Healthcare administrators and strategic planners are once again rolling up their sleeves and investigating merger opportunities that will make for ideal hospital marriages. In
Q2, there was a 17% surge in industry M&As from the same time last year, according to a recent report by market research firm Irvin Levin Associates.
With the healthcare climate heating up for integrated delivery systems (IDS), strategic planners and marketers will have to become more relentless in their efforts to prevent
some of the black eyes these systems have suffered in the past. A number of integrated strategies used for provider-sponsored managed care plans, global capitation and primary
care acquisitions have fallen short of expectations to reduce costs while improving healthcare service delivery. Not to mention the branding horror stories that occur when two
organizations fail at merging organizational cultures and marketing opportunities.
In spite of these roadblocks, IDS efforts can and do work, says Michael Treacy, president of Cashel Consulting in Fort Washington, Pa., who recently spoke on this topic at the
Society for Strategy and Market Development conference in Orlando. Using findings from a study the firm recently conducted of five leading integrated systems over a two-year
period, Treacy highlighted the key leadership strategies that help to strengthen market positions and financial performance. The study involved Geisinger Health System in
Danville, Pa., the Henry Ford Health System in Detroit, ProMedica Health System in Toledo, Ohio, Clarian Health Partners in Indianapolis, and Baystate Health System in
Springfield, Mass.
To achieve successful facility integration, Henry Ford and ProMedica relied on a "hub and spoke" model that decentralized corporate system-planning functions to local
management. In each market there would be a hub hospital responsible for developing regional planning efforts that involved affiliate clinics and providers in the area. Marketing
campaigns also highlight the local hospital name then the system name. This approach is what helps Promedica maintain a 41% market share, says Holly L. Bristoll, Promedica's
corporate director.
But full managed care integration can be difficult and slow. Conflicting business goals often erupt between the healthcare delivery system, which is focused on filling hospital
beds, and the managed care plan, which is focused on keeping costs down through prevention programs and negotiating contracts with competing payers and providers.
The study found that what works best is allowing the system's health plan to operate as a stand-alone business with the flexibility of developing independent marketing
strategies. This is one of the ways Henry Ford became the largest HMO in the greater Detroit area, with a 29% penetration covering 660,000 members. The system plan can develop its
own affiliations and mergers, and operating systems are generally separate from the parent system.
What all of the surveyed plans have in common is a long-term commitment to integration, with most of the systems launched in the mid-1980s. The process for achieving full
facility, provider and managed care integration takes at least five years, says Treacy.
(Irving Levin Associates, http://www.levinassociates.com, Cashel Consulting, Michael Treacy, 215/542-2412; ProMedica Health
System, Holly L. Bristol, 419/291-4081)