the contracts the acquirer has with the payer is not a quick, snap-of-the-finger type of move. It happens over time. Initially, the buyer is stepping into the shoes of whatever the seller has in place. Those contracts are a part of the reason there’s stress on the part of the target entity, so the acquirer is assuming that risk, though it tends to be short-term risk.

Capital is what drives a lot of those transactions, said Fraiman. Ultimately, the hospital industry is very capital intensive. In many of these instances, the target hospital or health system looks at the three-to-five-year time horizon and concludes they don’t have enough capital to invest in their business, and they need some deeper pockets. It’s not about price. It’s about terms, and how much capital they’re prepared to commit.

“There’s a huge risk the buyer is taking to assess whether the amount of capital they’re willing to commit over five or eight years is in fact going to be a good investment,” said Fraiman. “And if it’s not, that’s a huge risk, obviously, for the acquirer. At that point they’re really committed to it.”

There’s a view in the healthcare industry that scale is critically important, said Fraiman. Large corporate players are transforming how they’re operating in the healthcare economy.

“You’ve got some very, very large transactions that are happening in other parts of the healthcare economy, typically in the payer world, and that has a huge impact on hospitals,” he said. “In a given market or state, there’s a handful of insurance companies, and if a couple of them combine, that can have a real impact on the hospital system. Similarly, physician groups are going through a massive consolidation. All of that has a direct or indirect impact on health systems.”

Strode said that risk is slowly shifting away from insurance companies, and that this has had a catalytic effect on the ways mergers and acquisitions have played out in healthcare over the past several years.

“Insurance companies used to handle all the risk,” said Strode. “Now when they’re pushing that risk on hospitals and health systems, they have to spread that risk over larger and larger populations of people. They need more people to spread that risk. They need more doctors to spread that risk. The system needs to be bigger. You’re looking to be bigger because bigger geography gets the attention of payers. Smaller hospitals and community health systems can’t keep up. They can’t negotiate the same deals. They’d rather join them than fight them.”

Strode said that, despite the decreased number of independent facilities due to consolidation, the trend is still good in terms of market competition — at least for now — because it tends to drive down prices. He sees continued consolidation in the coming years, partly because there are still a lot of fragmented markets throughout the country. There are also a lot of academic medical centers that are expanding their sphere of influence by swallowing up some of the smaller hospitals around them.

Fraiman said the key to these deals is to be as prepared as possible.

“Like any business, it’s all about management,” said Fraiman. “Do they have the management capability to actually implement what they say they’re going to implement? That’s really hard. The implementation is harder than the deal. The deal might takes six months or a year, but you’ve got to live with it forever.”




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An upcoming CFO roundtable provides a peer-sharing platform to learn best practices for advancing a healthcare organization’s financial health.

Today’s healthcare financial leaders face escalating costs, quality improvement issues, difficult reimbursement environments, an increasingly complex service portfolio, and risk management associated with performance contracting.

Pressure mounts on CFOs to ensure their organizations remain viable as they deal with these issues, which makes gleaning proven strategies from colleagues imperative.

Four dozen executives will convene at a private roundtable forum during the 2018 HealthLeaders Media CFO Exchange, August 8–10 in Santa Barbara, California, to
address top-of-mind concerns.

In pre-event planning calls, Exchange participants—representing integrated health systems, academic medical centers, community hospitals, and safety net providers from across the U.S.—want to know how others are taking on risk, improving costs, addressing consumerism, and capturing additional reimbursement.

During the two-day event, a series of moderated roundtables will explore areas of special interest expressed by CFOs, including the following:

1. Cost improvement

Since costs are increasing at rates higher than reimbursement, how does a CFO drive cost performance to maintain sufficient operating margins? How are systems successfully leveraging scale to rationalize administrative and support services?

2. Proliferation of mergers and acquisitions

How can an independent organization survive in this environment? Should it consider other affiliations? For those involved in new entities, how are leaders achieving value?

3. Taking on risk

How does an organization prepare to take on and reduce risk, and when does an organization know that it is ready? How can CFOs build reserves to offset unexpected outlays?

4. Enhancing revenue cycle performance

How can financial leaders improve payer terms, reduce denials, ensure payer compliance, and improve clinical documentation? What are effective ways to deploy new workflow technologies in patient accounts?

5. Performance-based contracts

How are organizations engaging medical staff to reduce the cost of care and improve outcomes?

6. Medical group employment

How does a health system minimize provider subsidies for employed physicians and improve practice performance?

7. Medical consumerism

How can healthcare organizations compete against disruptors in the growing environment of consumer choice? What are creative ideas for meeting consumer demand without adding cost?

Additional information will be shared during the two-day gathering. The CFO Exchange is one of six annual HealthLeaders Media events for healthcare thought leadership and networking.

Revenue cycle and patient financial experience

Recently, HealthLeaders Media hosted a Revenue Cycle Exchange, which brought together 50 executives to discuss improving the patient financial experience; maximizing reimbursement; managing claims denials; technology adoption and data analytics; revenue cycle optimization; and creating a leaner, more effective team.

Noting how consumerism is influencing bill payment and giving rise to the patient voice, leaders are seeking ways to make paying easier. Consumer feedback suggested easy-to-understand and consolidated statements.

“We have a single business office with Epic, so regardless of where a patient gets their services, they get one bill from our organization,” says Cassi Birnbaum, director of health information management and revenue integrity at UC San Diego Health.

“We’ve also created a position for a patient experience director, so any complaint goes through that unit and they’ll contact one of my supervisors to ensure the patient gets the answers they need. That’s helped a lot and provides a one-stop, concierge, patient-facing experience to help ensure the patient’s balance is paid,” Birnbaum says.

Providing estimates and leveraging technology are also helpful for fostering patient payments. More health systems are promoting MyChart, an online tool for patients to manage their health information, as well as kiosks in key locations.

“We have a patient portal in which you can see any outstanding balance at a hospital or clinic and decide what you want to pay today,” says Mary Wickersham, vice president of central business office services at Avera in Sioux Falls, South Dakota.

“Patients can also extend their payments since we have a hyperlink that goes to the extended loan program if needed. With kiosks at our clinics, patients pull out their credit card and complete their copay. Nobody asks; they just automatically do it,” she says.


Front- and back-end staff play an integral role in calculating payment estimates, collecting dollars in advance of procedures and tests, and communicating the often-puzzling connection between hospital charges for physician practice and provider-based department patients.

“One of our big challenges now is we’re bringing a lot of that back-end work to the front,” says Terri Etnier, director of system patient access at Indiana University Health in Bloomington, Indiana.

Centralizing processes

As facilities move toward centralized scheduling systems to manage reimbursement, some facilities are centralizing coding and billing processes.

“We don’t have a full comprehensive preregistration function for our clinics mainly due to volume. We’re piloting a preregistration group for our clinic visits to work accounts ahead of time since we are continuing to work toward automation,” says Katherine Cardwell, assistant vice president at Ochsner Health System in New Orleans.

“We have kiosks in some of our clinics. Epic has an e-precheck function where we can now do forms. You can sign forms on your phone, and make your payment and your copayment ahead of time. And you can actually get a barcode that you can just scan when you get to the clinic,” Cardwell says.



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Recent moves to consolidate insurance customers under one corporate structure could lead next to carriers acquiring hospital networks.

The continued market consolidation and efforts to create an “all-in-one” approach to healthcare insurance customers may lead to carriers acquiring large hospital networks, particularly if the CVS-Aetna transaction proves to be successful and profitable, one analyst says.

The mergers and acquisitions in the insurance industry over the last year is the preamble for what will happen over the next two years, says CEO of Tom Borzilleri of InteliSys Health, a company aimed at bringing greater transparency to prescription drug prices, and the former founder and CEO of a pharmacy benefit manager (PBM).

The effort will ramp up to include hospitals if health plans start seeing financial rewards from the recent moves, he says.

“We are seeing carriers acquiring PBMs, as with Cigna/Express Scripts, and pharmacy chains/PBMs acquiring carriers, like CVS/Aetna, in search of cost efficiencies to increase earnings,” he says. “One may view these mergers and acquisitions as a favorable strategy to delivering both cost savings and patient convenience, but this strategy also has the potential to produce a serious negative effect on other critical stakeholders like doctors, hospitals, clinics, and others.”

In the past, many carriers managed their pharmacy benefits internally and found that it would be more cost-efficient to outsource that function to third-party PBMs, Borzilleri notes.

“As the PBM industry grew significantly over the last decade, allowing PBMs to gain market share and buying power for the millions of lives they managed, it opened the door for PBMs to methodically profiteer at the expense of both the carriers and their insured through the vague and complicated contracts for services the carriers were forced to sign,” he says.

Borzilleri continues, “In essence, the carriers really didn’t know what they were paying for at the end of the day for these services. As the market began to change with the onset of a movement and demand within the industry for more price transparency, carriers began to realize that they would be better served to bring the PBM function back in-house to reduce costs and increase earnings.”


Borzilleri explains that a merger like the CVS-Aetna acquisition provides the insurer the ability to:

  • Control drug costs by eliminating the profits that the PBM formerly enjoyed
  • Realize cost efficiencies to dispense medications at the pharmacy level
  • Directly employ the providers that can treat their members at a cost much lower than the reimbursement rates they currently pay their network doctors
  • Create a brand-new revenue stream from the retail products sold in these stores

That brings a ton of reward to CVS-Aetna, but not to anyone else, Borzilleri says.

“This type of closed-loop network will limit patient options to everything from who will be treating them, where they will be treated, and how much they will be forced to pay for services and their prescriptions,” he says.

“Based on the millions of patient lives that both CVS-Caremark and Aetna manage, patients will be herded into their own locations to be treated by their own doctors/providers and the independent physician or practice will be significantly impacted. So in essence, both the patients and doctors who treat them will lose,” Borzilleri says.


Hospital acquisition also could be driven by consumers, says Bill Shea, vice president  of Cognizant, a company providing digital, consulting, and other services to healthcare providers. As consumers select health services on demand, they will create their own systems of care instead of relying on a third party to do so, he says.

“The impact of these changes likely means integrated delivery systems must focus on providing on-demand healthcare and do so on a large scale. These systems can point to the proven value of offering a vetted and curated set of cost-effective providers and coordinating care to deliver better cost and quality outcomes,” Shea says.

Health plans also may consider returning to their pre-managed care origins to purse a classic insurance model of benefit design, risk management, and underwriting, he says. Some organizations could become a one-stop shop for every insurance need.

“These diversified insurance players will have the economies of scale to better manage profit and loss across multiple lines of business and to take creative approaches to health-related insurance, such as offering personalized policies targeted to specific market segments,” Shea says.


Consolidation is likely to increase at the state and regional level, says Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform.

“As providers with market dominance command higher prices, insurers will need to amass greater market power to push back. This means fewer choices of insurers for employers, other healthcare purchasers and consumers,” Delbanco says.

She says, “Fewer choices means less competition and less pressure to innovate. It’s possible we’ll see more of the integrated delivery systems and accountable care organizations beginning to offer insurance products where state laws and regulations allow them to as new entrants into the market.”

Those changes will make it more and more difficult to thrive as a small insurer or a small provider, she says.

Also, while rising prices and a continuation of uneven quality will motivate employers and other healthcare purchasers to demand greater transparency into provider performance and prices, larger players may more easily resist that call, she says.

“Increasingly it will be a seller’s game, not a buyer’s,” Delbanco says. “While quality measurement, provider payment reforms, and healthcare delivery reforms increasingly move toward putting the patient at the center, this may be more lip service than reality. Even if consumers end up with more information to make smarter decisions, their options may have dwindled to ones that are largely unaffordable.”


AHA report: Hospitals spend almost $3 trillion, support more than 16 million jobs


Every dollar a hospital spends yields roughly $2.30 of additional business activity; for every hospital job, another two are supported.

A new report from the American Hospital Association highlights just how much hospitals are driving their local economies, as well the national one, with data showing hospitals directly employ nearly 6 million people and purchase more than $900 billion worth of goods and services from other businesses.

But that’s not all. Enter the ripple effect. The goods and services hospitals buy drive economic vitality throughout their communities, with each hospital job supporting roughly two additional jobs in the community. Every dollar a hospital spends yields roughly $2.30 of additional business activity.

When you incorporate that ripple effects into calculations, the AHA reported hospitals actually support 16.5 million jobs nationwide and almost $3 trillion in economic activity.

“In 2016, America’s hospitals treated 143 million people in their emergency departments, provided 605 million outpatient visits, performed over 27 million surgeries and delivered nearly 4 million babies. Every year, hospitals provide vital health care services like these to hundreds of millions of people in thousands of communities. However, the importance of hospitals to their communities extends far beyond health care,” the AHA said.

When it come to states whose hospitals send the most money into the their economies, it’s no surprise that California is the top spender, with $103 billion in total expenditures. Factor in that ripple effect and the Golden State’s total economic output from its hospitals more than doubles to $230 billion.

New York, Texas, Florida and Pennsylvania rounded out the top five states that are most impacted by hospital expenditures, the report said.

When it comes to a hospitals impact on the state’s labor force, it’s not just about who creates the most. Maine is actually the state most impacted by hospital job creation with total of 38,105 hospital jobs. That hospital workforce makes up a little more than 14 percent of the states overall workforce. Ohio was the second most impacted state, with 298,371 hospital jobs that constitute just almost 13 percent of the state’s workforce.

Minnesota, West Virginia and Massachusetts rounded out the other top five states whose workforce is impacted by hospital jobs. Minnesota’s hospital workforce constitutes a little more than 12 percent of the overall state force, West Virginia’s hospital workforce was nearly 11.7 percent and Massachusetts was almost the same with 11.6 percent.

As both healthcare and economic cornerstones of their communities, the pressure is greater for hospitals leaders to find new ways to add value, maintain financial margins and keep doors open. That is one of the drivers behind the rash of merger and acquisition activity. With ever-increasing regulatory burdens that require more manpower or physician’s time to manage, coupled with the need to make much needed updates in technology, modernize facilities to meet current trends or just maintain appropriate levels of care and accommodation for patients, not to mention staying competitive for hospitals in areas where other systems want to dip into their patient volumes, hospital leaders are eyeing mergers as a means of keeping doors open sot they can continue to support their communities both clinically and economically.


A Long Road to Care for Rural Californians


Cramped rural hospital in Happy Valley California

In the northeast corner of California, nearly kissing Nevada and Oregon, lies Surprise Valley. At approximately 70 miles long, the valley is home to 1,232 people, which works out to about two people per square mile. Services are sparse: The Chamber of Commerce website lists two grocery stores, one insurance agency, and one hospital with an emergency room to provide care to its residents.

Essential CoverageThat hospital, Surprise Valley Community Hospital, is a vital institution, but it is bankrupt. Barbara Feder Ostrov of Kaiser Health News reports that years of mismanagement caught up to the hospital in 2017. By the time state inspectors arrived that June, the hospital was in a state of disarray — crushed by debt, it had only one acute care bed and a chief administrator who was MIA. Residents of Surprise Valley were torn between keeping it open and shuttering it even though the nearest hospital with an emergency room is 25 miles away on the other side of a mountain pass. In the June 5 California election, county voters chose to sell the hospital to an out-of-state entrepreneur rather than risk the hospital’s closure.

Surprise Valley isn’t alone in its lack of access to health care. Since 2010, 83 rural US hospitals have closed, Michael Graff writes in the Guardian. For residents of rural areas, the closure of the local hospital can cut off a lifeline. When Portia Gibbs of Belhaven, North Carolina, had a heart attack in 2014, her husband, Barry, had to choose between driving her 60 miles east to a hospital in Nags Head or 70 miles west to a hospital in the town of Washington. Portia never made it to a hospital.

It’s difficult to attract physicians and hospitals to rural areas, where wages and reimbursement rates tend to be lower. “What happens is if you’re a cardiologist you have a tendency to move to the East Coast where you can get paid more for the same procedure,” said US Senator Jerry Moran (R-Kansas) in a meeting with HHS Secretary Alex Azar, according to Modern Healthcare.

Solving the Rural Hospital Puzzle

There is no easy fix for the decline in the number of rural hospitals, but Moran and other senators have proposed fixing the Medicare wage index. The index, which factors into reimbursement of hospitals serving Medicare patients, is a formula that accounts for geographic differences in wages and the cost of living. Some lawmakers contend that the formula penalizes rural hospitals and exacerbates the hospital shortage. Updating the index to increase payments to Medicare providers in underserved areas could draw more physicians to rural hospitals, which could help prevent hospitals from going under.

Some rural hospitals have tried another solution: joining multihospital systems. In California, where 25% of rural hospitals have closed over the past two decades, 19 rural hospitals have combined forces in systems composed of at least two other hospitals. However, our analysis of six of these hospitals showed mixed results for this strategy: The financial status of one rural hospital improved substantially after joining a system, but two others saw lower net income.

Perhaps a more feasible solution to lack of access to care in rural areas can be found in expanding the health care workforce. A study published in Health Affairsfound a growing presence of nurse practitioners (NPs) among rural practices nationwide. From 2008 to 2016, the number of NPs in rural areas increased 43%. Not surprisingly, “states with restricted scopes of practice had lower NP presence and slower growth.” The authors conclude that “adding nurse practitioners is a useful way for practices to align themselves with contemporary efforts to improve access and performance.”

It seems fitting and bittersweet to end this edition of Essential Coverage with our tribute to the late Herrmann Spetzler, the visionary CEO and the heart of Open Door Community Health Centers in rural Humboldt and Del Norte Counties. To underscore his commitment to providing health care in remote locales, he often described himself in meetings and speeches as “Herrmann Spetzler, RURAL.” Spetzler’s unexpected death in March cut short his life’s work to provide health care to everyone, regardless of income or geography. His passing leaves a huge hole in the community he served.


Viewpoint: Small hospitals should be hopeful and wary of national health systems



With Cleveland Clinic eyeing acquisitions at two locations on Florida’s Treasure Coast — Indian River Medical Center in Vero Beach and Martin Health System in Stuart — residents and hospital workers should be wary but hopeful, according to the local TC Palm.

That a national power in the healthcare industry wants to snap up two independent nonprofit hospitals in Florida is no surprise. The area’s patient population has the trifecta of demographics: aging, wealthy and insured, TC Palm‘s Gil Smart wrote. In an era of increasing expenses, declining reimbursements and growing powers, finding a partner system can give small hospitals more weight in negotiations and help fund capital for investments in growth and change.

Yet as examples have shown, allowing bigger players to come into local markets means change, and not all of it is good, Mr. Smart noted. Unions will have it tougher at the negotiation table and control will change hands.

“Bottom line: There will be a loss of local control. There always is, where the bigger, faraway healthcare system gulps down the local guy,” Mr. Smart wrote. “Yet we shouldn’t let the drawbacks overshadow the potential benefits of having a globally renowned healthcare ‘brand’ set up shop in our backyards.”

The benefits, such as easier, better and more coordinated care, are a lot to be hopeful for. Read the full column here.





Top Three Trends in Mergers, Acquisitions, and Partnerships


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Learn how MAP activity is reshaping the healthcare landscape with these three key findings.

Mergers, acquisitions, and partnerships (MAP) show no sign of slowing down, and their momentum is expected to increase in the coming years, according to the HealthLeaders Media report Mergers, Acquisitions, and Partnerships: Examining Financial and Operational Impacts. MAP activity is “driven by the move to value-based care and provider needs for greater scale and geographic coverage,” says Jonathan Bees, senior research analyst at HealthLeaders Media.

The report also includes findings from a HealthLeaders Media survey, which polled 190 senior executives on recent and future MAP activity. The majority of respondents (71%) say their organizations plan to increase MAP activity in the next three years, with 68% exploring potential deals and completing deals underway over the next 12–18 months.

Here are three key findings from the latest wave of MAP activity.

1. MAPs lead to positive clinical and financial results

When healthcare organizations commit to a MAP activity, they are equally focused on meeting financial and care delivery objectives. Organizations cite a variety of financial reasons for pursuing MAP planning or activity, including to improve financial stability (63%), to improve operational cost efficiencies (61%), to increase market share in their geographical area (60%), and to improve position for payer negotiations (59%).

The results show that larger organizations are more interested in expanding geographic reach compared to smaller entities, which are more focused on meeting financial goals. Respondents say their top care delivery objectives include improving their position for care delivery efficiencies (65%), improving clinical integration (55%), and improving their position for population health management (54%).

Respondents are generally positive about MAP financial and clinical results. Nearly half (46%) say their net patient revenue increased following a recent MAP activity, while 28% report it remained the same. Only 6% experienced a decrease. Moreover, 73% of respondents expect the cumulative total dollar value of their organization’s MAP activity to increase within the next three years. Clinical markers are up as well, with 35% reporting quality outcomes increased after a MAP activity and 40% saying they remained the same. Patient readmission results were mixed. Forty percent mention they stayed the same, while 18% saw a decrease, and 11% experienced an increase.

2. New partnership deals are emerging

The majority of recent MAP activities don’t fall under a merger or acquisition category, technically. Twenty-nine percent of survey respondents report their most recent MAP activity was a contractual relationship that wasn’t an M&A. “The use of non-M&A partnerships is expected to grow because this type of agreement is typically less expensive than traditional M&A and usually doesn’t require an exchange of assets or a change of local governance,” according to the  report.

In the broader healthcare environment, transformative developments are also taking place, says Brent McDonald, head of Healthcare Strategic Advisory Services, managing director at Bank of America Merrill Lynch. “The U.S. healthcare landscape is certainly undergoing changes that are beyond the more traditional horizontal (hospital-to-hospital) mergers,” he says, pointing to Amazon’s announcement that it will enter the healthcare space, United/Optum’s acquisition of DaVita Medical Group, and the contemplated merger between CVS and Aetna.

3. Why most deals fall apart

As a MAP comes together, the due diligence period begins, and so does the potential for derailment. Financial liabilities and cultural issues are the leading causes for shutting down a MAP deal. The top three financial reasons MAPs are abandoned before or during due diligence are concerns about assumption of liabilities (21%), costs to support the transaction were too high (19%), and concerns about price (19%).

The operational reasons for backing out of a MAP include incompatible cultures (30%), concerns about governance (24%), and concerns about the operational transition plan (21%). Cultural clashes can occur at every level of the organization. “Oftentimes, you have cultural compatibility at the senior level (those who are consummating the deal), but find that culture throughout the remaining levels of the organization is not as conducive to a merger,” says Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Dallas-based Methodist Health System, and lead advisor for the HealthLeaders Media MAP survey. “That is something you don’t necessarily see until later, after the deal is done.”

Don’t lose sight of your key stakeholders

In this period of heightened MAP activity and an uncertain future, it’s important that healthcare organizations focus on building sustainable consumer-centered care models. It is critical to set strategic goals that strengthen an organization’s relevance with and attractiveness to employers and payers, as well as increase patient convenience and connectivity, says McDonald. “It would be prudent to keep a keen focus on positioning health systems with their key stakeholders in mind and on becoming/continuing as the healthcare delivery network of choice and a ‘must have.’ ”