Health systems are continuing to merge together at an accelerating pace. However, successfully capitalizing on the intended outcomes of mergers and acquisitions (M&As) has proven to be no easy task. For newly formed health systems, the failure rate of integration has been estimated at 70% - 90%. Health systems with poor integration of physician services and lack of alignment between executives and physicians tend to experience poor financial performance, higher costs, and lower quality of care.
However, strategically designed leadership academies apply a structured change process to creating a unified culture, uniting leaders around a common set of organizational goals and objectives and equipping leaders with the skills and competencies necessary to execute strategy to enhance system integration.
In this article, we’re providing evidence of system success resulting from a human-centric approach to system integration. Our case study features a successful system integration story of a recently created multi-hospital regional health system through alignment of executive and physician leaders toward a common purpose.
Why Do So Many Mergers and Acquisitions Fail to Achieve the Desired Outcomes?
Healthcare executives spend millions of dollars examining potential partners, reviewing and negotiating contracts, determining fit and gaining assistance from M&A advisors. Even so, some of the industry’s most prominent systems have failed to integrate effectively.
Well-known case studies of systems failing to come together post-merger include Stanford University with the University of California, San Francisco hospitals, or the NYU Hospital system and Mount Sinai. Certainly, improper deal negotiation, lack of executive responsibility, and limited operational bandwidth are just a few reasons why many past mergers have failed. However, the success of collaborative partnerships may be less a function of due diligence and careful planning than we think.
What is commonly overlooked are the people management factors that evolve once the C-suite in both organizations have shaken hands and signed the dotted line.
When newly merged organizations don’t prepare themselves for the change, they run the risk of going down a path that leads to inevitable failure, and the outcomes of poor integration are painfully clear: engagement scores drop, relationships fail to materialize, and an “us versus them” dichotomy quickly overtakes the culture.
Organizational Culture is Key to a Successful System Integration
By and large, experts agree that cultural preparedness is a critical factor to ensure successful system integration. A study from Cornell University showed that 92% of executives believe better cultural understanding would have made an acquisition much smoother. System-wide change efforts, like a merger or acquisition, have a greater likelihood of failure when the organizational culture, including values and beliefs, are not aligned and integrated together.
Hospital-physician collaboration is a critical component of system success, and it is no surprise that there is great demand to understand how to improve these relationships. The intentional development of a climate conducive to change can be a meaningful first step in bringing out the benefits that accompany effective system integration. In turn, the role of both physician and administrative leadership is critical in developing a supportive climate for change — it is needed in both governance and management decisions.
Case Study: Finding Success with a Human-Centric Approach to System Integration
Our client is a regional non-profit healthcare system based in PA. Under the stewardship of their CEO, the system recognized that physician leadership was a necessary ingredient in the transformation toward value-based care design and delivery. Due to harsh market forces and the organizations’ desire for clinical integration, the system’s leaders understood that physicians have become central players in system integration transformation.
While the executive team would be the ones to set the strategy for the newly formed system, it would require collaborative leadership across various levels of the system to execute strategy across the system. The CHRO noted that the organization was motivated to develop a mature, clinically integrated approach. Yet, the physicians lacked a sense of ownership and accountability for change. Recognizing this leadership gap, the system co-designed a physician leadership development academy to grow the talent of its existing physicians to manage change in partnership with the health system’s executives.
Achieving Cultural Integration Through the Applied Physician Leadership Academy©
Cultural integration through leadership development is a novel approach. To this end, the health system partnered with The Leadership Development Group (TLD Group). TLD Group’s Applied Physician Leadership Academy (APLA©) is a multi-faceted physician leadership development program which fosters physician engagement and strengthens physician leadership capabilities.
The APLA© experience creates a learning environment where various constituents from diverse cultures can come together to co-develop leadership skills by working collaboratively on system-wide challenges.
Skill building focused on four competency clusters associated with TLD Group’s Physician Leadership Success Model™ which, when mastered, creates the foundation for leaders capable of managing change in collaborations with health system’s executives:
- Leading Self: Understanding, managing, and developing self as leader and in relation to others
- Leading Others: Building, developing, and enhancing team collaboration and effectiveness
- Leading Change: Building the capacity for resilience and strategies for change management
- Leading for Results: Applying business fundamentals, strategic planning, and value-based decision-making for enhanced outcomes
The results of the health system’s experience with the APLA© indicated that participants experienced growth across 11 assessed competencies, with the largest growth occurring in business acumen, change management, and building effective teams.
Perhaps more meaningful than the quantitative growth in the system’s competency development are the qualitative results which accompanied this growth. HR team members reported receiving unsolicited feedback from hospital employees about the positive and productive change noted in the behavior of APLA© participants. Participants themselves reported increased feelings of connectedness, strengthened relationships, and increased organizational commitment.
John, a physician graduate of APLA© Cohort 3, shared with us his reflections on his APLA© experience, “You grow as a person and I think that’s the whole idea, you grow as a person and by extension you’ll help the whole system become better.”
When mergers and acquisitions fail to achieve desired outcomes, it is common to look toward external market factors, economic factors, and timing constraints, rather than looking internally to evaluate whether system integration leadership had the skills to drive organizational transformation. Organizations looking to build a common culture within a newly formed system must be able to influence the behaviors, mindsets, and social patterns of their workforce to create alignment around system-wide goals.
TLD Group’s Leadership Academy solutions apply a structured change process to creating a unified culture — uniting leaders around a common set of organizational goals and objectives, and equipping leaders with the skills and competencies necessary to execute strategy across a large system. Reach out to us to learn more about our customizable leadership academies and how we can drive change in your organization.